Copper Market Dynamics: What Will Drive the Price Forecast in Coming Years?

Copper markets faced significant headwinds throughout 2022, with prices experiencing a notable downturn amid recession fears, China’s prolonged lockdowns, and real estate sector distress. Yet as 2023 emerged, the red metal has staged a recovery, attracting renewed investor interest. Understanding the copper price forecast requires examining both supply-side constraints and demand catalysts that will shape its trajectory.

Supply Constraints: The Primary Bullish Anchor

Global copper production faces mounting challenges that could support prices above current levels. In South America, the region responsible for roughly 80% of projected 2023 mine supply growth, operational disruptions persist.

Chilean Production Headwinds

Chile’s Codelco, the world’s largest copper producer, saw output decline by 172,000 tons in 2022, with production falling from 1.618 million tons in 2021 to 1.446 million tons in 2022. Antofagasta reported annual output of 646,200 tons, down 10.4% year-over-year due to poor ore grades, labor shortages, and acute water scarcity—a pattern likely to continue.

Peruvian Production Instability

Ongoing protests in Peru’s mining regions have created a bottleneck in copper supply. The Las Bambas complex, operated by Chinese firm MMG Ltd., currently functions at merely 20% capacity due to blockade-related disruptions. While new mine development is anticipated in 2023, production recovery hinges on the duration and intensity of regional unrest.

According to CRU Group’s analysis, the copper market may transition from a deficit of nearly 200,000 tons to a surplus within three years as new supply enters the market. However, near-term tightness remains probable, with Chile and Peru expected to drive 80% of global mine supply expansion in 2023. Critical projects to monitor include Quebrada Blanca Phase 2, Oyu Tolgoi’s underground phase, and several Codelco initiatives.

Demand Recovery: China as the Wildcard

China’s reopening trajectory will be instrumental in shaping the copper price forecast for the year ahead. The country consumes roughly one-quarter of global copper demand, with the construction and real estate sectors accounting for approximately 23% of its copper usage.

Real Estate Recovery Signals

China’s property sector contracted 4.2% year-over-year in Q3 2022, while overall GDP expanded 3.9%, exceeding expectations. Real estate investment declined 10% compared to 2021—the first contraction since records began in 1999. Property sales fell to levels unseen since 1992.

The Chinese government has rolled out 16 property support measures, including debt extensions for developers and reduced deposit requirements for homebuyers. These initiatives aim to stimulate construction activity and, by extension, industrial metal consumption. Recent easing of quarantine restrictions signals policy flexibility, potentially unlocking deferred demand.

Export Demand Outlook

Global appetite for Chinese goods remains subdued, with December 2022 export figures disappointing. This weakness raises questions about whether copper demand can fully recover in 2023. Without sustained export growth, commodity demand—including copper—may face headwinds.

The Energy Transition: Long-term Structural Support

Beyond cyclical pressures, the global transition to renewable energy and electric vehicles presents a structural growth driver for copper demand. The red metal is irreplaceable in EV motors, batteries, wiring, and charging infrastructure. S&P Global analysts project copper consumption will double to 50 million metric tons by 2035, implying sustained price support.

However, meeting this demand faces obstacles. Opening new copper mines grows increasingly difficult as environmental regulations tighten globally. This constraint, combined with recycling limitations in developed economies, suggests supply-demand tightness will persist—potentially sustaining elevated copper prices throughout the decade.

LME Clarity and Geopolitical Considerations

The London Metal Exchange’s decision to maintain the status quo on Russian copper deliveries provides near-term market clarity. While Russian copper lacks formal sanctions, future escalation of Russian metal restrictions could reduce LME inventory, potentially creating price discounts to spot rates. This geopolitical wild card bears monitoring.

Technical Landscape and Trading Perspective

Copper’s monthly chart exhibits bullish momentum. On the upside, traders monitoring price action above 4.3030 could target 4.5615, with further resistance at 4.8480. Conversely, breaking below 3.8465 support could precipitate a decline toward 3.4775.

Short-term technical indicators align with a bullish bias, though overbought conditions may trigger minor pullbacks. Traders should balance momentum strength with the risk of temporary consolidation.

Institutional Price Forecasts Shape Sentiment

Fitch Solutions raised its copper price forecast to $8,500 per ton from $8,400, citing anticipated demand recovery despite operational constraints. The firm expects worldwide primary copper demand to grow 2% in 2023, with mining supply expanding 4%.

Goldman Sachs significantly increased its 12-month target to $11,000/t (from $9,000/t in December 2022), with an average 2023 forecast of $9,750/t and 2024 guidance of $12,000/t.

Bank of America strategists suggest copper could reach $12,000/t in Q2 2023 under favorable conditions—contingent on the Federal Reserve moderating rate hikes and sustained energy transition momentum.

SEB Commodities analysts project prices could climb to $11,000 per ton by 2024 from approximately $8,400 currently.

TD Securities maintains a cautious stance, citing global macro headwinds and surplus inventory, though acknowledges tactical opportunities during market downturns.

Critical Price Drivers in 2023

The copper price forecast hinges on several interlocking factors:

• Supply Tightness: Operational challenges in Chile and Peru will likely persist, limiting new supply influx
• China’s Policy Trajectory: Real estate stimulus effectiveness and COVID reopening pace will determine demand recovery
• Global Growth Prospects: Recession risks could dampen demand despite energy transition tailwinds
• Geopolitical Volatility: Further Russian sanctions or Peru protests could create supply shocks
• Central Bank Policy: Inflation persistence and interest rate adjustments will influence currency strength and investor sentiment

Inflation Hedge Dynamics

Copper maintains a strong historical correlation with inflation expectations. The high correlation between copper and the 10-year inflation rate—established since 2001—could amplify price support if inflationary pressures persist. Mining equities like BHP, positively correlated with copper, may benefit from any sustained upside.

Conclusion: Cautious Optimism for Copper

While near-term copper price forecasts reflect recession fears and Chinese economic uncertainty, structural support from supply constraints and the energy transition suggests a floor around $7,500/t through 2023’s conclusion. Institutional forecasts ranging from $8,500 to $12,000 per ton reflect this bifurcated outlook—conservative views anchored to current macro risks, bullish scenarios premised on supply tightness and demand recovery.

The copper price forecast ultimately depends on whether China’s reopening gains traction and whether supply-side disruptions continue. Investors should monitor these dynamics closely, as they will determine whether the red metal rallies toward institutional targets or consolidates near support levels throughout the year.