Copper prices surged to $US10,000 a tonne for the first time in two years after BHP’s blockbuster bid on resources heavyweight Anglo American sparked renewed confidence in the metal, adding fresh thrust to the wave of M&A sweeping across commodity markets.
BHP’s £31.1 billion ($59.6 billion) bid, which Anglo American knocked back on Friday, followed a more than 15 per cent surge in copper prices this year. Futures rose as much as 1.4 per cent to $US10,000 a tonne on the London Metal Exchange on Friday, the highest level since April 2022.
The metal’s resurgence has been fuelled by optimism about a recovery in global manufacturing and booming demand for clean energy technologies including wind turbines and electric vehicle batteries. That has coincided with a string of supply disruptions at major mines which has tightened the physical market.
That has prompted a growing chorus of analysts to upgrade their copper forecasts, with some tipping prices will rocket as high as $US15,000 a tonne over the coming years.
“BHP’s not making a $60 billion bid purely for copper if they don’t think the returns in copper will be as good, if not better, than iron ore for the next 10 years,” said Ben Cleary, portfolio manager of Tribeca’s Global Natural Resources fund.
Investors have been waiting years for the copper price to break out of the narrow $US8000 to $US9000 a tonne range it has been stuck in, which has kept a lid on the valuations of miners of the metal.
But Mr Cleary believes BHP’s bid will trigger a sustained rally in copper stocks both in Australia and abroad.
“The deal just has great look-through for the whole copper sector and will be a catalyst for equities to keep moving higher,” he said.
Indeed, copper stocks have already begun to lift and were a key driver for improved returns among resources funds in March following a soft 18-month period.
And fund managers are betting that the wave of M&A deals that flooded through the gold sector, headlined by Newcrest’s $26.2 billion merger with US giant Newmont, has now officially hit the copper industry.
“BHP’s offer brings a sense of urgency to the entire sector that the M&A cycle is starting to kick off and companies who think they have an indefinite amount of time before they move on a neighbour run the risk of leaving things too late,” said Sam Berridge, portfolio manager of Perennial’s natural resources fund.
It comes as mining companies increasingly look to purchase operations rather than build them themselves given the elevated costs associated with exploring and developing mines.
Terra Capital founder Jeremy Bond is on the hunt for smaller developers in North America which he believes could be appealing to the major miners looking to enhance their copper exposure.
“There’s some really interesting development assets there which look compelling, particularly if you’re a bigger company looking to buy rather than build,” Mr Bond said.
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