Top news

Copper price chart, January 1 to June 30, 2024.

Chart via London Metal Exchange.

Copper supply struggles lead to tight market in Q2

Both the loss of existing copper supply and the lack of incoming supply are supporting copper prices this year.

Weighing on copper supply has been the closure of First Quantum’s (TSX:FM,OTC Pink:FQVLF) Cobre Panama mine in Panama, which accounted for approximately 1 percent of global copper supply when it was operational.

The mine is currently in care and maintenance with negotiations halted as First Quantum awaited the results of presidential elections this past May. The newly elected José Raúl Mulino, a conservative, was seen as an investor favorite. However, Mulino has said his government won’t engage in a fresh round of negotiations unless First Quantum drops its arbitration claims.

“From what I understand most of the people that were running for presidential election were all against the project,” Mazumdar said. “I don’t think there’s anybody there that is for the project winning. So then it’s all about arbitration, which will drag on for a while.”

He believes the situation will impact investment decisions elsewhere as well. “It will also make people and companies rethink spending a lot of money in some jurisdictions if they don’t have government support.”

Elsewhere in the sector, the news has been mixed at best. Despite predicting lower grades and reduced production at its Quellaveco mine, Anglo American (LSE:AAL,OTCQX:AAUKF) saw an 11 percent year-over-year increase during the first quarter as the mine achieved its highest throughput rate. Even so, the copper miner has set guidance for copper production at 730,000 to 790,000 metric tons for 2024, substantially lower than the 826,000 metric tons of copper production it saw in 2023.

“We’ve also had a secular negative trend in production with the largest copper producer, which is Codelco. They’ve got problems with large amounts of debt, so their ability to fund their expansions is problematic,” Mazumdar said.

Codelco, Chile’s state-run mining company, saw production slump to 25 year lows in 2023. This year, the world’s largest copper producer is struggling to meet its 2024 production targets as a new mandate from the Chilean government has prioritized lithium production and the Chuquicamata and El Teniente mines continue to be plagued by long-term debt issues.

Lower production levels have stressed treatment charges since the start of the year, forcing Chinese refiners to begin their own production cuts earlier in the year. However, these cuts have done little to raise margins and producers have begun to plan for additional cuts in Q3 as lowered rates begin to affect annual deals that benefit refiners.

Mazumdar said that the majority of mines produce copper concentrate, for which 50 percent of the smelting capacity is in China. The end price is dictated by treatment and refining charges, which he said have gone low and nearly turned negative.

He went on to say that the other price to look at when analyzing copper markets is copper cathode premiums, which reflect cathode supply and demand.

“So there’s the cathode price. That’s stated in the London Metals Exchange, and Shanghai and the COMEX in the States. But if the market is tight in any of those regions, locally, you will see a cathode premium … over the price of the copper,” Mazumdar said. “People are willing to pay more to incentivize people that have copper inventory to actually put it into the market.”

According to Mazumdar, the current low treatment and refining charges and high cathode premiums are indicative of a very tight near-term market.

Electrification driving copper demand

Higher prices also reflect a recovery from manufacturing sectors as well as higher demand from industries tied to the global energy transition.

Electricity generation in general is a large driver of copper demand, and renewable energy options such as solar and wind consume even large amounts of copper. This is significant as the world continues to move away from fossil fuels, the need for both wind and solar will drive the need for materials to produce parts for turbines and photovoltaics, including copper.

In its Short-Term Energy Outlook, the US Energy Information Administration reported that US electricity generation increased 5 percent during the first six months of 2024 compared to H12023, and predicted that electricity in the second half of 2024 would be up 2 percent compared to last year.

The report also indicates that solar is currently the fastest-growing source of electricity generation. Solar generation was up significantly in the US year-over-year in H1, and the EIA expects it to grow 42 percent year-on-year during the second quarter.

This comes alongside increases in installed solar and wind, particularly in China, which saw record-setting installations of wind and solar projects as installed solar costs drop below that of any other energy source.

