In an era of energy transitions and economic shifts, global metal markets are at a juncture, influenced by volatility, surprise deficits, and geopolitical pressures.
The copper market, often considered a barometer of global economic health, has been on a particular rollercoaster of late. Late January saw copper prices skyrocketing to US$9,300 per tonne, only to plummet to a low of US$7,900 per tonne in late May, then rebound to close to US$8,800 per tonne in July. They’re currently around the US$8,300 mark, or US$3.78 per pound.
![Metal markets in flux: Copper crisis, nickel spikes, and geopolitical challenges ahead](https://www.northernminer.com/wp-content/uploads/2023/08/Screenshot-2023-08-23-at-6.13.32-PM.png)
Credit: MINING.com
What’s causing these gyrations? According to analysts at S&P Global, it’s down to supply concerns combined with robust demand.
In a recent webinar on the state of metals markets, Paul Bartholomew, senior analyst at S&P Global, noted that this year’s copper deficit caught analysts off guard. Supply has been weaker than expected as Chile, the world’s leading copper producer, downgraded its production forecast to 5.5 million tonnes for the year, with 2022 total production at a 10-year low. Zambia, another major player, is also expected to underperform.
The 2023 S&P copper price forecast paints a stark picture, with an expected deficit of 16,000 tonnes copper opening before year-end.
By 2025, this deficit is projected to spike to 217,000 tonnes and could further intensify to a staggering 2.2 million tonnes by 2032.
While not enough new discoveries are being made, Chile remains at the forefront of global copper production with the potential to shrink the expected deficits should conditions improve. However, countries like Argentina and Ecuador, currently minor contributors, are gearing up with significant projects that promise to elevate their status in the copper supply chain.
Paul Manalo, an S&P research analyst, said copper miners’ all-in-sustaining costs (AISC) saw an alarming 11% year-on-year increase in 2022, touching US$2.39 per pound. Factors like escalating labour costs and higher sustaining capital expenditures, especially from giants like Glencore (LSE: GLEN), contribute to this surge.
Declining discovery rates
Meanwhile, S&P flags dwindling discovery rates as a significant industry headache. While the 2013-2017 period yielded 71 million tonnes of new copper from major discoveries, the subsequent five years produced a mere 4.1 million tonnes. This decline comes despite increasing exploration budgets, underscoring the industry’s shift towards known deposits and operating mines.
Lower metals prices are expected to worsen the situation.
“Exploration in 2023 will be carried out more by the majors instead of the juniors due to the former’s healthy cash flow,” according to Manolo.
‘Geopolitically resilient’ supplies
Rebecca Gordon, CEO of CRU Consulting, recently highlighted the pressing need for stable supplies of raw materials, including copper.
“There is an absolute need from the world to get geopolitically resilient supplies of raw materials quickly to market. And that needs to be environmentally and socially responsible,” she told The Northern Miner in an interview.
Gordon pointed out the industry’s challenges, ranging from protracted licensing, drilling, and finance raising procedures to the rising mining costs due to degrading ore quality and escalating realization costs. The pursuit of green energy further complicates the scenario. “The pressure to make mining greener while meeting the increasing demand presents its own challenges,” Gordon said.
Gordon also emphasized the potential benefits of the ongoing energy transition for countries like Canada. With the rise of battery plants, there’s an ever-growing need for exploration and investment. Yet, geopolitical stability remains a pivotal concern for stakeholders. She concluded, “There’s an urgent need for geopolitically resilient supplies of raw materials. Obtaining these supplies must be quick and adhere to environmental and social responsibilities.”
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