ASX copper stocks overall had a very good 12 month year. Particularly the first of these 6 months, which saw copper prices reach all-time highs.
In the last 12 months Oz Minerals Ltd. (ASX: OZL), for example, is up 58%. Over the past 6 months, however, the Oz Minerals share price is down 3%.
It’s a somewhat similar story with the ASX copper share Sandfire Resources Ltd. (ASX: SFR). The Sandfire share price has risen 33% in the past 12 months, while it has only gained 5% in the past 6 months.
For some comparison, the Index of all ordinary (ASX: XAO) is up 18% in 12 months and 4% in the last 6 months.
The price of copper and ASX copper stocks
While many factors determine the price investors are willing to pay for ASX copper stocks, the price of the red metal is a crucial ingredient. This is because the bulk of any increase in the price of copper goes directly to the bottom line. Conversely, any decrease means lower profit margins.
Copper prices have jumped following the initial panic caused by the global pandemic. And prices have continued to rise, fueled by surging demand for electric vehicles, grid storage, wind turbine production, and the broader shift to green power.
Around the same time last year, a tonne of copper was trading at US $ 6,740. On July 5, the red metal hit a record high of US $ 10,417 per tonne. This is part of the reason we saw ASX copper stocks doing so well in the first half of the year.
Copper has since retraced and is currently trading at US $ 9,465 per tonne. While this is down from its record highs, it remains well above historical prices.
And, according to the International Monetary Fund Global economic outlook report, which just came out today, copper could join other clean energy transition metals to go much higher from here.
What did the IMF report predict?
According to the IMF, global copper production was valued at US $ 123 billion in 2020.
And, in what could be good news for ASX copper stocks, that value could rise, especially under the “net zero emissions scenario by 2050”.
Citing copper among the critical metals for green technologies, the IMF report said that “the demand for certain metals would increase with more certainty as they are used in a range of low carbon technologies (copper, nickel and manganese). , for example) “.
The report went on to say, “In the IEA’s net zero emissions scenario by 2050… copper shows a double increase in total consumption.”
And much of the expected increase in demand would come sooner rather than later:
The scenario also implies that the growth in demand for metals would initially be very high by 2030 and slow down over time as the switch from fossil fuels to renewables requires significant initial investments.
Now you might be wondering, if there is a big increase in demand for metals like copper, why aren’t producers stepping in with an equal increase in supply?
The answer, as the IMF report points out, is that “copper, nickel and cobalt are mined in mines, which often require capital intensive investment and take up to 19 years to build.”
That’s a whole planning horizon!
For this reason, “the results show that the supply is quite inelastic in the short term but more elastic in the long term. A positive demand-induced price shock of 10% increases copper production in the same year by 3.5%… ”
ASX Copper Forecast and Shares
It’s important to remember that any type of multi-year forecast is just that. A prediction. A number of factors can change over the years and may not match today’s assumptions.
As the IMF report notes, “A great deal of uncertainty surrounds the demand scenarios. First, technological change is difficult to predict. Second, the speed and direction of the energy transition depend on political decisions. “
But, if the report’s forecast for demand for critical metals for green energy is correct, it should offer favorable winds for ASX copper stocks.