BHP’s proposed bid for Anglo American is a big bet on copper

BHP Group’s proposed $39 billion buyout of Anglo American is a big bet on copper that could spark a scramble for mining assets as a bullish demand outlook and tight supply for a mineral crucial to the energy transition sends prices to multi-year highs.

Combined, the companies would churn out 10% of global output of the red metal, cementing diversižed miner BHP’s position as the top producer ahead of copper-focused Codelco and Freeport-McMoRan.

Thanks to its high conductivity and extreme resistance to corrosion, the metal is used in everything from cars, power grids to building construction.

“The energy transition is only just getting started, and if electricity is the lifeblood of this revolution, copper is the veins and arteries,” said Peter Arkell, chairman of the Global Mining Association of China (GMAC).

“There is no way that existing mines can meet the anticipated demand, therefore the major mining companies recognise that copper needs to be a fundamental part of their portfolio,” he told Reuters.

Global režned copper buys grew 6.7% in 2023 to 27.63 million metric tons, World Bureau of Metal Statistics data showed.

Global režned copper demand will rise at a compound annual growth rate of 2.3% from now through 2028, according to London-based commodity research žrm CRU.

That robust demand outlook is coupled with unexpectedly tight supply of copper concentrate this year, fuelled by the December closure of First Quantum Minerals’ massive Cobre Panama mine.

Also in December, Anglo

American cut its copper production guidance by up to 2,10,000 tons for 2024 and as much as 1,80,000 tons for 2025, citing lower grades and ore hardness at the Los Bronces

mine in Chile, pushing analysts to revise their market balance forecasts.

CRU predicts a shortage of 1,94,000 tons for global copper concentrate and a shortage of 1,49,000 tons for režned copper this year, and analysts have said they expect the concentrate dežcit to widen over the next three years.

Goldman Sachs is even more bullish, with its analysts forecasting a shortage of 4,28,000 tons of režned copper in 2024 in a note that also predicted prices would hit $12,000 per ton over the coming year.

That would be another 23% rise from current levels on the London Metal Exchange (LME), where the price has rallied on strong longer-term market fundamentals and speculative trading.

The LME’s benchmark three-month copper contract hit a two-year high of $9,988 per metric ton on Monday, up 15% so far this year, while the most-traded contract on the Shanghai Futures Exchange hit a record 81,050 yuan ($11,184.25) a ton on Monday, up 18% year-to-date.

Maintaining output

Craig Lang, a CRU analyst, said some miners are struggling to maintain production levels as mines age, which would encourage them to acquire other assets. Smelters are likely buy stakes in mines to secure o‡take, he added.

BHP said Thursday that purchasing Anglo would give it value-adding copper growth options.

“BHP has talked about getting more copper for a long time,” said Hayden Bairstow, head, research at Australian broker Argonaut. “Anglo’s got plans to go to a million tonnes per year in the next 10 years.”

Miners and smelters in China, the world’s top copper režner and the biggest raw materials importer, have also been looking for mining assets.

China’s Zijin Mining, which produced more than one million tons of mined copper in 2023, ranking sixth globally, last year joined with South Africa’s Sibanye Stillwater in an attempt to buy Zambia’s Mopani Copper Mines, but lost out to a unit of the United Arab Emirates’ International Holdings Company.

REUTERS Energy in transition: Bullish demand outlook for copper and tight supply are boosting prices.