A bright present, an even brighter future

Commodities analysts are forecasting bright futures for copper and aluminum, which are enjoying strong demand and pricing presently.

A New York-based analyst with Goldman Sachs predicts copper will approach $51,000 per metric ton, or $6.80 per pound, by 2025 in his analysis titled “Copper is the new oil.”

According to the Business Insider website, Goldman Sachs’ Jeffrey R. Currie predicts that copper will be vital in replacing oil with renewable energy, and “a supply crunch” has the potential to increase pricing “by more than 60 percent in four years.”

Currie’s analysis 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.

“Consumers are trying to buy only what they need in the short term. They don’t want to go long, but they don’t mind paying the market price.” – a contact with a scrap processing company in the Upper Midwest

The global transition toward renewable energy could increase copper demand by up to 900 percent on an annual basis to 8.7 million tons by 2030 “if green technologies are adopted en masse,” according to Business Insider.

Currie says copper mining and production aren’t ready for such a rapid increase in demand, however. He adds that the strain already is visible, with copper pricing rising by nearly 80 percent over the last year, though output has not increased similarly.

Analysts say aluminum also will benefit from the transition to green energy and green mobility, with Julian Kettle of U.K.-based Wood Mackenzie saying demand will increase by about a third by 2040, while the World Bank says 6 million tons of the metal will be needed annually by 2050.

Aluminum’s outlook for the year ahead is more muted, though. Mining.com reports that Fitch Solutions has forecast an aluminum price of $1,850 per metric ton this year compared with $1,731 per metric ton in 2020, noting that increasing supply from China in the global market is expected to limit the rise in prices.

However, the London Metal Exchange (LME) aluminum price has exceeded the Fitch forecast so far in 2021. In March, the LME aluminum alloy settlement price averaged $2,187 per metric ton. In February, it was at $2,080, up from $1,960 in January. This pricing strength has extended to aluminum scrap prices.

“All of the markets are really quite bullish in metals, whether ferrous or nonferrous,” a contact with a scrap metal processor based in the Upper Midwest says.

The processor adds that industrial generation of nonferrous metals remains 20 to 25 percent softer than prepandemic levels, but scrap demand and pricing are strong.

Scrap consumers have not been widening the spreads they are willing to pay relative to terminal market prices, he says, with the exception of export orders for birch/cliff, the mixture of No. 2 copper wire and No. 2 copper solids and tubing.

Prompt deliveries also are available with red metals and aluminum consumers. Scrap consumers are even looking for spot purchases of bare bright and No. 1 copper, which wasn’t the case in the fourth quarter of 2020 or January of this year, the contact says.

“Consumers are trying to buy only what they need in the short term,” he says. “They don’t want to go long, but they don’t mind paying the market price.”

He says he believes red metals prices have room to go much higher, adding, “I think there are going to be high prices and that it will be difficult for consumers to buy enough to widen their spreads.”