Fitch’s BMI Commodity Insights tips copper price to go bonkers in the next decade
Copper M&A is surging with analysts and miners bullish on the long-term fundamentals
Large ASX copper pure plays outperforming lagging materials index
US$17,000/t!!!
That’s the eye-popping copper price Fitch’s BMI Commodity Insights thinks we’re going to see by 2033.
That goes way beyond the US$15,000/t some of the big investment banks have forecast in the years ahead, and would outstrip historical records by around US$6000/t, ushering a new copper-plated age for the mining industry.
There’s no secret the world’s mining giants and independent analysts view copper as the commodity with the most potential to outperform in the years ahead.
By 2030, ANZ thinks copper demand will hit 38.1Mt, up from usage rates the International Copper Study Group thinks will add up to 27.8Mt in 2025, thanks to expanding wind and solar infrastructure in China.
BHP’s chief economist Huw Mckay in 2023 wrote a plausible upside scenario for copper demand would only be filled if the mining industry wrote out a cheque for a quarter trillion US dollars in capex by 2030.
The most-traded three-month copper contract on the LME currently fetches US$9869/t, and briefly hit an all time high of almost US$10,900/t in May.
That recent strength has prompted BMI to up copper forecasts for 2024 from US$9200/t to US$9600/t in its latest update, reflecting investor sentiment that US rate cuts could emerge sometime this quarter.
But it’s BMI’s long term outlook of US$13,500/t by 2028 and US$17,000/t by 2033 that would really have investors’ eyes bulging like a resident of Toontown.
That’s way beyond the Bloomberg consensus.
Fitch is way ahead of consensus on future copper pricing. Pic: BMI Commodity Insights
“We are revising up our 2024 average annual copper price forecast from USD9,200/tonne to USD9,600/tonne, as speculative buying in hopes of monetary easing in the US that would result in further US dollar weakening, and expectations of stimulus from the Mainland Chinese government during the third plenum fuel price growth,” BMI said in a note this week.
“In the longer term, we expect prices to reach USD17,000/tonne in 2033, as the structural deficit persists due to a strong demand outlook as the green transition accelerates.”
Copper M&A
It goes without saying even those prices, attractive in historic terms, are not enough to encourage miners and banks to take the leap and invest in large new operations.
M&A has been the order of the day, highlighted by Rex Minerals (ASX:RXM) and its $393 million cash takeover by the Australian coal mining subsidiary of Indonesian instant noodle billionaire Anthony Salim.
READ: Minted Indonesian family sees red metal upside in Rex’ Hillside
But listed miners stayed on the sidelines of the bidding process, even BHP (ASX:BHP), which is building a 500,000tpa copper province in the Gawler Craton, just up the road from the 42,000tpa Hillside development.
It prompted Rex boss and former Western Mining operator Richard Lauffman to describe the mining giant as a ‘risk manager’ unprepared to add new copper tonnes to the market.
The deal was completed at a near 80% premium to its pre-offer share price, with the firm’s shares 120% up YTD.
BHP’s most recent, but unsuccessful, corporate foray was a play for London-listed mining giant Anglo American, which would have made it undisputed as the world’s biggest exporter of copper metal via the acquisition of Anglo’s stakes in the Collahuasi and Quellaveco operations in South America.
And Codelco, Chile’s State mining company and a victim of industry-wide cost inflation that has blown out its expansion projects at major mines like Chiquicamata, is rumoured via local media to be keen to drop US$500 million on a 10% stake in TSX-listed Teck Resources’ Quebrada Blanca mine in which another State entity ENAMI owns the minority share alongside Teck (60%) and Sumitomo (30%).
The upgraded QB2 project is expected to have a production profile of 285,000-315,000tpa from 2024-2026.
Pure play copper miners are few and far between on the ASX, but have largely outperformed the broader materials sector, which is down 13% YTD.
Newly listed Metals Acquisition (ASX:MAC), which owns the CSA mine in Cobar, is up ~9% YTD, with Sandfire Resources (ASX:SFR) 22% higher.
Turnaround story Aurelia Metals (ASX:AMI), a gold producer building a new copper dominant asset at Federation in New South Wales, is up 104%. Another NSW-based miner hammered last year due to a swag of production and earnings downgrades, Aeris Resources (ASX:AIS) is ~57% up, while Queensland focused AIC Mines (ASX:A1M) is up 35% YTD after hitting its 12,500t FY24 production guidance and starting development of its Jericho mine, adjacent to the Eloise copper operations.
Along with the thunder (and rain) struck 29Metals (ASX:29M), a handful of smaller producers have been in the red this year, including True North Copper (ASX:TNC) and the Glencore-backed Austral Resources (ASX:AR1), which is currently trying to recapitalise after briefly calling receivers in at its Anthill copper mine near Mt Isa.
South Australia’s Hillgrove Resources (ASX:HGO) has also been down on a year to date basis but says it is generating positive cash flow at its Kanmantoo underground mine in South Australia after producing over 1000t for the first time in a month in June, with quarterly reporting to begin soon for the newly-minted producer.
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