EXCLUSIVE: Key Indicator May Flip Global Economic Forecasts — 'Copper Is Beginning To Define Its Own Narrative'

Demand for copper from the energy transition may eventually help the red metal diverge from other industrial commodities that are often seen as economic bellwethers.

As the energy transition from fossil fuels to renewables gains steam, copper's role as a leading economic indicator may decouple somewhat from aluminum and zinc, Eric Saderholm, managing director of exploration with American Pacific Mining Corp. USGDF, told Benzinga.

Copper, aluminum and zinc are gauges of the world economy because they are used in a vast array of products manufactured and shipped around the globe, said Saderholm, whose company is a precious and base metals explorer and developer with projects in Alaska, Montana and Nevada.

"However, copper is the most important of these metals, serving as an economic bellwether and as the most fundamental in industrialization due to its role in electrification," he said. "Without copper, our planet slowly grinds to a halt."

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Over the past two decades, these three metals have followed similar price trends, with the economy as the driver because market participants haven't been worried about a fundamental shortage of supply, he said.

But a coming acute supply shortage in copper will eventually give the metal a measure of support that other industrial metal indicators, like aluminum and zinc, might not have, he said.

"The economic indicator status of copper is about to change, regardless of the state of the world economy," he said. "Copper should find a level of stability that is not dictated as much by current demand, but by the realization that future demand will dwarf current supplies."

A Potential Timeline

• By 2027 copper will be in a deficit of 1.3 million metric tons because of the electrification required by the energy transition, Macquarie strategists said in a recent note.

• By 2031, the world will need 36.6 million metric tons of copper for electrification, but projected mine restarts, new production projects and recycling are expected to only be able to provide 30.1 million metric tons of that, leaving a 20% shortfall, according to a recent outlook from McKinsey & Co. New technologies could help close much of that gap, but they face obstacles to commercialization and widespread adoption, the consultancy said.

• By 2045, global copper demand could exceed 50 million metric tons, doubling current demand, according to Saderholm.

Copper May Become Its Own Market

"A declining copper supply is very real and will become acute within the next 15 years," Saderholm said.

Amid the increased demand and constrained supply, Saderholm sees a future where copper evolves into a separate market than other industrial metals. Investors and traders will evaluate the red metal with a different investment philosophy than aluminum and zinc, he said.

"Copper is beginning to define its own narrative and diverging from other base and industrial metal indicators," he said. "It is beginning to set its own trend and will not be comparable to other indicator metals."

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