From Our Correspondence
The copper price is booming again as a new cycle continues to gather pace following the COVID-19
demand set-back. This is apparent in year-on-year comparisons of copper assets when global trends and reflections in the markets are anything to go by.
When projects were assessed for last year’s handbook in March 2020, COVID-19 was rearing its head in almost every corner of the world causing widespread shutdowns of copper mines and disrupting global production.
Filo Mining chief executive Jamie Beck had this to say “Last year was really a weird year for
copper because in March it looked like it would fall off a cliff with the COVID-19 demand shock that hit prices hard.”
Looking at global trends and markets, the demand shock was reflected in plummeting ‘Confidence’ ratings, especially when compared to precious metals, which rode the wave of safe-haven buying amid the pandemic.
The heaviest weighting when assessing ‘Confidence’ in an opportunity, pits the base case
commodity price assumptions against current spot prices to get a feel for the durability of an asset in a downturn. Economic models factoring in conservative price estimates versus spot are rewarded, whereas as assets with little daylight between assumed and actual pricing levels struggle. In 2020, no single copper asset scored above 2.6 for its ‘Confidence’ rating.
Yet copper recovered perhaps a lot quicker from COVID-19 shock than the market anticipated.
The base metal is viewed as a bellwether for the overall health of the global economy and, with
the vaccine roll-out, copper prices had surged to all-highs at time of writing on prospects better
days ahead. With this, of course, ‘Confidence’ ratings, too, for the 2021 reflect a sense that
copper projects are much improved.
There is another eminent factor leading demand for copper – and may ultimately sustain this demand for a period to come: the ‘green energy revolution’.
With decarbonisation and electrification now top of the agenda for governments across the world, the outlook for copper demand is even rosier, as the red metal plays a fundamental role in any action to advance such things: from hydro, wind, or solar-power generation capacity; to transmission lines; to battery storage devices; to electric vehicles.
Speaking of ‘green’, we need to acknowledge the other commodity grouping were development
assets are riding the green hype.
“Last year was really a weird year for copper because in March it looked like it would fall off a cliff with the COVID-19 demand shock that hit prices hard.”