Renewable usage is also increasing with corporations. S&P Global Commodity Insights reports that corporate renewable capacity has increased by 15.8 gigawatts worth of contracts being signed through the first quarter, representing a 36 percent increase from the same time in 2023. Of those, solar led the way and made up roughly half of the deals signed.

The report indicated the mineral extraction sector saw strong renewable growth, including 2.5 gigawatts of deals signed by Rio Tinto (LSE:RIO,NYSE:RIO) as it works to improve its carbon footprint at its Australian operations.

Significant copper demand has also been coming from electric vehicle (EV) producers who have been trying to meet growth in the automotive sector. Since 2023, there have been reports of a slowdown in EV sales, but many US carmakers have strong growth in 2024.

During the first half of the year, US EV sales saw an 11.3 percent increase over 2023 with 330,463 units sold. Globally, sales were even stronger, increasing 20 percent to 7 million units sold. China held its position as the strongest EV market, accounting for 4.1 million of those sales.

EVs can use as much as 60 kilograms of copper versus the 25 kilograms in traditional internal combustion powered cars and 29 kilograms in hybrids. Additionally, the electrical demands on the grid will require more power generation and thus even greater amounts of copper.

In a May 2024 report from the International Energy Forum, a body established to facilitate dialogue between energy-producing and energy-consuming countries, it suggested that current goals for 100 percent EV production by 2035 were unrealistic. Instead, it recommended the goal be moved to the manufacturing of hybrids instead.

It noted that the average copper production output of the top 10 mines is 472,000 metric tons per year, and in order to maintain current increases to demand 1.1 new mines will need to be added every year until 2050. When EVs and their demands from the electric grid are factored in, that rises to 1.7 new mines per year or 54 new mines by 2050.

What can copper investors expect in 2024?

In the short term, there is still copper supply in the market, but the situation could quickly change. The Chinese real estate market, which has traditionally been a major demand generator for copper, hasn’t recovered yet, and a shift there could send an already tight market over the edge.

Chinese officials have made attempts to revive the flagging sector, but the initiatives have had little effect and are threatening to drag its economy down further.

However, in China, softened copper demand from housing has largely been offset by increased demand from EVs and the country’s attempt to move away from fossil fuel to meet its energy needs.

As for incoming supply, Mazumdar noted that funding for projects tough as due to rising costs, and the copper price hasn’t been enough to incentivize it. Additionally, projects that have seen development won’t come online in time to fill gaps in production as they’ve also been held back.

He suggested producers are looking to avoid the kind of cost overruns experienced with Teck’s (TSX:TECK.A,TECK.B,NYSE:TECK) Quebrada Blanca 2 expansion, which ballooned from US$4.7 billion to US$8.8 billion.

Additionally, while mergers and acquisitions are taking place in the industry, they have largely been focused on producing assets.

“They don’t mind paying a premium for a project in production because it’s permitted, obviously, the tailings are organized and the capital has been spent, so there is no capital escalation risk,” Mazumdar said.

Mazumdar also suggested that permitting issues are a major factor to timelines, causing investors to rethink where their capital flows to. These long permitting times are resulting in companies turning to jurisdictions with more government support for critical metals, citing Barrick’s (TSX:ABX,NYSE:GOLD) projects in Pakistan.

“Why spend a premium on a project that might take 10 plus years to permit when you can spend as much or less on a project that you can get funded in an area that might take half the time to put into production,” he said.

With limited supply and little to be done to ease permitting times, copper demand is likely to keep the market bullish. This demand is likely good news for investors looking to find opportunities in the resource sector as copper is critical in the medium and long term to energy transition goals around the world.

From critic to champion: Trump’s turbulent past with cryptocurrencies

In 2019, Trump criticized cryptocurrencies in a series of posts on X, then called Twitter, stating that they are ‘not money’ and that their value is ‘highly volatile and based on thin air.’

He also expressed concerns about their use in illegal activities.

However, his stance appears to have shifted in recent times. At a Mar-a-Lago dinner earlier this year, Trump encouraged his supporters to back him if they are in favor of crypto assets, signaling a possible change in his approach.

