The Global Copper Market Will Return To A Supply Deficit in 2025

In a new report, BofA global research analysts say they expect the copper market to move back into the red from 2025 as the current wave of project construction is completed.

Despite a projected deficit in 2022 and a 7.7 per cent increase in global copper production in 2023, risks are skewed to the downside given the poor performance of new mines in recent years, the bank said.

"While the visibility of the pipeline of recent projects has been good, the increase in activity has been accompanied by volatility," analysts at the bank said. "In fact, many projects currently under development have been nearly 30 years in the making, and supply growth is likely to fade from 2025 due to relatively limited exploration activity in recent years."

Bank of America sees a number of problems constraining production growth. During the recent LME week, a speech by Edgar Blanco Rand, a former deputy minister of mining in Chile, reflected these conditions.

The official presented a series of Chilea-based projects that would be realized at a cost of $74 billion by 2029 to achieve a total production of 7 million tons. Edgar Blanco focuses on copper, noting that production has been flat since 2000 at about 5.7m tonnes.

"This implies capex intensity of about $50,000 per tonne, well above the $10,000 to $20,000 per tonne range of recent years. As an aggravating factor, investment needs to be large enough to offset production losses of about 1.5 million tonnes."

According to Bank of America, the 10 most significant supply increases will account for 58% of the increase in output by 2022. This supports BofA's view that the expansion is very concentrated and has two implications. First, operational problems at just one or two mines could significantly affect the balance of the market, meaning that the trajectory of these 10 mines is critical.

Second, according to Bank of America, almost all new business is driven by operators with a proven track record, reducing the risk of outages and under-deliveries.