As the world hurtles toward an electrified future, the copper market stands at a crossroads.
Insights from JPMorgan analysts Patrick Jones, Greg Shearer and Bill Peterson paint a complex picture: short-term hurdles for copper prices, but a glittering long-term outlook driven by electric vehicles and evolving supply dynamics.
This could seem as good news for those invested in United States Copper Index Fund ETV (NYSE:CPER), Global X Copper Miners ETF (NYSE:COPX), iShares Copper and Metals Mining ETF (NASDAQ:ICOP) for the long-term.
The electric vehicle revolution is set to electrify copper demand. JPMorgan predicts copper usage in EVs will more than double from 1.4 million metric tons in 2023 to 3 million by 2030. While some worry that technological advances like thinner copper anode foils could dampen demand, the analysts argue otherwise.
Larger EV sizes and a pivot toward lithium-iron-phosphate (LFP) batteries — which are more copper-intensive — are expected to drive long-term growth.
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Leaching technologies are generating buzz, but can they revolutionize copper supply? Not yet, say the analysts. While projects from major miners like Freeport-McMoRan Inc (NYSE:FCX) and BHP Group Ltd (NYSE:BHP) are on the horizon, these advancements are unlikely to offset supply declines before 2030.
At best, leaching could add 550,000 metric tons annually, just 2% of global supply.
Recycling is a crucial cog in the copper machine, accounting for about 17% of refined supply in 2024, up from 14% in 2020. JPMorgan forecasts scrap supply will grow by 5-6% annually, faster than historical rates, yet insufficient to bridge the long-term deficit. Recycling alone won't solve copper's supply crunch.
JPMorgan warns of near-term risks from macroeconomic pressures, particularly a potential devaluation of the Chinese yuan to 7.8 to 8.0 per U.S. dollar. This could lead to a 12-15% dip in copper prices, presenting headwinds for equities. However, the analysts remain bullish on the long-term trajectory, underpinned by a looming supply-demand gap.
Their picks?
Lundin Mining Corp (OTCPK: LUNMF) leads in EMEA, while Teck Resources Ltd (NYSE:TECK) tops the Americas. Asia-Pacific favorites include Zijin Mining and Merdeka Copper, with caution advised on Jiangxi Copper and Sandfire Resources.
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