Bitcoin has had a turbulent year, experiencing significant fluctuations over the past months. Starting 2024 on a positive note, Bitcoin prices reached an all-time high in March, eclipsing US$73,000.

The price has pulled back since then, dipping below US$60,000 in early July.

Bitcoin saw both peaks and troughs during Trump’s presidency, including a remarkable 2017 price run that saw it skyrocket, breaching $US20,000 for the first time in December after hovering around US$1,000 at the start of the year.

What will Trump say about Bitcoin in Nashville?

The crypto market’s anticipation for Trump’s Nashville speech isn’t without basis.

Markus Thielen, founder of 10x Research, noted in an email sent to clients that there is speculation that Trump may use the conference as a platform to announce the establishment of Bitcoin as a strategic reserve asset.

‘Speculation is high that he will announce bitcoin as a strategic reserve asset, which could trigger a parabolic rise in bitcoin’s price,’ he added in a Monday (July 22) edition of the 10x newsletter.

According to CoinDesk, this sentiment has been echoed in the options market, where traders are preparing for potentially extreme price movements following Trump’s rumored announcement.

Beyond market reactions, there are broader economic implications to consider. If the US were to officially recognize Bitcoin as a strategic reserve asset, it could validate the ‘digital gold’ narrative and position Bitcoin alongside traditional reserve assets like gold. Moreover, the political ramifications are noteworthy. Rumors suggest that Trump may appoint pro-crypto figures to key positions, such as chair of the US Securities Exchange Commission or Treasury secretary.

Names like Larry Fink, chairman and CEO of BlackRock, have been mentioned, indicating a potential shift toward a more favorable regulatory environment for cryptocurrencies that could accelerate its growth.

The US government already holds a substantial amount Bitcoin seized during past confiscations, such as those resulting from the Silk Road case. Transferring these holdings to the Treasury could effectively position Bitcoin as a strategic reserve asset without requiring additional purchases on the open market.

This approach could reduce the supply of Bitcoin available for public trading, potentially driving up its price due to its inherent scarcity. However, the integration of Bitcoin into national financial strategies raises challenges.

The US government’s current legal framework and monetary policy would need substantial adjustments to accommodate Bitcoin as a strategic reserve asset. Additionally, experts have raised questions about the security and custody of a volatile asset like Bitcoin, particularly given its susceptibility to cyber threats.

The volatility of Bitcoin itself poses risks as well; its price swings could lead to substantial impacts on national financial stability if it were to be heavily integrated into the country’s reserve holdings.

Trump will join independent presidential candidate Robert F. Kennedy Jr., industry experts, business figures and politicians at the Nashville conference, where he is set to give a 30 minute speech at 3:00 p.m. EDT on July 27.

Uranium price, Q2 2024.

Chart via Trading Economics.

Schoffstall states that a positive trend working in uranium’s favor is the COP28 commitment to triple nuclear capacity by 2050. Globally, 152 nuclear reactors are currently either under construction or planned.

Additionally, in early January, the UK government announced plans to expedite investment decisions for new nuclear projects, aiming to quadruple its nuclear capacity by 2050. Schoffstall notes that with this expansion, nuclear energy would account for 25 percent of Britain’s electricity demand, up from 15 percent previously.

US ban on Russian uranium boosts prices

After holding in the US$86 to US$89 range through April, uranium prices were pushed higher in May by the news that the Biden administration will be banning Russian uranium imports.

“This new law reestablishes America’s leadership in the nuclear sector. It will help secure our energy sector for generations to come,’ said National Security Advisor Jake Sullivan on May 13.

‘And — building off the unprecedented US$2.72 billion in federal funding that Congress recently appropriated at the President’s request — it will jumpstart new enrichment capacity in the United States and send a clear message to industry that we are committed to long-term growth in our nuclear sector.’

The decision aligns with goals set last December by the US and its allies, including Canada, France, Japan and the UK, which collectively pledged US$4.2 billion to expand uranium enrichment and conversion capacity.

The US has relied on Russian uranium since the 1993 Megatons to Megawatts program, which involved converting 500 metric tons (MT) of uranium from dismantled Russian nuclear warheads into reactor fuel.

