Goldman says copper is the new oil, raises price forecast to $11,000 per metric ton

Published Wed, Apr 14 202112:45 PM EDT

Copper prices are expected to rise, as the transition to green energy accelerates and the supply of the metal tightens, says Goldman Sachs. Based on an expected spike in demand, coupled with an already tight market in the wake of the pandemic, the firm raised its forecasts on copper. Goldman now sees prices average $11,000 per metric ton over the next 12 months. On Wednesday copper traded around $8,900 per ton, according to data from the London Metal Exchange. "Copper is the new oil," Goldman said, adding that there's "no decarbonization without copper." "The critical role copper will play in achieving the Paris climate goals cannot be understated," analysts led by Nicholas Snowdon wrote in a note to clients. Copper's electrical conductivity and low reactivity are among the factors that make it the most cost-effective material for use in storing and transporting renewable energy. It can be used in cables, batteries, transistors and inverters, among other things. Goldman said that copper demand from the energy transition will grow nearly 600% by 2030 to 5.4 metric tons in the firm's base case. In the case of "hyper adoption" of green technologies, the firm believes demand could surge 900% to 8.7 metric tons. "Ripple effects into non-green channels mean the 2020s are expected to be the strongest phase of volume growth in global copper demand in history," Snowdon said, before adding that the copper market is "unprepared for this critical role." The firm said that a decade of lackluster returns combined with the momentum behind environmental, social and governance or ESG investing has curtailed investment in copper's future supply growth. This has had the effect of making the market the closest it has ever been to peak supply. Goldman believes this leaves the market vulnerable to large open-ended deficits from the middle of the decade, culminating in a long-term supply gap of 8.2 metric tons by 2030. This is double the size of the gap that sparked copper's bull market in the early 2000s, the firm said. "Copper is so integral to the green transition—a global effort underpinned by government support—that the supply requirements necessitate a spike in copper prices," the firm said. Goldman believes the metal will hit $15,000/t by the middle of the decade. A more specific breakdown of the firm's average copper price forecast is as follows: $9,675/t in 2021, $11,875/t in 2022, $12,000/t in 2023. Goldman then sees prices jumping to $14,000/t and $15,000/t in 2024 and 2025 respectively. "Metals are at the heart of the new commodity super cycle, and green demand is at the heart of the metals price rally," the firm said. Snowdon anticipates demand from green energy growing at an average annual rate of 20% year over year in the 2020s. The firm anticipates wind energy generating 20% of demand, while electric vehicles should account for 40% of green copper demand by the end of the decade. Solar panels and energy storage are other areas where copper will be key to widespread rollout. - CNBC's Michael Bloom contributed reporting.

A worker labels copper products at Truong Phu cable factory in northern Hai Duong province, outside Hanoi, Vietnam August 11, 2017.

Kham | Reuters

Copper prices are expected to rise, as the transition to green energy accelerates and the supply of the metal tightens, says Goldman Sachs.

Based on an expected spike in demand, coupled with an already tight market in the wake of the pandemic, the firm raised its forecasts on copper. Goldman now sees prices average $11,000 per metric ton over the next 12 months.

On Wednesday copper traded around $8,900 per ton, according to data from the London Metal Exchange.

"Copper is the new oil," Goldman said, adding that there's "no decarbonization without copper."