- Copper and iron ore have broken through $10,000/t and $200/t, respectively
- New copper supply needed for energy transition
Chinese demand for copper and iron has pushed them to record or near-record highs this week. The steel ingredient crossed $200 (£144) a tonne (t), while copper is now safely over the $10,000/t mark.
This has sent miners like Rio Tinto (RIO) and BHP (BHP) close to their own record prices, while copper producer Antofagasta (ANTO) is trading at a record of 1,895p.
Outgoing Glencore (GLEN) chief executive Ivan Glasenberg told a Financial Times event on Thursday copper would need to jump another 50 per cent for enough supply to come online.
“You will need $15,000 copper to encourage a lot of this more difficult investment,” he said.
Copper reserves are falling as the easiest deposits have been found already. There are promising new projects, like the Kamoa-Kakula mine in the Democratic Republic of Congo and Anglo American’s (AAL) Quellaveco in Peru, but none at the scale of BHP and Rio’s Escondida or Freeport McMoRan’s Grasberg mine in Indonesia. Many of the biggest mines currently were discovered decades or even over a century ago.
The current highs have come largely from demand, but supply issues have played a role, with some copper shutdowns in South America and wild weather in Australia for iron ore.
There are also geopolitical factors at play for iron ore, given China and Australia’s worsening relations. BMO Capital Markets analyst Colin Hamilton said iron ore would be the last commodity affected by this recent snafu, which has seen China cancel a key trade dialogue.
“We don’t expect any formally announced restriction on trade from either party, as it is simply too important to both. Australian iron ore fuels 60 per cent of China’s steel output and cannot be replaced in short order, while the tax revenue and terms of trade impact for Australia is significant,” he said.
China is looking elsewhere for iron ore supply, largely in Africa, but any new mines would take well over a decade to compete with Australian supply even on the most optimistic timelines.
Read more about the potential commodities supercycle.
