The copper market has experienced a rollercoaster ride in recent months, with supply concerns and rising demand expectations driving prices to multi-year highs in the first half of this yearHowever, in a surprising turn, prices have recently entered a downward trend, causing much speculation about the future of copper investment.

Despite this pullback, major investment banks on Wall Street and hedge funds continue to express optimism regarding copper pricesThey are betting on a comeback and are positioning themselves to capitalize on what many believe might be the beginning of a significant upward trend in copper pricesGlobal mining giants are competing fiercely for high-quality copper assets and are increasing their investments significantly.

Could we be on the brink of another copper bull market?

After surging past the $10,000 per ton threshold earlier in the year only to drop sharply thereafter, copper prices were dealt another blow by the unexpected surge in U.S

non-farm payroll data for MayLast Friday, LME copper fell to $9,652 per ton, marking an 11.5% decrease from the record high of $11,104 per ton established in MayThis decline broke a trend that had seen prices rise for several consecutive monthsThe upcoming U.Sinflation data for May and the Federal Reserve's decision are set to influence copper's short-term trajectory.

Saad Rahim, chief economist at Trafigura, noted the volatility in the prices of nonferrous metals like copper, attributing much of the earlier speculative surge to investment flowsYet he acknowledged that with Panama ordering the shutdown of the First Quantum Minerals copper mine, the tightening of global copper supply is an imminent realityRahim describes the situation, stating, “A downturn in mining supply will lead to severe shortages of concentrate copper, forcing smelters to cut production.” Producers like Vale and others have begun adjusting their copper supply forecasts for 2024 and 2025 downward.

Nevertheless, investment banks like Bank of America Merrill Lynch, Goldman Sachs, and Citigroup remain bullish on copper

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A research report titled “Everybody Wants Copper,” led by analyst Jason Fairclough at Bank of America Merrill Lynch, argues that due to factors such as energy transitions, escalating demand from India, and the AI data center boom, the demand for copper is poised to skyrocketThey predict that by 2026, the global copper supply-demand gap could double to 743,000 tons, potentially driving prices up to $12,000 per ton, a more than 20% increase from current levels.

Citigroup has expressed similar optimistic forecasts in their previous analysesThey suggested that the second copper bull market has just begun, as cyclical weaknesses from the past 18 months waneFactors contributing to this bullish outlook include increasing demand related to decarbonization efforts, particularly in renewable energy, power grids, and electric vehicles, alongside new demand from AI data center infrastructure

They project that copper prices will stabilize over the next 3-6 months before rallying to $12,000 per ton within 12-18 monthsIn their optimistic bull market scenario, prices could reach as high as $15,000 per ton.

Goldman Sachs anticipates that copper could hit these levels even before the end of this yearNicholas Snowdon, head of the industrial metals research team at Goldman, indicated in a May report that the spot market has absorbed the short-term reactions to rising LME pricesThey expect potential price stabilization in the near term, although this will be relatively short-lived due to greater supply-demand imbalancesConsequently, they raised their copper price target for the end of this year from $10,000 per ton to $12,000 and increased the average price forecast for the year from $9,200 to $9,800 per ton, projecting an average price of $15,000 per ton by 2025. Snowdon mentioned that a copper shortage could emerge as early as the fourth quarter of this year, indicating a significant drop in available copper stocks.

On the other hand, hedge funds such as Rokos Capital Management have made aggressive bets on copper prices rebounding significantly from current levels, with expectations surpassing even those of Wall Street banks

According to insiders, Rokos Capital has amassed a considerable number of options in recent months, speculating that prices could soar to as much as $20,000 or higher in the coming yearsAndurand Capital Management has taken a similar stance, indicating that copper was their largest position by market exposure by the end of April, and speculating that prices could eventually reach $40,000 per tonIn their investor letters, they reported that their main commodity funds gained between 13% and 30% in April, primarily due to their long positions on copperThey strongly believe that a copper bull market is in the early stages, fueled by a substantial 10-year supply deficit brought on by increasing demand from energy transitions and insufficient mining investment.

Amid these forecasts, hedge fund analyst David Einhorn from Greenlight Capital also disclosed that their fund has adopted a moderate macro position to benefit from copper price increases

They currently assert that an impending supply deficit will drive prices significantly higher, compelling them to maintain a bullish stance on copper through futures trading strategies.

As the competition for copper mining intensifies, global mining companies have started a frenzied race for copper resourcesIndustry titans like Glencore and Trafigura, as well as energy companies like Mercuria Group, are aggressively entering the copper mining sectorThey are locking in future copper supplies by signing long-term contracts that extend through 2050, offering substantial upfront payments, and committing vast sums to assist in the excavation of copper mines.

For instance, Mercuria and Trafigura are reportedly in negotiations to acquire $1 billion worth of copper and aluminum mines from Eurasian Resources Group, which only accepts upfront payment transactionsThey are also negotiating with Kazakhstan's ERG to purchase copper output slated for the coming year, potentially prepaying nearly $1 billion

Glencore has already acted, signing contracts with ERG to purchase copper and increasing the upfront payment percentage for these dealsNotably, mining giants have refrained from commenting on these developments.

On June 5, London-listed Antofagasta signed a $1.5 billion investment agreement with Madrid-based Almar Water Solutions and Chile's Transelec for a water transport system aimed at enhancing their Centinela mining operations in ChileThe Centinela project will involve constructing two 144-kilometer pipelines to transport seawater to the port, facilitating the mine's expansion and positioning it among the world's top 15 copper-producing mines with increased annual output.

In late April, BHP proposed a $39 billion acquisition of London-listed Anglo American PLC, largely driven by its desire to expand its copper business—Anglo American has operations across countries like Chile, South Africa, Brazil, and Australia

Known for mining iron ore, copper, metallurgical coal, potash, and nickel, BHP is poised to gain a greater copper footprint if this deal comes to fruition.

This heated contest for copper mining assets is indicative of the shifting dynamics mentioned in the Bank of America report, positing that, as copper prices are expected to rise, high-quality copper assets are becoming increasingly scarceThe strategic investments by companies like Antofagasta to improve water infrastructure at their mines underscore the challenges posed by critical water shortages in regions housing significant copper depositsAccording to the World Resource Institute, nearly 16% of land-based key copper mining reserves are located in areas with severe water scarcityData from CRU Group predicts a substantial decline in existing mine outputs over the coming years, with miners needing to inject over $150 billion into projects between 2025 and 2032 to meet industry supply demands