The enigma of copper, down 30% from the beginning of the year. But traders fear an imminent shortage of red metal – Il Fatto Quotidiano

Since the beginning of 2022 the price of copper dropped by 30%. The global economy slows down and the red metal is the one that is most directly and quickly affected by the economic situation. Especially the Chinese construction industry, a sort of dewatering pump and other raw materials, is in crisis and demand is falling. Yet copper stocks are dwindling so that is starting to worry traders. Today they amount to 4.9 days of global consumption and may have dropped by the end of the year at 2.7 days, well below the historical average. Mining giant Bhp says there may be a persistent and significant imbalance between available copper and demand. It transfigures, one of the largest commodity traders in the world, do not rule out an imminent price rebound. According to Chilean state group Codelco, mining 1.5 million tonnes of copper annually, copper buyers are so worried about future metal shortages that they are starting to ask for much longer than normal contracts to guarantee deliveries within three to five years. Contracts usually do not exceed one year.

Where do these concerns come from? From the fact that the consumption of copper for everything it has to do with energy transition, electric cars and renewable sources it’s gigantic. In a 3 MW wind turbine they are found for example nearly 5 tons of copper. If installed in the sea they become more than double. For photovoltaic systems, the use of copper is about one ton for each megawatt. The United States, which wants to increase its photovoltaic generation capacity to 262 GW by 2027, will need nearly one million tons of additional copper in 5 years, against a global consumption of 25 million tons. As with any metal or hydrocarbon the more it is extracted the more difficult and expensive it becomes to do it since the most profitable and easiest to process fields are the first ones that are used. Copper is mostly found in Chile and Peru and extracting it requires a lot, a lot of energy produced with …. fossil fuels. Not only do drilling rigs consume huge amounts of diesel but the trucks, giganticwhich carry the material “suck” gallons with frightening voracity.

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The enigma of copper, down 30% from the beginning of the year. But traders fear an imminent shortage of red metal – Il Fatto Quotidiano

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