Factors That Affect the Price of Copper

According to The US Geological Survey (USGS), the total amount of discovered copper is 2.8 billion metric tons.

The USGS also estimates that undiscovered resources contain about 3.5 billion metric tons of copper, which would mean that there are roughly 6.3 billion metric tons of copper on Earth.

Copper is easy to work with and is a great conductor of electricity and heat, making it vital to today’s technological advances, as it has been throughout history.

The global copper market is one of the largest, along with iron and aluminum.

There are several factors affecting base metal prices, such as supply, demand, and existing stockpiles.

Let’s take a deeper look at each factor and how it could affect copper prices in 2022.

COVID Response Boosts Green Metals

On a global scale, the response to COVID-19 has spurred plans for a “green revolution” in which copper would play a major role.

The EU, China, and The US have all put forth plans to move away from conventional fossil fuels and shift to clean energy.

The EU has promised €91 billion for green heating, another €20 billion for electric car subsidies, and a commitment to build two million charging ports.

In the US, President Biden’s administration has put forth a $1 trillion infrastructure plan that will boost electric vehicles access.

The plan includes tax incentives for consumers buying EVs, and $7.5 million dedicated to building charging ports.

China has made its intentions clear that it wants to dominate the EV market.

By 2028, China will be making over eight million electric cars a year, according to estimates.

In the same time frame, Europe is on track for 5.7 million EVs per year, while the US lags behind at 1.4 million.

All in all, the rampant production of EVs and other clean energy solutions will feed into the demand for copper.

For example, it takes about 83 metric tons of copper to construct 1,000 EV batteries.

It’s clear to see that there is no green revolution without copper.

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Commodities Used in Electronics

Whether you’re reading this on a smartphone, laptop, or PC, your device likely contains copper.

The car you drive, the home you live in, and the technology you interact with every day all rely on copper and other materials to function.

Copper’s versatility and conductive properties keep it in constant demand, although the level of demand has fluctuated.

Between 2017 – 2020, copper prices remained at around $6,000 per tonne.

The COVID-19 pandemic was a major factor affecting the supply and demand for copper, and ultimately copper prices.

At the height of the pandemic, prices dropped sharply with demand, as countless operations shut down and global economies ground to a halt.

But as vaccines helped re-open economies, copper prices increased to new highs at around $11,000 per tonne in Q2 of 2021.

Though it’s unlikely copper will finish the year at record highs, copper could be heading for a good year in 2022 and beyond.

What Factors Determine Copper Prices?

Before investing in the copper market, you should know what factors affect its price. The copper market is subject to typical market influences, such as supply and demand, but other factors are more unique to the red metal.

Copper is key to construction and infrastructure. When economies are booming and expanding, copper demand accelerates, providing a nice boost to its price.

Construction accounts for about 25% of copper use, and electrical use accounts for about 17%.

With so many governments worldwide pushing for green technology, it’s not unreasonable to surmise that copper demand could remain high for years to come.

There is a finite supply of copper on earth.

While most of it is still buried beneath the surface, the existing supply of copper has been put to use and recycled over time.

You may read about copper supply shortages, but in reality, there is no shortage of copper. There is a shortage of readily available copper.

As nations ramp up their efforts to produce green technology, the race to eat up as much copper can spell disaster for supply.

Smart investors know that when demand for a commodity is high, and supply is either low or difficult to attain, the price for that commodity usually soars.

To help offset some pressure on the copper market, governments may dip into their existing stockpiles.

But this is only a temporary solution.

And as copper demand grows, more governments will likely try to add to their existing stockpiles in preparation for their plans.

Copper Forecast for 2022

Despite how well copper did in 2021, in total there was a deficit in the amount of copper produced.

The good news is that estimates for 2022 put copper supply ahead of demand.

Experts say copper demand is expected to grow by about 2.4% and that refined copper output should grow by nearly 4%.

The growth in refined output is thanks to new and expanded operations worldwide.

There was a big concern in 2020 about how mining companies would recover from the extended Covid shutdowns.

Fortunately, strong mining operations worldwide were able to recover—and more importantly—grow.

So what does this mean for copper prices in 2022?

With an increase in supply, the price of copper should take a hit, but not a major one.

By the end of 2021, experts believe the copper prices should fit in the range of $9,315-$9,880 per tonne.

At the end of 2022, experts forecast copper prices to trade at $9,500 per tonne.

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