• August 29, 2017

Global economic recovery proving good news for copper

Published on August 29th, 2017

SNL SUMMARY | 29 August 2017 11:46 AWT | By  Angie East

Global growth forecasts of over 3% in the next couple of years will benefit copper, with an uptick already evident, according to CSA Global.

“Even with all the volatility that’s apparent in the world today, things are looking pretty good,” Eastern Australia and Pac-Rim Manager Patrick Maher told attendees Aug. 29 at the Mining Resources Convention in Brisbane, Australia.

“Overall for the next couple of years we’re looking at 3.5% to 3.6% growth, which is not bad at all. Advanced economies are still pushing in the right direction and most importantly they are looking at emerging markets and developing economies.

“I think this is where it’s starting to get exciting for everybody in the copper business and because it is really the commodity that’s most connected to the world’s economic recovery.”

The key driver of this is the advancement of the electric vehicle industry.

“Of course the revolution of the electric car industry is probably one of the biggest ones that we’re all watching and the extra amount of copper that will be needed there,” Maher noted.

The price of the red metal has gained in recent months on growing demand and decreasing stockpiles. In the past year, the LME cash price has climbed to over US$6,700 per tonne from over US$4,700 per tonne.

Meanwhile, LME stockpiles have come off a one-year peak of just under 380,000 tonnes to about 240,000 tonnes and stockpiles in Shanghai have declined from a peak of about 330,000 tonnes to below 190,000 tonnes.

“You can see pretty well on the pricing side recently that things are definitely on the up,” Maher said. “It is quite pleasing for anybody that’s selling copper at the moment.”

On the exploration front, however, there has been a “massive drop-off” in the definition of maiden resources.

In 2016, US$1.51 billion was spent on copper exploration, according to S&P Global Market Intelligence data. Latin America attracted the largest chunk of that, with US$592.5 million spent on copper exploration in the region. Australian explorers only invested US$145.7 million.

The vast majority of the global exploration budget was spent on late-stage and brownfields exploration.

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