Copper held firm above the $13,200-a-tonne level on Wednesday amid elevated supply risks caused by the ongoing war in the Middle East and optimism over its demand.
Prices briefly surpassed the $13,300 mark earlier in the morning, before pulling back to earlier-week levels. The red-coloured metal is coming off four straight weeks of gains and recently surged to nearly $13,500 per ton — about $1,000 short of the all-time high set in January.
After falling sharply at the start of the war, copper and other industrial metals have rebounded in recent weeks – a rebound that BMO Capital Markets metals and mining analyst Matthew Murphy attributes to “growing market confidence in de-escalation as the intense phase of the conflict has given way to a ceasefire and blockade, and is expected to transition to a deal that would allow shipping to resume through the Strait,” according to a research note published Wednesday.
Supporting the rally was the growing shortage of sulphuric acid caused by the closure of the Strait of Hormuz. It is estimated that around a fifth of the world’s primary refined copper supply relies on this input.
China — the largest sulphuric acid producer — is set to ban its exports starting next month, threatening the production outlook for copper miners.
Additionally, as the world’s biggest consumer, China’s consumption of copper is also showing signs of growth. Satellite data showed that activity at Chinese copper smelters was at an all-time high in March, coinciding with a sharp decline in copper inventory held by the Shanghai Futures Exchange.
Goldman maintains forecast
Given the supply risks, analysts at Goldman Sachs have maintained their average copper price forecast at $12,650 per tonne this year, despite predicting a 490,000-tonne surplus for the metal.
The disruption caused by the Strait of Hormuz closure, combined with China’s decision to ban sulphuric acid exports from May 1, could tighten a market critical for copper production, the bank said in a note on Tuesday.
Markets that are specifically exposed to these risks are the Democratic Republic of the Congo and Chile — two of the metal’s largest producers.
While companies in the DRC still hold two to three months of inventory, they could curtail about 125,000 tonnes of production this year if supply chain delays extend beyond late May through June, the bank warned. The African country relies on the Gulf region for the majority of its sulphuric acid imports.
A shortage of acid could also cause similar problems for Chilean producers. Last year, mining companies in the world’s leading copper nation sourced roughly a third of their sulphuric acid from China in 2025, Goldman noted. A Chinese ban could put 200,000 tonnes of production — or 1% of the global total — at risk, the investment bank said.
Miners in Chile generate around 1.125 million tonnes of copper through the SX-EW process — which uses sulphuric acid as a leaching reagent –and rely on China for around 20% of their acid supply, according to Morgan Stanley.
$15,000 in view
Commodity traders are also bullish on copper, especially in the long run. Those at Traxys expect prices to reach $15,000 a tonne within two to three years.
“I think we’ll see higher copper and maybe not by the end of this year,” CEO Mark Kristoff said Wednesday at the Financial Times Commodities Global Summit in Lausanne.
“But in the next 24 to 36 months, I think we’ll see $15,000 a tonne copper,” he predicted.
