According to Bloomberg, the world's largest copper trader expects prices to hit $15,000 a tonne over the next 10 years as global demand for decarbonisation creates a severe market gap.

Even in the early stages of the covid-19 crisis, Trafigura was betting on a rebound in copper prices, which have doubled in the past year to more than $9,000 a tonne. Copper Trading Director Kostas Bintas said in an interview that the commodities giant expects prices to hit record highs above $10,000 as Western economies emerge from the epidemic and the Green Revolution begins.

So far, copper has been driven higher by supply disruptions caused by the virus and an unprecedented buying spree in China. China consumes half the world's copper. But as global investment in renewable energy and electric vehicle infrastructure surges in the next few years, Tokke believes raw materials prices, the industry's bellwether, will rise further.

"We think that copper is going to be stronger in this new coronavirus crisis, and it is, " Bintas said. "What NCP has done is it has made the rest of the world a major factor in the growth of consumption, whereas in the past, copper was only associated with China. "

TRAFIGURA expects copper prices to break through $10,000 a tonne this year and into a range of $12,000-$15,000 a tonne over the next 10 years. Other bullish copper investors, including Goldman Sachs Group Inc. , Bank of America Corp. and Citigroup Inc. , have similarly strong short-term expectations, but TRAFIGURA's long-term goals are high.

Goldman Sachs expects copper to hit $10,500 a tonne in 12 months, while Citi's bullish forecast is for $12,000 next year. That could be the lower end of the price range over the next few years as the metal industry revalues, Tokke said.

"You can't turn to a green economy and not let copper prices go much higher, " Bintas said. "How can you have one and not have the other? " While China's urbanization pushed prices to record levels during the last major bull market, the trading company expects, this time the rest of the world will play a bigger role.

"China has largely lived up to its commitments, " says Greim Train, Trafigura senior economist, "while in the rest of the world we are really starting to see some breakthroughs in demand. "

1. Demand Surges

Trafigura sold 4.4 m tonnes of copper in 2020, further overtaking glencore as the world's largest copper trader. Unlike Glencore, Trafigura is no longer buying mines and is even planning to sell part of its operation in Spain -- Foshan -- whose profits are largely in the physical copper market.

During the pandemic, Tokke surveyed customers across the industry and showed a rare surge in demand in Europe and the US even before the green infrastructure stimulus went into effect. In Europe, demand grew almost 5 per cent year-on-year in the first quarter, in sharp contrast to sluggish industrial growth for much of the past decade.

"All the feedback we got was that it was their best quarter ever, " Train said. TRAFIGURA's bullish forecast for copper will be welcomed by investors who have flooded into the market over the past year, as well as mining companies that have already made fat profits. But for consumers, it's a different story. Some leading copper producers have warned that the surge in copper prices will prompt buyers to look for alternatives, such as aluminium, which is used in electrical wiring. High prices also encourage waste dealers to increase their collection.

2. Running out of stock

But with the green revolution, Tokke believes the pressure on supply will be too great to prevent prices from soaring. In 2019, coronavirus disease severely affected the supply of copper scrap and mined copper, resulting in a sharp decline in global stocks over the past year. As inventories approach a critical level, any further supply disruptions could start to have a significant impact on prices, Trafigura said.

"When you see copper being repriced in a low-inventory environment, the market is saying that only the people who really want copper will get it and they will have to pay a higher price for it, " Train said.

In addition to the futures market, Trafigura expects some profound changes in the physical sector as the market slides further into deficit. The cost of processing finished ore at smelters is already at its lowest level since 2010 and could soon drop to zero or even negative, Bintas said.

While this will put severe pressure on smelters'profitability, tight supplies of refined copper will push up transport premiums paid by customers. By-product prices could also rise, helping to offset some of the impact, he said. The coming Green Revolution has boosted the outlook for many industrial metals, prompting some analysts to suggest a new supercycle in commodity markets. But Tokke said the tight supply of copper made it unique and supported the company's bold price forecasts.

"I'm not sure about the supercycle for commodities, but I'm 100 per cent sure about the copper supercycle, " Bintas said. 2021 the global economy rebounded from the epidemic, with China leading the world in economic growth, surging demand from copper entities, limited supply growth from copper entities, and limited supply of various types of social stocks and scrap copper, in the super cycle of global investment and speculative capital being heavily invested in commodities caused by the overflow of the US dollar and the general trend of financial war between China and the US, Dr. Copper is bound to become the shining star of price growth and the key commodity of financial war in commodities, copper is expected to 2021 above 100,000 yuan per ton, after breaking or have a significant correction in the range of 60,000-80,000 shocks or the probability (the stage of financial tug-of-war) ! 

Source: Mining