The copper price is important to the Australian economy. Last year, approximately $6.6 billion of copper was exported by Australian companies. Rio Tinto and BHP as well as other resources companies have positioned themselves to benefit from the copper price, with strong performances from their respective copper operations in the most recent quarter.
Yet in recent weeks, research houses including Goldman Sachs have reduced copper forecasts as miners’ profit outlook dims. Goldman Sachs now expects copper prices to average $10,100.00 a tonne in 2025, sharply lower than its earlier forecast of a record $15,000.00 and a reduction by a third in its expectations, as the fall in Chinese demand for the red metal clouds the profit outlook for leading miners.
Source: FT
The pullback for copper adds to the drag on profitability for the world’s largest miners such as BHP and Rio Tinto, which are grappling with a slide in the price of iron ore — their foremost profit generator.
Copper is used for electric wiring and batteries that are crucial as the world tries to decarbonise. While it has been at the centre of investor focus because of the expected surge in demand, BHP acknowledged in its annual commodities outlook released 2 weeks ago that the copper market would be in a marginal surplus this year and an even bigger one next year.
The metal has sunk almost 20% since May to about $8,950.00 per tonne, sparking a wave of pessimism among the biggest lenders about the medium-term outlook for a metal used in everything from renewables to power grids.
Copper’s price decline is likely to weigh on miners’ profits going forward. Global inventories of copper have risen to their highest level in four years as weak demand has led to a glut of metal entering warehouses, according to Bloomberg data. In China, inventories rose in June to the highest level since March 2020 when Covid-19 ground Asia’s largest economy to a halt.
Source: FT
Goldman’s new forecast follows other banks which have also reduced their copper market outlook. Macquarie said last month that strong supply and depressed demand “have pushed the market to a surplus sooner than expected, with the market expected to remain in surplus in 2025 and 2026”. Macquarie now expects a quarterly average price of $8,000.00 per tonne in 2026.
While BHP predicts near-term weakness, it remains bullish in the medium term. It warned about the possibility of “systematic excess of demand over supply” as clean energy booms in the final third of the 2020s.
