The global copper market is witnessing a whirlwind as shares of major copper miners, represented by the Global X Copper Miners ETF COPX, surged by over 13% in March. This surge marks an extraordinary month for copper stocks, the best since November 2022, propelling key players like Southern Copper Corp. SCCO and Freeport-McMoRan Inc. FCX to impressive gains of 25% and 18%, respectively.
At the core of this meteoric rise lies the elevation in copper prices, fueled by an unprecedented tightness in the global copper market.
The surge in copper prices has been driven by a confluence of factors, including record-low copper stocks, an anticipated peak in mine supply, rapid growth in demand from green technologies, and the limited price flexibility of both supply and demand.
Goldman Sachs commodities analysts, Lina Thomas and Daan Struyven, recently spotlighted this acute market tightness, noting a continuous decline in global visible copper stocks relative to demand. The current copper coverage ratio, representing global inventory levels vis-a-vis demand, now stands at a historic tightness percentile of 100.
The experts predict that these conditions pave the way for scarcity pricing in the copper market by 2025, signifying potential significant impacts on the global economy, particularly sectors heavily reliant on this essential metal.
Goldman Sachs holds a structurally bullish outlook on copper and refined oil products, while taking a bearish stance on U.S. natural gas in 2024.
