Copper is still a megatrend to follow

Copper retreats with falling prices. Fears of weakening demand from China, but more generally from developed countries, have weighed on valuations, which remain in the $9,000 per tonne area, down about 20% from their mid-May peak. "What has given impetus to the rally in recent weeks has certainly been the demand in China, which has fallen today, but also the strong interest in artificial intelligence, hence also in servers that use copper to function," explains Maurizio Mazziero, founder of Mazziero Research. Already by next year, however, the copper market will suffer from a production deficit,' Mazziero continues. 'The demand for copper in 2023 was 25.2 million tonnes, against a production, between primary copper, the mined one, and secondary, the recycled one, of 25.3 million tonnes'.

But in 2025, the scenario is expected to change because, while production is stable, demand could grow a lot. Essentially for two reasons: the green transition and the development of data centres. "Copper is fundamental in the construction of wind turbines, but also for data centres that exploit the cloud, which is increasingly strategic for companies: these two drivers will contribute to the growth in demand for copper, making it a true megatrend," adds Mazziero . In times of economic slowdown, quotations usually fall, but in the coming months copper will be increasingly needed in various areas, and its use is set to grow accordingly'. Production more or less stable against a growing demand. "I can't say for sure where the price will go compared to today, but certainly in three years' time the price of copper will be higher."

And on the subject of valuations, for George Cotton, commodities portfolio manager at J. Safra Sarasin, "an attractive entry point for copper-related positions appears to be rapidly approaching", while forecast balances suggest that "copper shortages are likely to occur in 2026-2027", with likely bullish effects on demand. Indispensable for decarbonisation, the red metal has the most cross-cutting use in all sectors affected by the energy transition. This is also why until a few weeks ago, before the correction, forecasts for copper valuations were more than optimistic, with a projected price of up to $10,000 per tonne by the end of 2024.

"Copper weakened mainly due to stimulus news from China and disappointments related to merger activity, which led to a wave of liquidation by investors in recent weeks," concludes portfolio manager J. Safra Sarasin. The abrupt slowdown has certainly cooled enthusiasm about the outlook but, net of a supply that is not likely to grow by much, the role of copper remains crucial to the major challenges of the near future.