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The Oregon Group predicts copper supply gap

TORONTO — The supply of copper, essential for a host of industries and crucial to green technology and the global energy transition, is expected to face a supply gap of nearly 10 million mt within the next ten years according to a new report. The Oregon Group predicts a long-term supply deficit in the copper market, despite the existence of large global reserves in its report, entitled “Copper: At the Centre of the Metal Supercycle”.

The report examines key trends affecting global copper supply and demand. These include years of supply side underinvestment, rising geopolitical tensions, and exponential growth of industries connected to decarbonization.

Due to the global green economy, copper demand is expected to nearly double by 2030. The Oregon Group believes that despite stark warnings from major copper producers in recent years, production has yet to recover from more than a decade of neglect. Dwindling ore grades, aging mine infrastructure, higher development costs, and also minimal exploration in prior years means primary supply is badly equipped to cope with a major, sustained rise in demand. According to Bloomberg NEF, the upcoming supply upcoming supply shortfall could be so large that it could “hold back global growth, stoke inflation by raising manufacturing costs and throw global climate goals off course.”

Overall, these trends will benefit a number of players in the copper market. Existing producers like Freeport-McMoRan, First Quantum, and Southern Copper have the potential to see continued strong profits from their copper production. Large development plays like Faraday Copper and also past producers with near-term production potential such as US Copper Corp.  are positioned to benefit once they move into their next phase of development.

ETFs and ETNs, such as the iPath Series B Bloomberg Copper Subindex Total Return ETN, Global X Copper Miners ETF, and United States Copper Index Fund are directly linked to the price of copper and will see strong value in a higher priced copper market.