Iron ore, copper prices surge onwards and upwards as “green demand” clashes with weak supply

Iron ore pellets

IRON ore futures increased 10% to more than $226/t whilst the copper price continued to rise despite last week’s record-making gains through $10,000/t.

The iron ore sector “is very, very hot,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, said in Bloomberg Television interview. “Supply is still not able to meet that strong demand.”

The iron-ore boom comes as China’s steelmakers keep output rates above one billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply, said Bloomberg News.

That has boosted steel prices and allowed steelmakers to absorb iron ore costs. They may also be ‘frontloading’ iron ore ahead of additional carbon emission reduction plans, said the newswire.

“There is a chance that ex-China demand can come back to such an extent that we still see steel demand pick up globally and that will see iron ore demand remain at these elevated levels,” CBA’s Dhar said.

Copper rose as much as 2.1% to a record $10,639 a metric ton on the London Metal Exchange as optimism grows of its increased use in technology aimed at cutting carbon emissions. Its “massive green demand” could “clash with a completely unprepared supply side,” Bloomberg News cited Goldman Sachs as having wrote in a recent report.

The bank said the metal may rise to $11,000 a ton in 12 months and to $14,000 in 2024.

“The supply side has been overshadowed somewhat recently with this spike in prices and stimulus projects talking about electric vehicle demand and decarbonization,” Sam Spring, CEO of Kincora Copper, an exploration company, told Bloomberg News.

“Before Covid and the spike in the copper price, you already had the industry struggling to keep supply flat. Investment from the last commodity cycle had peaked and not many new projects had been kicked off post 2015-16.”