The rally in copper this year has flown mostly under the radar with so much else happening in markets but it's one that many people -- including Goldman Sachs' commodity team and me -- have written about for a long time.
Goldman's paper called 'copper is the new oil' is one of the most well-read research papers of the decade. The thesis is well known as copper grades are declining and there have been zero new projects approved this decade. In addition, the green transition (plus possibly AI) will require large amounts of copper and there's a setup for a structural deficit that will be very hard to solve without much higher prices.
That most had 2025 or 2026 ciricled as the year that deficit started to bite, in part due to the startup of the QB2 mega-project in Chile late last year. However at the same time, Panama also closed a mine that supplied around 1.7% of global output. That appears to have moved up some timelines, depending on who you ask.
As for Goldman, the same analysts with the 'copper is the new oil' moniker dropped another great line today saying, prices are only in “the foothills of what will be its Everest."
That was in Santiago where the copper world is meeting this week at the annual Cesco Week symposium. Prices are currently at a 22-week high but Goldman sees prices rising more than 50% from here, to $15,000 per ton or about $6.50/lb.
There were certainly differing views with some sticking to forecasts for physical tightness in the second half of the decade. However all six members of the panel of market participants were unanimous that higher prices are coming eventually. You can take that as a sign of a one-sided trade or a sign that no one can find holes in the forecasts.
In a separate report, here is what Citi had to say:
Funds have driven copper up to ~$9,500/t (+~20% since late November), on early signs of global reflation and in anticipation of physical deficits. Pure-play copper equities, which are even more forward-looking, have moved up to a price of $10.5k-12.5k/t copper into perpetuity, suggesting that there is further room for forward-looking investors to take the commodity price higher. Indeed, pure-play equity-implied copper prices are consistent with our view that we have entered the second secular copper bull market this century. Likely LME withdrawals of Russian metal and modest deficits should support prices around current levels over the next 3 months. We still see a path up to $15k/t by 2026 in our bull-case scenario.
One touted risk is that speculators are driving the current move. At the LME, long positions reached 84,117 contracts, equivalent to over two million tons, at the end of last week. That's the highest level since the LME started publishing its Commitments of Traders report at the start of 2018.
Over at the CME, copper longs are at the most since January 2018. What's also notable is that on both exchanges, short positions are also high, leaving the net below the 2021 peaks. Volumes are up around 20% y/y.
