Copper supply constraints may persist as green efforts drive demand.

While copper had a solid start for the year, benefitting from the broad reflationary trade that supported other commodities, it has been under pressure since its top in May, mainly due to a worsening macroeconomic situation.

Copper has benefited fundamentally from favourable supply-demand dynamics. The physical market constraints and high copper price environment have prompted China to release part of its strategic copper stockpiles. Furthermore, Chinese officials have issued cautions to local metal businesses to avoid potential market manipulation.

Copper underinvestment during the last decade is generating supply issues today, at a time when prices have risen, and green efforts are increasing demand for the metal.

In addition to electric vehicles, copper is utilized in infrastructure and renewable energy generation. Copper is used extensively in manufacturing, including electronics and homes. Copper is also seen as a leading economic indicator. Copper prices reached their highest level a decade earlier this year; prices have climbed by around 21% so far this year.

Copper consumption expects to rise in the coming years. One crucial element is the push for sustainability, as governments spend more money on green activities.

While the "green transition" is crucial for copper, we do not believe additional energy demand will significantly influence the market balance next year. We see it as a long-term beneficial influence that will be felt more strongly towards the end of the decade.

In the short term, a rapid transition to green energy may have unanticipated consequences, such as rising energy prices because the loss of fossil energy capacity is faster than the rate of development of renewable energy capacity. It may adversely influence downstream demand for copper and, as a result, pricing.