CRU - Copper Conundrum: Invest Now to Maximise Future Profit or Await Price Recovery but Risk Missing Out

CRU - Copper Conundrum: Invest Now to Maximise Future Profit or Await Price Recovery but Risk Missing Out

PR Newswire

LONDON, Feb. 25, 2019

LONDON, Feb. 25, 2019 /PRNewswire/ -- In recent years CRU's long term view of the copper market has foreseen falling production at existing mines coupled with a demand boost from electric vehicles resulting in multi-million tonne per year shortfalls in supply and commensurately higher prices by the end of the next decade. The forthcoming Copper Long Term Market Outlook which is to be published at the beginning of March 2019, considers whether this narrative still holds true.

Copper conundrum: invest now to maximise future profit or await price recovery but risk missing out
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Copper price paradox

CRU continues to hold a positive long term outlook on copper, predicated on a significant supply gap eventually opening up in the 2020s. However, today's low $6,000s /t copper price contrasts with project economics that require a much higher price in order to incentivise new mine capacity. For the major mining companies in particular this presents a conundrum: invest now in an attempt to maximise future cash flows while risking the ire of short-term focused shareholders or wait until the copper price recovers but then potentially miss out on the most lucrative years of the next upturn.

Moving from surplus to deficit

Over the last year CRU has fully incorporated a number of high profile copper projects into their mine supply projections, including Quebrada Blanca Sulphides and Quellaveco. Board approval for these multi-billion dollar investments was undoubtedly helped by the period of near or at $7,000 /t copper prices during the second half of 2017 and first half of 2018. More broadly, renewed C-Suite confidence has helped firm up the project pipeline to the extent that we now expect almost 1 Mt/y more mine supply by the early 2020s than at this time last year. Looming market deficits have given way to modest surpluses and prices are expected to remain below $3.00 /lb ($6,614 /t) in real terms over the next five years.

The shift in the medium term view raises the question as to whether the long term outlook for copper has also changed. Previously, falling production at existing mines coupled with a potential boost to demand from electric vehicles meant that multi-million tonne per year shortfalls in supply and commensurately higher prices were expected by the end of the 2020s. The forthcoming Copper Long Term Market Outlook which is to be published at the beginning of March 2019, considers whether this narrative still holds true.

Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2019/copper-conundrum-invest-now-to-maximise-future-profit-or-await-price-recovery-but-risk-missing-out

Read more about CRU: http://bit.ly/About_CRU

About CRU

CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.

CRU employs over 280 experts and has more than 11 offices around the world, in Europe, the Americas, China, Asia and Australia – our office in Beijing opened in 2004 and Singapore in 2018.

When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.

CRU – big enough to deliver a high-quality service, small enough to care about all of our customers.

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