– Copper is used in electric vehicles and battery storage technology, and demand for both will be high.
Currently, the price of copper is continuously decreasing. Demand for base metals would naturally remain low at a time when fears of recession are rising across the world, and due to this, copper prices are continuing to fall. Benchmark copper prices fell by one percent on the London Metal Exchange last Friday.
The price of this metal, which is widely used in the electricity and construction industry, has fallen by about 30 percent from the level it was in last March. The problem of the Kovid epidemic was severe in China until recently and at the same time the demand for drugs in other parts of the world is also weak. As the dollar continues to appreciate, metals denominated in dollars are proving expensive for holders of other currencies. This is a major reason behind the low demand for copper. On the other hand, inflation in the US and European countries has reached not just years but decades highs, which is driving up interest rates and thus slowing economic activity. Thus, the demand for copper is decreasing as mentioned above.
From the current commodity prices around the world, there is a possibility of a severe recession in America this year. This recession will start from America, but other countries of the world will need it.
Along with other metals, copper is currently on a downward trend. Copper was running at a near 17-month low until last week. Credit Suisse says the price of copper could fall further and has support at $6,844. Above is support at $8,740. A similar view has been expressed by many other analysts.
Currently, the demand for copper in the construction sector has been adversely affected. Demand is limited in household consumption, but demand is expected to sustain in the coming days as it is increasingly used in electric vehicles. The demand for copper is also high in the renewable energy sector, so copper will decrease in the near future, but its demand will not decrease much. On the other hand there is also an option of copper plastic, which provides an optimistic picture in the near future.
While talking about copper, it is also necessary to study its two main producing countries, Chile and Peru. These two countries account for 40% of the total global production. Chile’s world’s largest mine has reached production limits. It may also be mentioned here that the discovery rate of copper reserves like gold has also decreased. Also, the time it takes for a reserve to be discovered and produced from that location increases costs, and because of this, conditions are soft for copper.
Between 1990 and 2019, 224 mines containing copper were discovered. It is to be noted that in the last 10 years only 16 places have been found. Nature has provided the earth with abundant copper, but the newly discovered amount of copper appears to be of low quality, so that may be a big challenge in the near future. In such circumstances, copper is used extensively in electric vehicles and battery storage technology, and demand for both these items will remain high. Until recently, the sale of electric vehicles was around 30 lakh units, which is likely to be seven crore units by 2040. The International Energy Agency has stated that copper is widely used in renewable energy technologies. Although aluminum is used as an alternative in the electrical sector, copper is superior in terms of quality. Goldman Sachs estimates that by 2030, global copper traffic will increase by nearly 600 percent and total demand will reach 5.4 million tons.
In short, copper is a base metal and even though demand and prices for base metals may be weak for a while, overall its future is bright.