Goldman Sachs tabs red metal as red hot

A commodities analyst from New York-based Goldman Sachs calls copper “the new oil” and predicts its price is heading toward $51,000 per metric ton, or $6.80 per pound, by 2025.

An April 14 article on the Business Insider website refers to an analysis titled “Copper is the new oil,” by Jeffrey R. Currie at the investment bank. One premise of the analysis is that copper will be crucial in replacing oil with renewable energy sources, and that “right now, the market is facing a supply crunch that could boost the price by more than 60 percent in four years.”

An analysis released in March by United Kingdom-based Wood Mackenzie alludes to the ongoing likelihood of such a supply crunch if the government of China adheres to its plan to switch from fossil fuels to more renewable and more carbon-neutral energy sources by 2060.

In the United States, the Biden administration’s effort to make alternative energy a key part of its $2 trillion infrastructure plan also ties into potential copper demand. For copper producers, a $174 billion portion of the plan supporting the EV industry includes funding to “establish grant and incentive programs for state and local governments and the private sector to build a national network of 500,000 EV chargers by 2030.”

Currie’s analysis for Goldman focuses on the next five years and sees copper rising to as much as $11,000 per ton ($4.98 per pound) by mid-2022 and $15,000 per ton by 2025.

“Discussions of peak oil demand overlook the fact that without a surge in the use of copper and other key metals, the substitution of renewables for oil will not happen,” Business Insider quotes part of the report’s text as saying.

As of mid-April, copper is trading at more than $9,000 per metric ton, which at more than $4 per pounds is already considered at the high end of its historic trading range.

The Goldman analysis points to the creation of new infrastructure systems, whether in China, the United States or other nations, as necessary in any energy transition away from fossil fuels.

These global transitions could cause demand for the red metal to increase by up to 900 percent on an annual basis, to 8.7 million tons by 2030, “if green technologies are adopted en masse,” the Business Insider report says. Even in a slower transition copper demand could “still surge to 5.4 million tons, or by almost 600 percent,” says the website.

A separate equity research analysis from Goldman Sachs released this January focusing on China's net-zero carbon emissions by 2060 plan tied that effort alone to a 15 percent global increase in copper demand.

The analysis authored by Currie points to copper’s role in electric vehicle (EV) batteries, EV charging infrastructure and other “clean energy” alternatives being explored throughout the world.

According to Currie, the copper mining and production sectors are not prepared for such a swift increase in demand. The strain already is showing, says Goldman Sachs, with the copper price rising by about 80 percent in the last 12 months with as yet no matching rise in output.