Molten copper flows into molds at a Wuzhou Jinsheng Copper smelter on January 19, 2022 in Wuzhou, Guangxi Zhuang Autonomous Region of China.
He Huawen | Visual China Group | Getty Images
According to Jonathan Barratt, CEO of weather insurance company CelsiusPro, investors should buy copper if the opportunity arises.
“Our outlook for 2023 and 2024 is, if you get a dip in copper prices, that’s something to have in your portfolio,” Barratt told CNBC, citing insufficient supplies and high demand for copper in the renewables space. energy.
Copper is a key component in electricity-related technologies and, by extension, a pivot in energy transition projects.
“There’s just not enough supply. And when we look at everything that’s happening in the environmental space, the renewables, everything, copper is a major component. So that’s a buy-on-dip every chance you get.”
The world is currently facing a global copper shortage due to increased demand pressure and difficult supply flows in South America.
According to the International Energy Agency, sales of electric cars will more than double by 2021, bringing the total number of electric cars worldwide to about 16.5 million. That means ramping up the EV charging ecosystem.
Copper futures last traded at $4.14 a pound, up about 8.34% since the start of the year.
Iron ore prices will fall
As for iron ore, Barratt predicts the metal is about to trade at $115 to $110 a ton, which is about 9% lower than what they’re currently working on, citing regulatory action in China.
The benchmark 62% grade iron ore last traded at $126.80 a ton.
“I think the main moment we focus on is what the Chinese regulators are doing in the ports in terms of price regulation… and the fact that they really don’t want to see too much [iron ore] inventory in the ports,” he said. Barratt added that this could result in a drop from 160 million tons of iron ore stockpile to 120 million tons.
In a recent response to rising iron ore prices in China, the National Development and Reform Commission (NDRC) said regulation and a crackdown on illegal activities will be introduced to strengthen surveillance of iron ore market prices.
“As a result, we could see a significant pullback in inventory building in Chinese ports…that will sort of put less demand into the equation,” Barratt said.
Workers maintain steel furnaces at the ArcelorMittal metal plant in Kryvyi Rih, Ukraine, on Wednesday, March 6, 2019.
Vincent Mundy | Bloomberg | Getty Images
Declining prices for global crude steel production may also contribute to lower iron ore prices.
“Steel production is the main driver of demand for iron ore and coking coal,” Vivek Dhar, director of the Commonwealth Bank of Australia’s Mining and Energy Commodities Research team, said in a daily note.
“Global crude steel production fell modestly on a year-over-year basis last month… The result was driven by a decline in steel production at most of the world’s largest steelmakers.”
World crude steel production fell 3.3% in January compared to the same period last year, according to the World Steel Association.