Copper prices rise, could boost Arizona economy

Global copper prices have skyrocketed so much and so fast that “copper is the new oil,” says one global commodities expert, and the Wall Street Journal reports that “the world has gone copper crazy.”

Copper prices rose above $5 a pound in recent days for the first time on several metals and other commodities exchanges. They have risen steadily throughout the year and are now about 25% higher than earlier this year.

Prices have increased for eight days in a row. The increase has been driven in part by expectations of higher demand for copper for the “green energy economy,” for use in artificial intelligence data centers that provide cloud storage and other services, and to respond to the increased demand from the military, experts said. Added to this are short-term upward pressures from speculators.

Arizona mines, including three near Tucson, generate about 70% of total U.S. copper production.

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But two academic natural resources economists don’t expect rising prices to trigger significant increases in copper production or mine jobs here or nationally until it’s clear the rise is sustainable over the long term, they told the Arizona Daily on Tuesday. Star. Copper prices have been quite varied and at times very volatile for decades, having risen and fallen repeatedly since the COVID-19 pandemic caused them to crash in 2020, the two noted, Ian Lange of the School of Mines of Colorado and Charles Sims of the University of Tennessee.

What’s more likely in the near term is that mines in Arizona and elsewhere will pump more money into local economies from higher price-driven profits by purchasing more mining equipment and supplies, said the Institute’s Lange. Payne of Colorado School Public Policy.

“We tend to find that increased production doesn’t tend to stimulate the local economy as much as revenue from increased prices,” Payne said. “More prices don’t necessarily mean more production. It takes a while to get more out of the land.”

One local expert, Rick Grinnell of the Southern Arizona Business Coalition, said continued high demand for copper due to green energy needs and other forces will ultimately lead to increased production and employment, not immediately, but in the next five to ten years.

“You will see an increase in Arizona production, simply because the need will continue to increase,” said Grinnell, whose coalition has long been a strong supporter of the mining industry.

Tom Aldrich, executive director of the Mining and Minerals Education Foundation, agreed that higher prices will lead to more production and employment at Arizona’s copper mines, but mainly after the new mines get their permits and start operating.

“They can improve their efficiency, that type of thing. (But) to see a big change in production, you have to see more facilities being built,” said Aldrich, a former top official at Asarco’s Mission mine south of Tucson. .

“The fact is that there is not enough copper being produced to support the clean energy initiatives and the revolution that is happening now in terms of everything we need,” he said. “In contrast, permitting is still slow in Arizona. There are a number of warehouses they are trying to get up and running. It all depends on how quickly they move through the process.”

This year’s rise in copper prices has already helped copper giant Freeport McMoRan, which operates mines in Arizona near Green Valley south of Tucson, at Morenci in eastern Arizona and in Miami near Globe. It reported higher profits in the first quarter and higher sales volume during the first three months of 2024 compared to the same period in 2023.

Hudbay Minerals Inc., which proposes to build a major copper mine in the Santa Rita Mountains south of Tucson, reported first-quarter revenue nearly double what it was a year ago, and net profits that were more than three times higher than those of the same period. 2023. But profits at Grupo México, Asarco’s parent company, declined in the first quarter of 2024 compared with that period a year ago.

This week, commodities expert Jeff Currie made the “copper is the new oil” comment on Bloomberg TV.

Copper ores can be seen along the mountain slopes of Hudbay Mineral Inc. property in the Santa Rita Mountains south of Tucson.

Grace Trejo, Arizona Daily Star

He added: “If you go back to the 2000s, I was as bullish on oil as I am today on copper. You know that oil ended up going from $20 to $140, seven times more. The advantage of copper here is very significant.”

Currie is the head of Energy Pathways strategy at London-based Carlyle Investment Group and former global head of commodities research at Goldman Sachs. He has forecast that copper prices will reach $6.80 a pound, or $15,000 a ton, in the coming years.

He said he had been “telling this story” – predicting $5 per pound of copper – for three years, but it hadn’t worked until now. And even now, copper prices won’t match their all-time high in inflation-adjusted dollars until they hit $15,000 a ton, she said. That would put them at the same level they were in real dollars in 1968, when a housing boom sent prices soaring to a then-high 72 cents a pound.

“All we know is that increasing supply is really difficult” now, Currie told Bloomberg in explaining part of the reason for the current copper price rise.

Last week, the Wall Street Journal’s report on global copper demand noted growing competition between the United States and China for global copper supply. He also highlighted Australia-based BHP Group’s failed $43 billion takeover bid for Anglo American, a major commodities producer whose assets include copper.

Copper is used in the energy and construction industries and is expected to benefit from the transition to green energy through additional demand from the electric vehicle sector and new applications, including data centers for artificial intelligence, it reported. Reuters news service.

Equipment manufacturing is currently the largest end-use sector for copper, followed by construction and infrastructure, Reuters said.

Global apparent use of refined copper has soared by more than 150% since the late 1980s to more than 29 million tonnes in 2023, as Asia became the largest consumer with a 70% share of the consumption. In 2022, China was the largest consumer of refined copper with use of 14.7 million tons, Reuters reported.

In the short term, metal prices have been rising in recent weeks amid growing optimism about lower interest rates this year as well as stimulus measures in China, the top importer, the site reported this week. website. Bets on tighter supplies – amid refinery cuts in China and stricter sanctions on Russian metals exports – also boosted copper purchases, that site said.

But the biggest boost for the metal came from a “short squeeze” on the Comex Exchange last week, where heavy buying of long-term copper contracts boosted prices and shook off short positions on the metal, added. The Comex Exchange is the largest metal futures and options trading market in the world.

US copper futures in particular soared last week on contraction, while traders were also seen rushing to acquire copper supplies for delivery in the July contract. A short squeeze occurs when the price of a commodity or other item rises much faster than analysts have projected, taking by surprise investors who were trying to “short” a stock and profit from an expected drop in prices. prices.

The long run is really fueling this big speculative price run, Bloomberg television commentator Clara Ferreira-Mareuez said on Tuesday. “It’s really about long-term demand, the energy transition, electric vehicles and whether there could be a shortage of the metal.”

But the extent to which rising prices affect copper production and jobs will depend on how sustained this increase is, Professor Charles Sims, a natural resources economist at the University of Tennessee, told the Star on Tuesday. Over the past few decades, copper prices have fluctuated repeatedly, rising, falling, and then rising again one or more times, including since the pandemic began in March 2020.

“Part of this will depend on how quickly other countries respond to this price shock,” Sims said. “The price is rising because there is an increase in demand and limited supply. If other countries take advantage of this and can easily increase their production, the supply on the market will increase and the price will fall again.”

The longer the price increases last, the greater the incentive “for people to take that step, the commitment to invest in more production,” Sims said.

Grinnell said: “Copper prices will fluctuate up and down over the next 10 to 20 years.” But as the need for copper will continue to increase, that will drive copper prices to a new long-term base of $5 a pound, he said.

Ultimately, large producers will increase, “and it will be a huge benefit to southern Arizona in particular,” Grinnell said.

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