The slide began in mid-April and led copper back to its November price level. On the London Metal Exchange (LME), a ton has been trading for the past few days at around $8,000, 25% less than at the peak reached last year in the wake of the invasion of the ‘Ukraine.
This fall in prices is directly linked to the moribund state of the world economy, the red metal is not nicknamed Doctor Copper for nothing! The prices are particularly linked to the health of China. The Middle Kingdom concentrates most of the copper refineries, the level of its imports therefore has a direct impact on prices.
Rising production costs in Chile
But this trend is only a facade and should not last. Structurally, the sector is faced with a drop in the content of deposits located in Latin America, and in particular in Chile, the world’s largest producer and a key player in the sector. The average concentration of minerals in Chilean deposits has fallen by 55% over the past twenty years, according to the Cyclope report on raw materials, published last week. As a result, in 2022, Chilean copper production fell by 6% compared to the average of the last decade.
Heavy investments are essential to redress these figures. In mines such as Chuquicamata, it is now necessary to fetch copper much deeper. To produce the same quantity of red metal in these aging deposits, the energy costs have become much higher.
To compensate for this drop in grades, opening new mines is one of the alternatives but ” it is difficult today to identify which sites could take over “says an expert. Not to mention the necessary investments which amount to billions of dollars and are spread over 10 to 15 years.
80 kg of copper in an electric car
This structural trend towards lower levels will inevitably support the courses adds Yves Jegourel, co-director of the CyclOpe report, and professor at the National Conservatory of Arts and Crafts.
Prices are expected to rise by 2% between 2022 and 2023, according to CyclOpe estimates. More optimistic, the banks Goldman Sachs and Bank of America foresee much higher increases by the end of the year. Especially since opposite, demand is set to grow as part of the energy transition. While it takes 23 kg of copper in a thermal vehicle, it takes 60 kg in a hybrid model and 80 kg in an electric car.
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