According to the US Energy Information Agency, Russian imports accounted for 12 percent of the nation’s uranium supply in 2022. The new legislation aims to shift this dependenct toward local uranium sourcing.

The announcement raised questions about the US’ ability to source uranium domestically and through allies, which proved beneficial for US-focused producers like Energy Fuels (TSX:EFR,NYSEAMERICAN:UUUU).

Uranium miners bringing supply back online

As countries look to bolster their nuclear energy capacity, issues around future supply are intensifying. In 2022, total global production satiated just 74 percent of global demand, pointing to a sizable shortfall.

If the world intends to meet the COP28 obligation of tripling nuclear capacity, increased uranium production is needed. Some of that supply will come from projects that were curtailed due to weak prices in the 2010s.

Restarting uranium production at these projects will likely prove easier than bringing new projects online due to the decades-long process of getting mines approved. Indeed, several uranium companies in the US, Canada and Australia have already announced plans to restart existing mines due to recent market optimism.

In late November, Cameco( TSX:CCO,NYSE:CCJ) announced it would resume operations at its McArthur River/Key Lake project in Saskatchewan. In January of this year, Denison Mines (TSX:DML,NYSEAMERICAN:DNN) and Orano Canada revealed plans to restart the McClean Lake project, also in Saskatchewan’s Athabasca Basin.

On the other side of the border, IsoEnergy (TSXV:ISO,OTCQX:ISENF) is preparing to restart its Tony M underground uranium mine in Utah, with first production slated for 2025.

In Australia, Paladin Energy (ASX:PDN,OTCQX:PALAF) resumed commercial production at its Langer Henrich mine in late March, with the first customer shipment expected in July. The company subsequently released guidance for its 2025 fiscal year, outlining 4 million to 4.5 million pounds of production. Paladin’s goal is for Langer Heinrich to reach nameplate production of 6 million pounds annually by the end of the 2026 calendar year.

“Now that uranium prices have returned to more profitable levels, many previously closed mines are taking steps to start producing again,” said Schoffstall in his note. “However, adding to the supply of uranium isn’t as simple as flipping a switch, and increasing uranium production is proving difficult.”

Case in point — the sector’s largest producers have had to reduce their 2024 production guidance.

In 2023, Cameco, the largest pure-play uranium miner by market cap, had to lower the production forecast for its Cigar Lake mine and its McArthur River/Key Lake operations, expecting a nearly 3 million pound shortfall.

Similarly, Kazatomprom, which produces about 44 percent of the world’s uranium, announced in February that it will fall short of its production targets in 2024, and likely in 2025 as well.

These positive long-term fundamentals pushed uranium to a Q2 high of US$93.72 on May 8.

Paladin’s Fission offer hints at more M&A

Amid that environment, some producers started looking for uranium deals in June.

Most notable was Paladin’s C$1.4 billion offer for Saskatchewan-focused Fission Uranium (TSX:FCU,OTCQX:FCUUF).

“The acquisition of Fission, along with the successful restart of our Langer Heinrich Mine, is another step in our strategy to diversify and grow into a global uranium leader across the top uranium mining jurisdictions of Canada, Namibia and Australia,” said Paladin CEO Ian Purdy in a June 24 press release.

“Fission is a natural fit for our portfolio with the shallow high-grade PLS project located in Canada’s Athabasca Basin. The addition of PLS creates a leading Canadian development hub alongside Paladin’s Michelin project, with exploration upside across all Canadian properties,’ he continued.

While some market watchers think the deal could open the floodgates for more M&A activity in the sector, others have warned of potential pitfalls like those witnessed during uranium’s last bull market.

During that period, only one major acquisition led to the development of a new uranium mine: China General Nuclear’s 2012 purchase of Extract Resources, which resulted in Namibia’s Husab mine. Other deals failed to produce viable assets as they were often based on promising geological surveys rather than proven reserves.

