Copper prices may potentially rise to $40,000 per tonne in the next few years, as predicted by hedge fund manager Pierre Andurand in an interview with the Financial Times.
The metal has surged by almost 20% this year, reaching a record $11,000 per tonne ($5.00/lb) this week.
Drivers of Demand
Andurand explained, “We are moving towards a doubling of demand growth for copper due to the electrification of the world, including electric vehicles, solar panels, wind farms, as well as military usage and data centers.”
Andurand, a former Goldman Sachs trader who co-founded BlueGold Capital before launching Andurand Capital, manages approximately $2 billion in assets.
Predictions and PerspectivesPredictions and Perspectives
“I think we could see prices up to $40,000 per tonne ($18.18/lb) over the next four years or so. I’m not saying it will stay there indefinitely; eventually, we will get a supply response, but that supply response will take more than five years.”
Former Goldman Sachs executive Jeff Currie, who is now chief strategy officer of energy pathways at asset manager Carlyle, offered a positive assessment in a recent interview with Bloomberg. According to him, the trade in copper “is the highest conviction trade I have ever seen.”
Currie sees copper prices reaching $15,000 a tonne ($6.80/lb).
Future Demand Projections
The demand for copper in the transport sector alone is projected to increase by 11.1 times by 2050, compared to 2022. Electric vehicles, for example, can contain more than a mile of copper wiring.
Furthermore, the demand for copper needed to expand the global electricity grid is projected to increase by 4.8 times by 2050, compared to 2022.
By 2030, the copper supply gap is projected to approach 10 million tonnes, according to BloombergNEF estimates.
Andurand’s Track Record
The hedge fund manager Pierre Andurand is not widely known among American investors, but he has a strong track record in commodities trading. His Andurand Capital funds, particularly the $1.3 billion Commodities Discretionary Enhanced fund, have seen an 83% increase in value so far this year. Andurand is now bullish on copper, predicting that it could soar to $40,000 per metric ton from its current trading price of around $10,290 per ton.
Market Dynamics and Impact
Copper prices have already risen about 21% this year, reaching a record high of $11,000 per ton. Andurand believes that this rally has a long way to go, as demand for copper is outstripping its supply due to the increasing global electrification, including the demand for electric vehicles (EVs), solar panels, wind farms, military usage, and data centers. He anticipates that it could take up to four years for copper to reach $40,000 per ton, and even after that, a supply response would take more than five years, as highlighted by a study from S&P Global indicating that it takes an average of 15.7 years from discovery to production for mines.
Challenges in Supply
The recent bid for rival Anglo American by BHP Group is evidence of the increasing difficulty and expense of building new mines, as opposed to acquiring existing ones with copper mines. Andurand is not the only one optimistic about copper and metals in general. Recent buying from futures market traders has driven metal prices, including copper and gold, to all-time highs. The rally in copper has also positively impacted the prices of other industrial metals, such as aluminum and zinc.
Historical Context and Future Needs
Strong demand depleted inventories to historic lows last year, making this surge in metal prices unsurprising, despite Wall Street’s shorting of metals. Looking specifically at copper, a study from the International Energy Forum (IEF) highlighted the need to mine 115% more copper in the next 30 years than has been mined historically. Additionally, to electrify the global vehicle fleet, producers must bring 55% more new mines into production than would otherwise be necessary.
Growing Demand in Developing Countries
The demand for copper was exceptionally strong in 2023, with a 7.3% year-on-year growth in the first 10 months, according to the World Bureau of Metal Statistics (WBMS). It’s important to note that most of this demand growth came from the developing world, especially China, India, and Indonesia.
While China is already the largest consumer of copper, India and Indonesia are also experiencing significant growth in copper demand.
Copper Long (Buy)
Enter At: 4.8195
T.P_1: 5.0545
T.P_2: 5.2085
T.P_3: 5.4175
T.P_4: 5.6145
T.P_5: 5.8025
T.P_6: 6.0210
T.P_7: 6.3415
T.P_8: 6.5945
T.P_9: 6.8585
T.P_10: 7.1225
T.P_11: 7.4635
T.P_12: 7.8485
T.P_13: 8.1125
T.P_14: 8.4205
T.P_15: 8.7935
T.P_16: 9.0985
T.P_17: 9.4030
T.P_18: 9.7075
T.P_19: 9.8525
T.P_20: 10.0290
T.P_21: 10.2900
S.L: 3.6855
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