January 21, 2022

Beyond Going Long

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Producing governments have also noted the prospects for copper

Producing governments have also noted the prospects for copper

The prospects for copper are encouraging and producing countries are already grinding their teeth in the form of higher taxes. Copper works well. It has held steady at $9,550 a ton (the price on the London Metal Exchange) for a long time, despite growing concerns about China’s economic outlook. In order to allay concerns about China’s economic growth, Vice Premier Liu He stressed that growth must exceed targets planned this year and that the government plans more support for businesses.

“However, more important than the demand side concerns are the supply side incentives, which will be driven by a green shift in the coming years. This will mean increased global demand for copper,” says Ole Hansen, commodities analyst at Saxo Bank. One example is the number of completed and planned seabed ‘transport systems’ that are critical to reducing emissions and increasing the efficiency of renewable energy production. The instability of energy production from renewable sources, such as wind and solar, compared to conventional sources such as coal and gas, will increase the need for high-capacity energy transmission capacities between countries and regions. Copper is an important part of these systems.

Countries where copper is mined heavily and want to cut an ever-increasing share of mining profits are also seeing opportunity. They plan to use it to mitigate social inequalities that have been exacerbated by the pandemic. This intention has already been announced, for example, by Chile, which plans to double the tax burden on mining. Mining companies have already warned that such a measure could discourage investment and make meeting future demand more difficult. Thus, copper will remain the focus of analysts and investors alike.

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Source: Bloomberg

copper taxes

Ole Hansen, commodity analyst at Saxo Bank


Note: Editors do not have to agree with the author’s opinion