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Informist, Tuesday, Feb. 25, 2025

 

By Ashutosh Pati and Sandeep Sinha

 

MUMBAI – Copper prices have risen over 7% on the Multi Commodity Exchange of India and the London Metal Exchange since the start of 2025 and are likely to stay firm because of strong demand and concerns about supply. The rise in prices of the red metal is driven by competition between countries trying to secure critical minerals to meet their future needs.

 

At 2110 IST, the most active February copper contract on the MCX was slightly up at INR 862 per kg. On the LME, the three-month copper contract was at $9,484.0 per tonne, slightly down. So far in the current year, copper prices have risen 8%, or $712 per tonne, on LME and 7.5%, or INR 60.45 per kg, on MCX.

 

Al Munro, strategist at London-based brokerage Marex sees resistance at $9,525 per tonne and then in the range of $9,650-$9,700 per tonne. The support level for copper is at $9,350 per tonne and then in the range of $9,200-$9,225 per tonne. The red metal hit an all-time high of $10,935 per tonne on May 20, 2024.

 

In the short term, the resistance for copper prices is in the range of INR 885–INR 890 per kg on the domestic bourse, Sriram Iyer, senior research analyst at Reliance Securities said. "...if that (resistance) is broken, then further upside is possible towards INR 940 per kg levels, but currently INR 885–INR 890 will be a key hurdle to watch out for," he said.

 

The support for copper prices on the domestic bourse is in the range of INR 845–INR 850 per kg. If the prices slip below these levels, it will retest the INR 800 per kg mark. On LME, the support zones are around $9,245-$9,250 per tonne, Iyer said.

 

HIGH DEMAND

 

Copper prices are rising as demand for the red metal has risen consistently. The deficit in the copper market narrowed to 22,000 tonnes in December from 124,000 tonnes in the previous month, as per the International Copper Study Group. The latest LME Commitments of Traders Report showed traders raised their bullish positions in copper for the sixth straight week to 73,763 lots as of Feb 7, the highest net long addition since Nov 1. The size of one lot is 25 tonnes.

 

Copper inventories at LME-accredited warehouses have declined over 17% to 266,700 tonnes Tuesday from the high of 322,950 tonnes on Aug. 29, implying tightness in the physical market.

 

The Chilean Copper Commission, also known as Cochilco, expects a global copper deficit of 118,000 tonnes this year as growth in demand for the red metal will outpace the growth in supply of the metal. Cochilco forecasts that global copper demand will reach 27.4 million tonnes this year, a growth of 3.2% on year and supply will rise 2.3% from last year to 27.3 million tonnes. Chile is the largest producer of the red metal in the world, accounting for 23.6% of the total global production.

 

"The recent statements by the Chile government, that there's going to be a shortage of copper has propelled the markets higher in the recent times," said Iyer.

 

Global copper mine production was 22.91 million tonnes in 2024, according to International Copper Study Group. The study group's latest data showed global production of refined copper rose 4% on year to 27.63 million tonnes in 2024 from 26.5 million tonnes in 2023. Consumption was up almost 3% on year at 27.33 million tonnes.

 

Chile was the largest producer of mined copper with an output of 5.3 million tonnes in 2023. China accounted for 15.5 million tonnes of refined copper demand in 2023.

 

Aurobinda Gayan, founder and chief executive officer, Bluglance Consulting Pvt. Ltd. expects an upside trend in copper prices in the medium term, with a potential for prices to touch $10,000 per tonne on the LME. "If concentrate supply is tight, refined metal production could be constrained, supporting higher copper prices. Smelters might increase premiums on refined copper sales to compensate for low treatment and refining charges," he said.

 

DEMAND DRIVERS

 

Signs of improvement in economic activity in top consumer China and an economic recovery in developed nations also supported the demand for copper. The data released by the China's National Bureau of Statistics showed the country's retail sales rose 3.7% on year in December and industrial production surged 6.2% on year in the same month.

 

China's industrial production witnessed accelerated growth last year, driven by the country's continued efforts to optimize and upgrade its industrial structure, according to the National Bureau of Statistics. China's value-added industrial output, an important economic indicator for assessing demand for metals, rose by 5.8% on year in 2024, accelerating from the 4.6% growth recorded in 2023, the data showed.

 

The second revised estimate published by Eurostat on Feb. 13 showed that Eurozone's GDP rose 0.1% on quarter in Oct-Dec compared to the estimate of no growth. The bloc is one of the biggest users of copper. Eurozone industrial production fell 1.1% on month in December, but manufacturing activity rose to 46.8 in January from 44.3 in December.

 

US President Donald Trump Feb. 12 announced plans to impose 25% tariffs on aluminium and steel imported into the country. There are expectations he might also impose tariffs on copper, which has led to a dislocation in COMEX and LME copper prices. Copper was traded at a premium of $600 per tonne Tuesday over the prices on the LME, which is making metal delivery on COMEX warehouses attractive. However, the premium has come off from the high of $1,200 per tonne on Feb 14. Usually, the metal trades at very similar prices on the two exchanges.

 

Supply constraints in the copper concentrate market and the latest demand-supply projections by Chile's National Copper Commission are also reasons why copper prices have risen. Experts see a deficit in the global copper market this year because refiners are not charging for treatment and refining.

 

"A reduction in treatment charges and refining charges from $80 to zero indicates an extremely tight supply of raw material (concentrate) relative to smelting capacity," said Gayan.

 

Treatment and refining charges are the fees that buyers of the metal pay smelters to convert concentrate into metal. "If treatment charges and refining charges goes to zero, smelters essentially process ore at no profit from treatment fees, relying only on metal recovery," Gayan said. In such a situation, smelters make money only if they recover a higher quantity of metal from the ore. The smelters also make money from selling by products such as gold and silver derived from copper ore.

 

LONG-TERM TREND

 

Copper has no substitute for its use in electric vehicles, wind and solar energy, and battery storage. The metal is vital in the transition to green energy, which is likely to keep demand higher over the next few years. Copper is also vital to support the rapid growth of data centres around the globe as nations embrace artificial intelligence and generative artificial intelligence technology.

 

BHP, the world's largest mining company, has estimated that the use of copper in data centres globally will grow sixfold by 2050 – from around 500,000 tonnes a year now to around 3 million tonnes a year by 2050. "That uplift is roughly equivalent to the combined annual output of the world's four largest copper mines today," the mining giant said.

 

"We expect copper prices to test new highs around $12,000 per tonne on LME and INR 1,150 per kg on MCX in the next 12-18 months," Navneet Damani, head of research, commodities and currencies at Motilal Oswal Financial Services said. He expects copper to outperform other base metals this year on hopes of stronger Chinese stimulus and green energy growth.

 

Investors are increasingly seeking refuge in hard assets such as gold, silver, copper, and platinum, which are historically viewed as stores of value during times of financial uncertainty. "The risk of sovereign debt crises, currency devaluations, and systemic financial instability could further reinforce this trend, making metals an attractive hedge against economic turbulence," Ole Hansen, head of commodity strategy at Saxo Bank said in a note to clients. End

 

US$1 = INR 87.21

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

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