The global demand for copper continues to grow. According to Wood Mackenzie, the medium term outlook for the copper market has been impacted by the global pandemic, however the fall in demand in 2020 was less than expected while the 2021 recovery looks set to be better than originally anticipated. Last year's China led recovery has been reinforced this year with progress on vaccinations and continued efforts by governments to boost growth via large stimulus policies across major markets.

According to Wood Mackenzie, total and refined copper consumption will expand by a CAGR of 3.0% and 2.6% respectively, between 2021 and 2026. The energy transition will support global refined consumption growth of 1.8% p.a. for the period 2021-2040. Meanwhile, future demand growth will be shaped by copper's role towards a greener, more sustainable world. Demand will also be met by a rising share of direct use of scrap, with total consumption growth of 2.2% p.a. forecast for the period 2021-2040.

According to Wood Mackenzie, refined copper production is expected to grow at a modest CAGR of 2.3% from 2021 to 2030. Although China continues to be a strong contributor to overall production and will continue to have an increasing share of world copper production, copper mine supply is forecast to peak in 2024, followed by a decline in supply resulting from expected reserve depletion at global SXEW mining operations.

The strong copper price environment is expected to increase investment in copper supply in the short-term; however, long lead times and non-meaningful production capabilities of the projects receiving this investment may limit the impact this has on increasing supply. From 2026 onwards, mine supply constraints are expected to result in an overall deficit in copper supply. More stringent environmental regulations for mines, smelters and refineries may compound the supply deficit in the mid-to long-term.

According to Wood Mackenzie, without additional mine production (assumed to come on stream over and above what is available from the base case scenario as outlined above), the theoretical supply gap would stand at ~5.4 Mt by 2031. This theoretical supply gap reflects the revisions to the global refined demand outlook but also adjustments to the scrap volumes that should be available to smelters and refineries over the long term. Taking all these factors into account, they remain confident that a long term incentive price of US$7,275/t (US$3.30/lb) in constant 2021 US dollars should be sufficient to close this supply gap in order to maintain market equilibrium and retain a reasonable market balance over the next decade.