Copper has been on a surging spree in 2024, with the metal jumping 11 percent so far as investors see a positive outlook ahead over global demand.

The metal has also been trading near 14-month high on the London Metal Exchange around $9,500 per metric ton, while it is at an all-time high on the Shanghai Metal Exchange. It is also trading at a 16-month high on the CME.

Why is copper surging?

There are several factors behind the jump in prices.

The Cobre Panama project was forced to shut down after Panama's top court ruled that its contract was unconstitutional. This project was one of the world's largest open-pit copper mines and its closure has created a big hole in the supply chain. Another global mining company Anglo American had recently announced that it plans to cut its spending and as part of the move, it will put one of its copper mines on ‘care and maintenance’.

This gap in raw materials has put the Chinese smelters under pressure as they have declared that they will cut production by 5-10 percent.

Spot treatment charges, which are the fees smelters earn for converting mined concentrates into metal, have collapsed in recent weeks as too many buyers chase too little material.

As the world's largest buyer of concentrates, China is particularly exposed to the resulting squeeze on smelter margins. China's collective reaction has turned the market's attention from weak global demand to copper's stressed supply dynamics.

This is likely to further add to the woes as the demand for copper in electric vehicles, AI power grids and wind turbines has seen an exponential rise in the last few years. The demand is likely to double by 2030. According to Trafigura, artificial intelligence could add a global demand of 1 million tons of copper by 2030. Some reports say green energy transition alone could gulp 4.2 million by 2030.

The prices could go further up if the US Federal Reserve decides to cut interest rates. Citigroup in a note said “Copper is entering a second bull market this century” and the prices have the potential to rise further, according to Bloomberg.

Forecast for 2024

Goldman Sachs: 0.5 million tons global deficit in 2024

Morgan Stanley: Copper disruption allowance at 6.5% in 2024

Trafigura: Bullish copper on underinvestment, expects 5-6mn tons deficit by 2030

Copper price forecast:

Copper hit an all-time high in March 2023 at $10,730

Citi: $10,000 in 2024, $12,000 in 2025

Goldman Sachs: $10,000

(With inputs from Reuters)