Katusa Research Indicates Copper Inventories Will Cover Just ONE DAY OF FORWARD CONSUMPTION
by 2026
Consuming Way More Copper Than Available
One of the most striking indicators of copper’s looming supply crunch is the rapid decline in days of forward consumption.
In 2019, global inventories covered 20 days of forward consumption.
Fast forward to 2025, and that number shrinks to just 4 days
and by 2026 it could be down to just a SINGLE DAY.
This huge reduction highlights how fragile the supply chain has become.
With inventories falling, prices are bound to rise as industries scramble to secure their copper needs.
The copper market is poised for a significant supply crunch in the coming years, with demand expected to outpace available supply by 2025-2026. This looming shortage is driven by several factors, including the rapid growth of artificial intelligence (AI) and data centers, as well as the ongoing transition to green energy technologies.
Goldman Sachs predicts that global copper mine supply will grow by only 2% in 2024, down from previous forecasts and marking the weakest growth since 2020. Meanwhile, demand continues to surge, particularly from AI data centers.
These facilities require significantly more copper than traditional data centers, with estimates suggesting they could consume up to 80,000 tons of copper in 2024 alone, doubling to 160,000 tons by 2026.The supply-demand imbalance is expected to result in a deficit of 454,000 tons in 2024 and 467,000 tons in 2025.
This tightening market could lead to a potential shortage as early as the fourth quarter of 2024. To address this scarcity and incentivize long-term mine investment, Goldman Sachs suggests that copper prices may need to reach $15,000 per ton by 2025.
Bank of America echoes these concerns, forecasting average copper prices of $10,750 per ton in 2025, rising to $12,000 per ton in 2026. The bank's commodity strategist, Michael Widmer, highlights the critical nature of the situation, noting that global inventories could cover just 4 days of forward consumption by 2025, down from 20 days in 2019.
To meet growing demand, mining companies are turning to acquisitions and expansion projects. However, bringing new mines online is a time-consuming process that cannot quickly balance supply and demand. The situation underscores the need for increased investment in copper mining and recycling to support the green transition and the burgeoning AI industry.
Citations:
https://www.spglobal.com/marketintelligence/en/news-insights/blog/copper-project-pipeline-project-shortage-to-see-supply-lag-demand-post-2025
https://www.cruxinvestor.com/posts/structural-copper-deficits-soon---strategies-to-capitalize-from-bull-market-ahead
https://longportapp.com/en/news/203465149
https://www.wsj.com/articles/ai-siphons-copper-supplies-needed-for-green-transition-8fef79e6
https://markets.businessinsider.com/news/stocks/bank-of-america-sees-gold-at-3-000-warns-of-a-copper-supply-crisis-metals-dance-to-their-own-tune-1033234049
https://www.cnbc.com/2024/01/03/copper-appears-set-to-rally-more-than-75percent-by-2025-analysts-say.html
https://www.techopedia.com/investing/copper-price-forecast
https://www.marketwatch.com/story/bank-of-america-says-the-copper-supply-crisis-is-here-138853d2