Copper prices are likely to remain steady at current levels around $2.20/lb in the near term, but rise to $2.50/lb by 2017 on the back of electricity infrastructure growth in China and other developing nations, plus non-residential building construction globally, Wood Mackenzie senior researcher Nick Pickens said Thursday.
"We're looking at grid spending as being the driver of growth," Pickens said in a presentation at the American Copper Council Spring Meeting.
"Despite the fall we've seen in 2016, much like we saw in 2015, the actual investment -- because of the lower prices -- flowed through to higher volumes. So we think that the electrical network will be the strongest end-user sector this year, with growth of around 7%," Pickens said.
Though residential construction has weakened, non-residential construction, which includes office buildings, hotels, shopping centers and hospitals is "going to be a key source of [demand] growth over the next five years," Pickens said.
Non-residential construction growth is expected to level off and begin easing in 2020 as developing nation non-residential units reach the same per capita levels seen in the developed world, he added.
Other end-user sectors expected to increase their copper demand include hybrid-electric vehicles, which use nearly 63 times more copper than a conventional vehicle.
Looking forward, Pickens said China will be significant part of refined copper demand growth over the next 20 years, with Chinese demand expected to grow at 1.1%/year over that period. Global copper demand growth is expected to be 1.3%/year over that period.
Mine supply is likely to begin moving into a deficit in 2021, but prices will need to rise to around $3.30/lb for additional mine projects to come online to meet that demand.
Wood MacKenzie expects mine supply to total just above 19 million mt this year, but rise to more than 21 million mt by 2019, Pickens said.
