BlackRock's Evy Hambro, head of fundamental equities thematic and sector investing, projects a "very exciting" market for copper, anticipating further positive pricing. This outlook is driven by several key global trends including industrial activity, the shift away from fossil fuels toward renewable power, and increased electrification. Hambro also highlighted the growing demand from artificial intelligence, noting that all these pressures require commodities like copper to be addressed.
The demand surge for copper is occurring amidst significant supply constraints. Mine output has been under pressure, with data from the International Copper Study Group indicating a 1.1% decline in the first half of the year. Major producers such as Codelco and Freeport-McMoRan Inc. experienced double-digit decreases in production. Morgan Stanley, which initially expected modest growth in mine supply, now foresees little change or even a slight reduction, potentially marking the first annual decline since 2017. This divergence between rising demand and stagnating supply is a core driver of the bullish outlook.
Copper prices have already seen substantial gains, with the LME three-month contract recently touching an all-time high of $14,415.50 per ton, representing a nearly 50% increase over the past year. Analysts like Ben Salter from Victor Smorgon Group believe prices need to climb even higher to incentivize new mining projects, as current projects often involve lower grades or deeper deposits that were previously uneconomical. The scarcity issues and resilient demand, despite market volatility, suggest limited downside risk for copper prices.
Beyond traditional industrial uses, new technological advancements are significantly contributing to copper demand. The expansion of cloud computing and AI infrastructure, both energy and commodity-intensive, requires substantial amounts of copper. Furthermore, the global push towards electric vehicles and new-energy infrastructure is expected to sustain consumption, according to analysts at ANZ Group Holdings Ltd. The combination of these demand drivers with ongoing supply challenges, including potential tariff-related trade flows, reinforces BlackRock's positive pricing forecast.
