Copper price to remain 'very robust' for foreseeable future: Trafigura CEO

Copper prices should remain "very robust" for the foreseeable future due to a very strong infrastructure demand recovery in China from the coronavirus pandemic and the red metal's fundamental role in electrification, trading company Trafigura's executive chairman and CEO Jeremy Weir told participants in the virtual FT Commodities Global Summit Sept. 29.

"And it looks like a pretty exciting year next year," Weir said, noting that Trafigura trades "a very large body of copper", its biggest book in the non-ferrous metals space.

China has emerged from the COVID-19 markets crisis quicker than others, showing a very strong demand for copper which has resulted in low stocks, Weir said.

The London Metal Exchange cash price for copper, which is used in charging systems for electric vehicles, gained more than 40% between its late-March lows of $4,617/mt, at the peak of the pandemic-related crisis, and its Sept. 28 price of $6,571.50/mt.

Aluminum and zinc have also seen solid recoveries due to increasing demand, Weir said.

Renewable energy push

Metals is one of Trafigura's "very mature" businesses, alongside oil. The company's recently-announced push into renewable energy, with expected investments of $2 billion by 2025 in creation of 2 GW of wind, solar and power storage projects, will in future provide a "significant third pillar" for the business, Weir said.

"Oil and metals trading is a very capital intensive business and our margins have traditionally been thin ... there's no shortcuts in this business. You have to be sure that you manage your risks all the time," the trader said.

Weir noted that in future less financing can be expected to be available to smaller players, which could lead to consolidation in the industry. Financiers participating in the conference said there is growing pressure for companies to display green credentials to qualify for financing.

Weir said that Trafigura's Nyrstar zinc smelter should benefit from various solar and energy storage initiatives under the group's renewables push.

Massive copper usage

Trafigura plans to announce targets for limiting its Scope 1 & 2 carbon emissions later this year, he said. "Shipping is our largest carbon footprint and we are addressing this," the CEO said.

Robert Friedland, founder and executive co-chairman of Ivanhoe Mines, addressing the conference, said that due to the electrification of transport, the world will need to use in the coming 18-20 years the same amount of copper that has been used in the last 120 years, if GDP growth of 3% a year is to be maintained.

"As you rebuild the world you need more copper," Friedland said.