As the world hurtles toward an electrified future, the copper market stands at a crossroads.
Insights from JPMorgan analysts Patrick Jones, Greg Shearer and Bill Peterson paint a complex picture: short-term hurdles for copper prices, but a glittering long-term outlook driven by electric vehicles and evolving supply dynamics.
This could seem as good news for those invested in United States Copper Index Fund ETV (NYSE: CPER), Global X Copper Miners ETF (NYSE: COPX), iShares Copper and Metals Mining ETF (NYSE: ICOP) for the long-term.
EV Boom: Supercharging Copper Demand
The electric vehicle revolution is set to electrify copper demand. JPMorgan predicts copper usage in EVs will more than double from 1.4 million metric tons in 2023 to 3 million by 2030. While some worry that technological advances like thinner copper anode foils could dampen demand, the analysts argue otherwise.
Larger EV sizes and a pivot toward lithium-iron-phosphate (LFP) batteries - which are more copper-intensive - are expected to drive long-term growth.
New Technologies: Leaching A Lifeline?
Leaching technologies are generating buzz, but can they revolutionize copper supply? Not yet, say the analysts. While projects from major miners like Freeport-McMoRan Inc (NYSE: FCX) and BHP Group Ltd (NYSE: BHP) are on the horizon, these advancements are unlikely to offset supply declines before 2030.
At best, leaching could add 550,000 metric tons annually, just 2% of global supply.
Scrap & Recycling: The Unsung Hero?
Recycling is a crucial cog in the copper machine, accounting for about 17% of refined supply in 2024, up from 14% in 2020. JPMorgan forecasts scrap supply will grow by 5-6% annually, faster than historical rates, yet insufficient to bridge the long-term deficit. Recycling alone won't solve copper's supply crunch.
Near-Term Risks, Long-Term Rewards
JPMorgan warns of near-term risks from macroeconomic pressures, particularly a potential devaluation of the Chinese yuan to 7.8 to 8.0 per U.S. dollar. This could lead to a 12-15% dip in copper prices, presenting headwinds for equities. However, the analysts remain bullish on the long-term trajectory, underpinned by a looming supply-demand gap.
Their picks?
Lundin Mining Corp (OTC: LUNMF) leads in EMEA, while Teck Resources Ltd (NYSE: TECK) tops the Americas. Asia-Pacific favorites include Zijin Mining and Merdeka Copper, with caution advised on Jiangxi Copper and Sandfire Resources.