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Copper prices to hit record high in Q4 on Fed cuts, China stimulus: Fastmarkets

Pentwater Capital Management LP, the second-largest investor in Turquoise Hill Resources (TSX: TQR) has increased its stake in the Canadian company while rejecting again Rio Tinto’s C$43-a-share offer for the 49% of the miner it doesn’t already own. The activist investor disclosed it had bought around 1.24% of common stock at C$41.01 per share in Turquoise Hill, for a total of C$102.5 million on September 15. It means it currently owns 13.77% of Turquoise Hill’s shares Rio Tinto agreed on earlier this month to take over Turquoise Hill after sweetening an initial offer by around 20% to “a best and final” $3.3 billion. Penwater, which joined minority shareholder SailingStone Capital Partners in publicly opposing Rio Tinto’s offer as too low, restated its discontent. “The proposed price implies an equity value of C$8.65 billion, which is a fraction of the free cash flow that Pentwater expects Turquoise Hill to generate over the next decade,” it said in the statement. Pentwater noted it expects Turquoise Hill to generate over C$10.5 billion of free cash flow through 2030 assuming a $3.50 per pound copper price and almost C$14.2 billion of free cash flow assuming copper prices of $4 per pound. It also said it was weighing options to thwart the deal, including but not limited to the possible exercise of dissent rights or other legal action. Rio’s offer equires two thirds of shareholders, including Rio Tinto’s, to vote in favour. More than 50% of minority shareholders must approve it. Rio’s final bid represents a 67% premium from Turquoise Hill’s closing price of C$25.68 a share on March 11, the trading day prior to the initial proposal. Pentwater has said the proposed premium is unacceptable for a mine that it expects to be “the third largest copper and gold mine in the world with a mine life in excess of 90 years.” Some analysts believe that Rio Tinto will need to increase its offer to win over some minority shareholders and so hold a direct majority stake in massive Oyu Tolgoi copper-gold mine in Mongolia. The global miner, which has mined copper from Oyu Tolgoi’s open pit for a decade, will have the task to conclude building the underground section of the mine. Once finished, it will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes per year at peak output, which is now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.The Oyu Tolgoi copper-gold mine in Mongolia. (Image courtesy of Erdenes Oyu Tolgoi LLC.)

By: Mining.com Staff October 11, 2024

Copper prices are poised to reach an all-time high in the fourth quarter of 2024, with Fastmarkets analysts projecting an average of US$10,265 per tonne. This bullish forecast is driven by a combination of favorable macroeconomic conditions and tighter market fundamentals.

The critical metal traded for US$9,548 per tonne (US$4.33 per lb.) on Friday, up 12% from its position at the start of year, but down from its high of over US$11,000 per ton in May. 

Key factors contributing to the surge include further expected rate cuts by the U.S. Federal Reserve and a substantial stimulus package from China.

Announced in September 2024, China’s stimulus injects 3.95 trillion yuan (US$560 billion) into the economy, equivalent to more than 3% of its GDP.

China saw a modest recovery in its physical market in August 2024, with the premium for grade A copper cathodes in Shanghai ticking upwards. This rebound is largely attributed to improved import conditions following a decline in London Metal Exchange (LME) prices. However, price volatility continues to present challenges, according to Fastmarkets.

In addition to macroeconomic factors, seasonal trends and speculative positioning are expected to boost copper prices in Q4.

Historically, the fourth quarter has been the strongest period for copper, and smelter production cuts alongside rising demand from China’s physical market are expected to tighten supply.

Long-term copper price forecast

The copper market’s long-term outlook remains bullish, particularly driven by the rising demand for copper in the global energy transition, according to Fastmarkets.

By 2025, the grade A copper cathode premium in Rotterdam is projected to increase by 25% due to tighter supply and recovering demand in Europe. However, despite growing demand from green energy projects, Europe’s overall copper market remains weak, with Germany—the region’s largest consumer—facing sluggish demand from the manufacturing, automotive, and construction sectors.

In the United States, optimism persists for long-term copper demand, fueled by anticipated supply imbalances and the increasing need for copper in green energy projects.

Fastmarkets also expects copper demand to grow at a compound annual growth rate (CAGR) of 2.6% through 2034.

Within the energy transition sectors, demand is expected to grow at a more robust 10.7% CAGR, driven by electric vehicles (14.3%), solar power (5.6%), and wind power (9.3%). Traditional industries are projected to see more modest growth at 1.4%.

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COMMODITY: Copper
REGION: AsiaUnited States
 

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