the reasons behind the spectacular increase in its price… and the cases of theft
On Sunday the Catalans were going to vote and found that a gigantic copper theft left them almost without Rodaliesits commuter trains. It was the umpteenth robbery. The next one was last Tuesday, this time in the province of Lleida. Days before, the Mossos d’Esquadra arrested eight people who were part of an alleged criminal group specialized in the theft of copper from companies in Catalonia.
But it is not that the copper used in Catalan infrastructure is better. The theft of cables of this mineral occurs throughout Spain. Without going any further, in April, the Civil Guard arrested seven people in León accused of the theft of 250 kilos of copper wiring in the AVE works being carried out in the municipality of La Pola de Gordón.
Half of the robberies in Catalonia
Copper cable thefts continue to increase and The railway sector is one of the most affected. According to Adif, in 2022 there were 72 thefts, 151 in 2023 and in the first four months of 2024 there are already 46. And yes, the majority of copper thefts in the Cercanías and Regional networks occur in Catalonia.
Of the 11,151 acts of vandalism against road safety recorded by the Ministry of Transport, 52% was in Catalan infrastructures. By city, 32.5% of the cases occurred in Barcelona, 11.4% in Madrid, 10% in Tarragona and 8.5% in Girona.
(Almost) at the price of gold
Copper thefts are a constant. It wasn’t even gold! Or in another way, is copper worth so much that there are organized gangs systematically dedicated to copper theft? It’s not worth as much as gold, but Copper is at historic highs in 2024.
So far this year the price has risen 21.2% and that of copper futures has risen 29%
This Wednesday, the value of copper rose 1.4%, going from 4.57 dollars per pound to 4.63. So far this year the price has increased by 21.2%. Copper futures were trading at $5 per pound as of May 15, the highest level since March 2022, when the price already hit an all-time high. So far in 2024, the price has accumulated a rise of 29%.
How is this price explained in maximums?
To begin with, copper becomes more expensive because there is demand, a lot of demand. According to Statista, the total production of copper mines in 2023 was about 22 million metric tons, compared to 16 million metric tons in 2010. S&P Global forecasts that demand will double, especially in the US, China, Europe and India, reaching 50 million metric tons in 2035.
The projected growth suggests that the world production will reach 30 million tons metrics in 2036, assuming production continues at the same pace.
Why is so much copper required?
As a summary, behind the rise in demand, and therefore the price of copper, there are three fundamental reasons:
- The transition towards green energy
- The rise of electric cars
- The expansion of artificial intelligence
Many economists believe that we are facing a structural change. For this reason, S&P Global predicts that copper prices “will rise in the long term as result of the transition towards clean energydespite the apprehensions that prevail in the short term.” However, the expected increase in production is much lower than the expected increase in demand.
Lack of investment in base metal mining
There are more elements that explain the high price of copper. Lack of investment in base metals mining could exacerbate the problem of supply shortages in the coming years, writes Tina Teng in Euronews. Goldman Sachs data indicates that the investment in mining companies in 2022 was almost 50% lower than in 2010. This applied to copper could cause an increase in the deficit in copper supply from 2024.
The new level [entre 5,50 y 6 dólares/libra]”It will depend on whether such a high level will be able to encourage new mining projects that increase supply.”
“Copper is on its way to seeking a new level that balances demand and supply. That new level may be in that range [entre 5,50 y 6 dólares/libra]but also It will depend on whether such a high level will be able to encourage new mining projects. that increase the supply. Today we have more weakness and uncertainty in supply than strength in demand in relative terms,” reads a report from Scotiabank (Canada’s third-largest bank) echoed by the newspaper. Third.
China’s key role
In that sense, China plays a fundamental role in the copper supply chain. What this country does and decides is key because it is both a major supplier and consumer of copper.
And what has happened this year is that in March the Chinese copper smelters They reached an agreement to reduce production between 5% and 10% in response to a sharp decline in copper treatment prices. That decision caused copper prices to rise to their highest level in a year, initially exceeding $4 per pound.
The effect of speculation
Then, one fall of the US dollar boosted copper prices to over $4.2 per pound in early April. They added to this fund purchases, driven by speculation that central banks would implement interest rate cuts later in the year. And so, today, two months after the Chinese decision, we are at $5/pound futures.
According to Macquarie Group (a global investment and financial services fund), the recent bullish momentum is based on investors’ fear of losing profitsrather than any observed changes in underlying market equilibria.
It will continue to rise
It is not going to stop at 4.5 or 5 dollars per pound. Bank of America analysts warn of an additional 11% rebound in 2026 from the current price. They believe that a combination of tight supply and growing demand will push copper prices up to $5.44 per pound within two years.
“It gives the impression that we are going to have a high copper price at least in 2024 and 2025.”
“It gives the impression that We are going to have the price of copper high at least in 2024 and 2025 unless there is an unexpected slowdown in demand. A price above 5 dollars/pound for 6 or 8 quarters will undoubtedly generate appetite for more investment, acquisitions, mergers, among others,” explains the Scotiabank report. Its analysts expect a price of 4.5 for 2024 and “something similar for 2025”.
Chile, the largest copper producer
In Chile they are happy. The South American country is the leading copper producer in the world, with enormous distance over Peru, China, the United States and the Democratic Republic of the Congo. Chileans have their production under control. In 2023, the amount extracted was the lowest in 20 years. At the end of last year, 5.25 million tons were removed from Chilean mines, 1.4% less than in 2022.
Chile expects the average price of copper to remain stable until 2028
Only a Chilean company, the state-owned Codelco is key in the course that the price of this mineral may take. In 2010, it produced 11% of all the copper mined on the planet. But this company is also extracting less: in 2023 it was 1.42 million tons.
Copper is worth so much and so much is extracted in Chile that the Government of this country has raised its economic growth forecast for this year. The Chilean Ministry of Finance estimates that GDP will grow by 2.7% this year, compared to the February forecast of 2.5%. And that’s because they expect copper to rise this year and the average price to remain stable until 2028.