This time, industry players are expected to focus on acquiring high-quality, low-cost assets that can withstand market downturns. The Fission deal emphasizes the importance of prioritizing ‘large single asset scale’ properties, Arthur Hyde, partner and portfolio manager at Segra Capital, told Energy Intelligence.

“This is perfectly predictable and probably exactly what the market should be seeing,” he continued during the interview. “I would say that we’re kind of in a unique commodity cycle here, where I don’t think smaller bolt-on acquisitions will be enough to satiate the supply-demand gap. What I think we’re seeing in the Fission deal is a premium for scale and I think that’s something that you’ll continue to see through the cycle.’

Tailwinds seen pushing prices higher

Uranium’s May rally was short-lived, with prices returning to rangebound status through June. Values registered a Q2 low of US$82.07 on June 11, but remained in multi-decade high territory.

“Besides being a pause in a longer-term bull market, the uranium spot market has been susceptible to broader factors like broader commodities weakness, seasonal softness and a lack of expected buying activity with the passage of the Prohibiting Russian Uranium Imports Act,” wrote Jacob White, ETF product manager at Sprott Asset Management.

“On the other hand, fundamentals continue to strengthen with nuclear power plant restarts, new builds and a deepening supply deficit. Notably, the spot market may have paused, but the increasingly positive fundamental picture has played out differently for both the term market and uranium miners,” he further explained.

This sentiment was shared by panelists polled by FocusEconomics. They noted that June saw prices fall for the third time in four months, although they remain near the highest levels since the pre-financial crisis bubble in 2007.

This decline likely indicates a market correction, as the spot price has eased this year, while the long-term contract price, which better reflects market fundamentals, has increased.

Against that backdrop, the panelists expect to see prices remain around their highest level in more than a decade for the rest of the year, with a Q4 price forecast of US$91.72. “Over 2024 as a whole, they see prices averaging the highest level since 2007, with the pledge at the December UN COP 28 summit to triple nuclear energy output driving a worldwide push for uranium supply — which is relatively inelastic,” the firm’s report reads.

April: Oversupply keeps lithium prices low

Lithium carbonate equivalent prices slipped to US$14,780.57 at the start of April, but had clawed back to a Q2 high of US$15,503.96 by April 9. They then began a consolidation period that would last for the rest of the quarter.

Prices for lithium hydroxide on the London Metal Exchange remained flat from the start of the year.

“Regional markets have begun to converge to similar levels (against) the backdrop of a bearish market globally and oversupply concerns,” said Lee at the Fastmarkets event, which was held in Las Vegas, Nevada.

With prices locked in a downward trajectory, Will Adams, head of base metals research at Fastmarkets, warned of the sector’s precarious state in his presentation at the conference. “The lithium market is in a difficult space — low prices are putting the brakes on development, when in reality there is no time to waste,” he said.

In the long term, demand for lithium carbonate equivalent is set to increase to 2.5 million tonnes by 2030, a substantial difference from the 292,000 tonnes of demand recorded in 2020.

As Adams explained, this increased demand will be satiated from a “more diversified supply base.”

Some of that new supply could come from Piedmont Lithium (NASDAQ:PLL,ASX:PLL), one of North America’s leading lithium suppliers. On April 17, the lithium miner announced that the North Carolina Department of Environmental Quality had approved a mining permit for its Carolina lithium project in Gaston County.

The open-pit lithium mine could play a key role in the North American lithium supply chain.

Further down the supply chain, Honda Motor (NYSE:HMC) revealed plans to invest C$15 billion to build a comprehensive EV value chain in Canada. In a late April announcement, the company said the funds will be used to construct an EV plant and a separate EV battery facility in Alliston, Ontario, slated to begin production in 2028.

Another portion of the investment will establish a cathode active material processing plant and a separator plant.

According to Honda Motor, once open, the EV plant will be able to produce 240,000 vehicles annually, while the battery plant will have a capacity of 36 gigawatt hours per year.

May: Tough financing environment for lithium juniors

Despite the difficult price environment, S&P Global data shows that juniors saw some positivity in Q2.

According to the firm, funds raised by junior and intermediate mining companies soared 179 percent month-on-month in April to reach US$1.38 billion, following a slow start to 2024.

