The Green Economy- Pushing Copper Prices to Record Highs

Copper, a vital part of the industrial revolution and the electricity age economy, will play a significant part within the up and coming green economy, defined as a low carbon, resource efficient and socially inclusive economy, as well. Cables made of the metal are still the foremost cost-effective means of transmitting electricity from solar and wind sources, and it could be a key fabric in charging stations and the electric vehicles that utilize them. Goldman Sachs analysts say, there's “no decarbonization without copper,” which they call “the new oil” and predict copper to be entering a new commodity super cycle. 

After the outbreak of the pandemic in early 2020, prices for base metals such as copper and aluminum have risen steadily. The rally has been fueled by consumer demand for products containing such metals, as they are unable to spend money on travel or dining out. Government stimulas in response to the pandemic, which includes a significant focus on infrastructure spending, is adding to the significant price spike. Another trigger affecting prices has been the output levels dropping at South American mines disrupted by Covid-19 and difficulties transporting material around the world, making supply drop, while demand rises.

According to a study by Goldman commodity analyst Nicholas Snowdon, supplies, which are already tight as the global economy recovers, may be further strained by a projected fivefold increase in green energy demand in the current decade, resulting in major shortages beginning in the mid-2020s. Copper, which is currently trading at $4.50 per pound, is expected to reach $6.80 by 2025 and hit $6 this year according to Michael Widmer, a commodity analyst at Bank of America. On the London Metal Exchange, prices of copper hit $10,417 a metric ton, surpassing their previous high of $10,160 in February of 2011.

Stocks in copper production have risen sharply in the last year as the metal's price has doubled from a post-Covid low, but there is still potential for more growth as the previously discussed factors add to the bullish sentiment in the current market.