Supercycle hit agency forecasts copper prices to $15, 000 over the next decade

On May 5, Trafigura, the world's largest copper trader, forecast that copper prices would top $10, 000 a tonne this year and $15, 000 a tonne over the next decade as global demand for decarbonisation creates a severe market gap.Goldman Sachs expects copper to hit $10, 500 a tonne within 12 months, while Citi expects it to hit $12, 000 next year.

Trafigura Group, the world's largest copper trader, expects copper prices to rise above $10,000 a tonne this year and to $15,000 a tonne over the next decade as global demand for decarbonisation creates a severe market gap.

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Trafigura expects copper prices to top $10, 000 a tonne this year

Even in the early stages of the COVID-19 crisis, Trafigura was betting that copper prices would rebound.Copper prices have doubled in the past year to more than $9,000 a tonne.Copper prices will break through record highs above $10,000 this year as Western economies recover from the epidemic and the green revolution takes hold, Kostas Bintas, head of copper trading, said in an interview.

So far, copper prices have been driven by supply disruptions and an unprecedented buying spree in Asia.Trafigura expects the price of copper, the bellwether raw material, to rise further as global investment in renewable energy and electric vehicle infrastructure surge in the coming years.

Trafigura expects copper prices to break through $10,000 a tonne this year and move into a range of $12,000 - $15,000 a tonne over the next decade.

Investment banks such as Goldman Sachs, Bank of America and Citigroup are also bullish on copper prices and offer similarly bullish short-term forecasts.Goldman Sachs expects copper to hit $10, 500 a tonne within 12 months, while Citi expects it to hit $12, 000 next year.Trafigura said it was likely to be the bottom for copper prices in the next few years as the industry revalued the metal.Bintas said that in a green economy, copper prices could not go much higher.

Global demand for copper has surged

While Asian urbanisation helped push copper prices to record levels during the last big bull market, Morgan Stanley expects the rest of the world to play a bigger role this time around.'In other parts of the world, we're really starting to see some breakouts in demand for copper,' said Graeme Train, senior economist at Trafigura Group.

During the outbreak, Trafigura surveyed clients across the industry and reported a rare surge in copper demand in Europe and the US, even before the green infrastructure stimulus took effect.In Europe, demand rose almost 5 per cent in the first quarter from a year earlier, a sharp contrast to the sluggish industrial growth rates of most of the past decade.

The outbreak has had a severe impact on the supply of scrap and mined copper, leading to a sharp decline in global stocks over the past year.As stocks approach critical levels, any further disruptions could start to have a big impact on copper prices, Mr Trafigura said.

Beyond the futures market, Trafigura also expects profound changes in the physical sector as markets slide further into the red.Processing fees for smelters to turn mined ore into finished metal are already at their lowest level since 2010 and could soon fall to zero or even negative, Bintas said.

While this will put severe pressure on the profitability of smelters, tight supply of refined copper will spur higher freight premiums paid by customers.By-product prices could also rise, helping to offset some of the impact, he said.

The coming green revolution has boosted the outlook for many industrial metals, prompting some analysts to suggest a new supercycle is in store for commodities markets.But Trafigura said tight copper supplies set it apart and underpinned its bold price forecast.