The supersized amount represented the highest monthly total in 10 months, and was driven by a 14 percent increase in financings and several high-value deals. The surge was led by the lithium and copper sectors.

However, this energy-driven momentum didn’t last long.

“After nearly tripling in April, funds raised by junior and intermediate mining companies fell 16 percent to US$1.16 billion in May,” a subsequent S&P Global report states. “The decline was fueled by lower copper and lithium financings and partially offset by an increase in gold financing, which rose for a fourth consecutive month.”

As Fastmarkets’ Lee explained during his presentation, the market glut and weak prices have been especially challenging for junior miners and lithium companies in the intermediate stage.

Commenting on incentive prices, he noted, “They usually sit around US$20 to US25 per kilogram per for battery-grade lithium chemicals. Currently, according to Fastmarkets’ assessments, battery-grade lithium chemicals sit below US$15. Therefore, access to capital for new project development or existing production expansion could be challenging.’

This hindrance to the project pipeline could make the market swing back into deficit as early as 2028, said Lee.

June: EV makers sign strategic deals despite sales concerns

As the last month of Q2 unfolded, concerns about weakened EV sales in the EU and Europe continued to apply pressure to lithium demand and prices. Adams noted that Chinese demand growth is set to dip from 113 percent in 2022 to 32 percent this year, while in Europe it’s projected to fall from 44 percent in 2022 to 7 percent in 2024.

However, the most pronounced decline is anticipated to be the US market, where demand growth will fall from 81 percent in 2022 to a meager 4 percent in 2024.

These drops are the result of first-adopter saturation, as well as consumer concerns about affordability, range and charging infrastructure, said Adams. There are also mixed signals from OEMs and governments.

Those challenges didn’t inhibit EV makers from penning large-scale deals at the end of Q2.

In mid-June, sector major SQM (NYSE:SQM) announced that its subsidiary, SQM Salar, had secured a long-term agreement to supply lithium hydroxide to Hyundai Motor (KRX: 005380) and Kia (KRX: 000270).

‘We are incredibly proud to announce this supply agreement with Hyundai and Kia,’ said Carlos Diaz, CEO of SQM Salar, at the time. ‘By providing these world-leading EV manufacturers with high-quality battery-grade lithium hydroxide, we are actively contributing to a more sustainable future.’

Earlier in the month, SQM partnered with Codelco, Chile’s state-owned copper miner, to jointly exploit lithium and other resources in the Salar de Atacama. The venture aligns with Chile’s strategy to nationalize its lithium industry, leveraging its status as the holder of the world’s largest lithium reserves and a leading producer of the battery metal. Under the nationalization plan, Codelco will hold the majority stake in the joint venture. The partnership entails merging Codelco’s subsidiary, Minera Tarar, with SQM’s subsidiary, SQM Salar, to boost lithium production through 2060.

Other notable news events from June include Volvo’s (STO:VOLV-B) introduction of a ‘battery passport’ for its EX90 electric SUVs, enhancing transparency in the supply chain. This digital tracker, developed with British firm Circulor, verifies the origins and recycled content of raw materials like lithium, cobalt, and nickel used in EV batteries.

The battery passport aims to ensure responsible sourcing and improve sustainability.

Available in the EU and US starting this year, customers can access the information via an app or QR code in the vehicle, leveraging Circulor’s blockchain technology for secure tracking.

To end the quarter, SQM announced plans to pilot test direct lithium extraction technologies with a goal of selecting one or more for long-term use by 2025. ‘We would like to have multiple direct lithium extraction solutions,’ Diaz said on stage during the Fastmarkets conference. ‘It’s difficult to choose one that is going to fit and be suitable for all kinds of different chemicals that can be in different types of brine.’

Looking ahead, Adams noted that the lithium market is consolidating in an environment of oversupply, weak demand and high inventory. He added that there is a risk of further price weakness due to the continued oversupply.

However, lower prices could prompt more supply restraint, helping to rebalance the market.

“We expect prices to remain flat in the short to medium term,” he said.