Toronto, Canada – The price of copper has been on a significant rise since the beginning of the year, driven by concerns over potential supply shortages. Hussein Allidina, the Managing Director and Head of Commodities at TD Asset Management, believes that the rapid climb in the metal’s price may have gone too far and shares his outlook for the future.

According to Allidina, the surge in copper prices has been supported by three main factors. Firstly, the closure of a major mine in Panama last year forced a reassessment of supply-demand balances, revealing that the market may not be as loose as previously thought. Secondly, an improvement in Chinese economic activity has boosted copper demand as economic conditions on the ground have shown signs of recovery. Lastly, the increasing need for copper in technologies like AI to support data centers has also contributed to the price surge.

While acknowledging the long-term potential for copper prices to rise, Allidina suggests that the current price levels may be too high given the existing fundamentals. He anticipates a potential pullback in prices in the coming weeks before a more sustained increase over time, considering the lack of investment in new copper mining projects in recent years.

When discussing the future supply of copper, Allidina highlights that, based on current projections, there may not be enough copper to meet the growing demands, especially with the rise of electric vehicles (EVs) and AI technologies. The need for increased production is crucial, but the time required to bring new mines online poses a significant challenge.

Regarding the impact of EVs on copper demand, Allidina notes that while the growth in EV sales may have slowed, the absolute amount of copper needed per EV remains significantly higher than traditional internal combustion engine vehicles. Despite the current focus on emerging technologies like AI, the demand for copper in these sectors is still relatively small compared to traditional uses.

As the market navigates the challenges of supply constraints and increasing demand, Allidina emphasizes the complexity of the copper mining industry. Resource nationalism, labor strikes, and economic uncertainties in key production regions could further complicate efforts to meet future demand for copper, leading to potential price volatility in the market.