Rio Tinto, which is eager to increase its exposure to copper, believes the base metal faces challenges in the near-term.
After achieving record highs in March 2022 in the wake of the Russia–Ukraine war, the copper price has struggled to regain its momentum, trading below $US8000 per tonne (t) for the last few months.
Rio Tinto chief executive officer Jakob Stausholm said copper’s short-term outlook “might look a little bit challenged”.
“I don’t know where the world economy is heading, but I reckon coming out of COVID there’s still a lot of bottlenecks in the system and we’ve got inflation as high as we haven’t seen for 30 to 40 years,” Stausholm said in a recent Bloomberg interview.
It comes as Fitch Solutions forecast copper prices to average around $US7500/t in the fourth quarter of 2022.
Fitch said the declining price came as the global macroeconomic picture worsened and concerns grew about future demand from China in particular. Global inflation has been a particular disruption to industrial activity.
“A stronger US dollar has also capped demand for the commodity, which is traded in the currency internationally,” Fitch said.
While the short-term copper outlook might look bearish, Stausholm said the base metal is supported by the fact China doesn’t face the same inflationary pressures as Western nations. China is considered the world’s largest metal-consuming nation.
Fitch expects copper prices to average $US8400/t in 2023, before edging higher to $US9100/t in 2024 and $US9400/t in 2025.
Fitch believes copper prices could reach $US11,500/t by 2031 “as a long-term structural deficit emerges” due to the “very strong” long-term demand outlook.
While copper has a “significant pipeline” of new projects, particularly in Chile, Peru, Australia and Canada, Fitch expects supply increases to be outpaced by demand growth from the renewable energy transition.
“Our Autos team forecasts global EV (electric vehicle) sales to increase 279 per cent from 2021 to 2031, and reaching 24.7 million units per year by the end of the forecast period,” Fitch said.
Rio Tinto recently entered into a binding agreement to acquire the remaining 49 per cent stake in Turquoise Hill Resources it doesn’t already own.
Stausholm said the major miner’s most recent offer of $C43 per share – or $US3.3 billion – for Turquoise Hill would be final.
If approved, the transaction would give Rio Tinto a 66 per cent interest in the Oyu Tolgoi mine in Mongolia, which is considered one of the largest known copper and gold deposits in the world.