BHP Group Ltd., the world’s second-largest copper producer, has issued a cautious outlook for copper, predicting a near-term surplus before a significant surge in prices later this decade. In its recent commodities market overview, released alongside its full-year earnings report, BHP cut its forecast for Chinese demand this year and warned of a global copper surplus through the end of 2025. However, the company remains optimistic about the long-term prospects of copper, driven by the accelerating energy transition.
The company’s revised forecast reflects growing concerns over China’s slowing economic growth and ongoing property market crisis, which have dampened the demand outlook for copper. The metal reached a record high in May but has since fallen back as the Chinese economy struggles. BHP now expects China’s copper consumption to grow by only 1% to 2% this year, a significant drop from the 6% growth rate seen in 2023. This downturn has led to increased volatility across the metals market, a trend BHP expects to continue over the next 18 months.
Short-Term Surplus, Long-Term Shortage
Despite the current market softness, BHP maintains a bullish outlook for copper over the longer term. The mining giant predicts that global copper supply will face significant challenges in meeting a growing wave of demand driven by renewable energy, data centers, and expansive power grid developments. The company’s analysis suggests that by the latter part of the 2020s, the market could experience a severe deficit, potentially leading to what BHP describes as a “fly-up pricing regime.”
“With the deficit conditions we anticipate in the final third of the 2020s, it’s possible that we enter into a ‘fly-up’ pricing regime, whereby prices disconnect from the cost curve due to systematic excess of demand over supply amid inadequate inventory levels,” BHP stated in its report. This scenario would see copper prices rise sharply, driven by a shortage of supply and sustained high demand.
BHP’s outlook aligns with a broader consensus among industry experts who believe that, despite the current surplus, the global copper market will tighten considerably in the coming years. The energy transition and the push towards greener technologies require vast amounts of copper for infrastructure, electric vehicles, and renewable energy systems, leading to what some analysts predict could be a structural deficit in the copper market.
Impact of Chinese Demand and Market Dynamics
China, the world’s largest consumer of copper, plays a crucial role in the global copper market. BHP’s downgrade of its Chinese demand forecast underscores the impact of the country’s economic slowdown on global commodities. As China grapples with a protracted property crisis and a shift in its economic model, the demand for copper and other metals has weakened, causing ripples across global markets.
“The ongoing shift in the Chinese real estate market and broader economic challenges have led to a downgrade in our prior expectations,” BHP explained. The company also highlighted that these conditions are contributing to increased volatility in the copper market, which is expected to persist for at least the next 18 months.
Despite the current challenges, BHP remains confident in copper’s long-term fundamentals. The company’s strategic focus on copper is part of its broader commitment to supporting the global energy transition. By investing in copper and other key commodities essential for renewable energy, BHP aims to position itself at the forefront of the mining industry’s shift towards sustainability.
As of the latest trading, copper prices were at $9,373.5 per ton on the London Metal Exchange, reflecting a 0.9% increase. However, this is still around 16% below the all-time high reached in mid-May, demonstrating the market’s ongoing volatility.
Source: Mining.com
