BHP Foresees Copper Surplus in 2024, But Long-Term Deficits Loom

Australian mining giant BHP has projected a moderate surplus in the copper market for the remainder of 2024, driven by softer demand from China and increased supply. However, the company warns that the red metal could experience significant price increases in the medium to long term as supply deficits emerge due to growing demand.

Short-Term Surplus Expectations

BHP, in its 2024 fiscal results, has adjusted its outlook for the copper market, now anticipating a marginal surplus for the calendar year. This shift is attributed to reduced demand expectations from China, coupled with higher copper supply levels. Earlier this year, the copper market experienced a price surge, with the London Metal Exchange's official three-month copper price reaching an all-time high of $10,927.50 per ton in May. This spike was fueled by reduced production from key South American and Panamanian mines, expected smelter cuts in China, a ban on Russian metal deliveries, and speculation of a US Federal Reserve interest rate cut.

However, the market corrected over the past three months, as it became clear that Fed rate cuts were unlikely before September, and China's economic slowdown—particularly in the real estate sector—further dampened demand. BHP now expects this softer Chinese demand to persist through the end of 2024, limiting the potential for significant increases in LME copper prices in the near term.

Long-Term Copper Deficits

Despite the near-term surplus, BHP remains optimistic about copper's long-term prospects. The company anticipates that demand from traditional sectors, combined with emerging needs from industries such as artificial intelligence and the global shift towards decarbonization, will eventually outstrip supply, leading to market deficits. These deficits could result in price surges, which in turn may incentivize the development of higher-cost supply sources in the future.

BHP's Growth and Expansion Plans

In response to the anticipated future demand, BHP plans to increase its copper production by 4% in the 2025 financial year, focusing on mining higher-grade ores at its Escondida mine in Chile and improving productivity across all assets. The company also highlighted several growth opportunities, including four major expansions across existing and new facilities in Chile, with final investment decisions expected between 2026 and 2029.

Additionally, BHP is evaluating the potential to boost its Copper South Australia production from 322,000 tons in fiscal 2024 to 500,000 tons annually by the early 2030s, and further to 650,000 tons annually by the mid-2030s. The company also holds a 45% stake in the Resolution project in the United States, one of the world's largest undeveloped copper projects, which could play a significant role in meeting future copper demand.