The copper price has hit a 10-year high of US$10,000 per tonne, partly driven by demand from China, the world’s second largest economy. Copper prices are strongly correlated to the Chinese economy, hardly surprising given that the country accounted for 50 per cent of global demand in 2020 but only produced 8 per cent of supply (source: UBS). International Monetary Fund (IMF) forecasts China’s GDP growth of 8.4 per cent in 2021, up from 2.3 per cent in 2020.
The resurgent North American economy – UBS predict 8 per cent plus GDP growth in 2021 – is another reason why the copper market moved from surplus to deficit in 2020. Estimated global demand of 26.1m tonnes exceeded supply of 25.5m tonnes, and the market remains tight. US housing starts and building permits are at their highest levels since 2006. That’s worth noting because the construction industry accounts for 30 per cent of global demand for copper.
Furthermore, the infrastructure and green energy stimulus programmes that have been unleashed in response to the Covid-19 pandemic are all copper-intensive. For instance, wind farms and solar panels require five times more copper than for fossil fuel power generation, and electric vehicles use four times as much copper as ICE vehicles.