Monsters of Rock: Westpac remains bullish on the long term outlook for copper and nickel

Westpac keeps medium and long term commodity prices largely unchanged despite recent surge in iron ore, coal and energy prices
The big bank is eyeing big lifts in nickel and copper pricing as the decade progresses
Liontown, Azure, Capricorn among the top performers on a tough day for large and mid-cap miners

Picking commodity prices is a fool’s errand but given most mines take around a decade to go from discovery to an a living and breathing operation, forecasting is an essential service.

While plenty of bankers will have to put their hands up and say a mea culpa at some point in the future — as Chalice Mining (ASX:CHN no doubt hope the critics who have called their commodity assumptions for the Gonneville nickel-copper-PGE scoping study overambitious find out — it helps to have an idea for where analysts think commodity markets are heading.

There have been plenty of ructions in the mining and energy industry of late, especially when it comes to higher prices for things like oil, gas and coal.

Despite upward movements over the past month, Westpac’s senior economist Justin Smirk has left his outlook effectively unchanged even as thermal coal, iron ore and coking coal prices have moved higher.

While premium low volatility coking coal from Queensland has surged around over US$30 over the past month to US$275/t, Smirk still has prices in the mid-US$240s by 2027, levels which are admittedly fairly high.

Iron ore, fetching around US$119/t today, is expected to fall to US$103/t in December and US$83/t in December next year before rebasing to the low US$90/t range long term.

Newcastle thermal coal is expected to slide from US$164/t today to US$125/t by June before recovering to US$131/t by September 2027.

Where the gains are really going to be found though, Westpac’s numbers show, is in nickel and copper.

It expects copper markets to remain in limbo next year, with mid-2024 prices of US$8433/t barely above the US$8346/t level seen for copper metal today.

But that is where the fun begins. Copper inventories are around multi-year lows and from the middle of this decade a lack of discoveries, increased demand from EVs and renewables and falling supply from South America’s major hubs in Chile and Peru could rebalance the industry.

By December next year Westpac see copper hitting US$9216/t, breaking the US$10,000/t barrier by September 2025. By September 2027, it sees prices of US$11,143/t. In nominal terms, that would break the record highs seen in May 2021.

At that point, the big bank assumes, nickel would be fetching US$24,915/t, over 20% higher than current levels of US$20,265/t.

A battery metals loving boy can dream. You can check projections for the full suite of commodities tracked by Westpac here.

And on the markets

Miners faded through the afternoon session, sending the materials sector trundling to a 1.11% loss, continuing a tough month for the ASX mining sector.

It has seen 4% of its value come off over the past 30 days.

Liontown Resources (ASX:LTR) and Monadelphous (ASX:MND) were among the winners after the lithium developer announced the WA-based mining services play as the recipient of the final major contract on the processing plant at its Kathleen Valley lithium mine ahead of a mid-2024 opening for the next Tier-1 hard rock lithium asset.

Closely watched lithium explorer Azure Minerals (ASX:AZS), SQM backed owner of the Andover discovery in the Pilbara with Mark Creasy’s Creasy Group, was up almost 3%, with coal miner Coronado (ASX:CRN) and gold producer Capricorn Metals (ASX:CMM) also among the day’s top large and mid cap miners.