Copper Prices Set To Fall: Goldman Sachs Lowers 2025 Forecast As Mining Profits Shrink

Goldman Sachs has sharply revised its copper price forecast for 2025, lowering its estimate from a record $15,000 per tonne to $10,100. This significant reduction has raised concerns across the global commodities market, particularly for copper miners who are already facing shrinking profit margins. With demand slowing from key economies and broader economic challenges on the horizon, the outlook for both copper prices and the mining sector appears increasingly uncertain.

Drivers of the Downgrade

Several factors have contributed to Goldman Sachs’ decision to cut its copper forecast, with slower demand from major economies being one of the most critical. China, the world’s largest consumer of copper, has seen a cooling in its industrial output as it grapples with economic headwinds. Slower infrastructure spending and weakened growth in construction and manufacturing sectors have reduced the need for copper, a metal that is essential for electrical wiring, construction, and industrial machinery.

In the United States, similar trends are playing out. Rising interest rates and persistent inflation have cooled demand for new construction and large-scale manufacturing projects, both of which are major drivers of copper consumption. The high cost of borrowing has slowed growth in sectors like housing and automotive, where copper is heavily used. As a result, expectations for copper demand over the next few years have been revised downward.

Global economic challenges are also a major factor in the forecast revision. With central banks around the world raising interest rates to combat inflation, growth in many industrial sectors has slowed. Concerns about a potential global recession are leading to more conservative economic forecasts, further dampening the outlook for copper demand.

Meanwhile, shifts in the energy and technology sectors have affected copper’s short-term prospects. While copper is crucial for renewable energy technologies and electric vehicles, the transition to these industries is progressing more slowly than previously expected. This slower pace of adoption, combined with innovations that may reduce copper’s role in some applications, has contributed to lower expectations for copper prices.

Implications for Mining Companies

For the world’s major copper mining companies, this revised forecast represents a significant challenge. Many miners have based their long-term strategies and investment plans on higher copper prices, assuming continued strong demand driven by industrial growth and the energy transition. With prices now expected to be much lower than anticipated, miners face shrinking profit margins.

In particular, smaller and medium-sized copper producers that rely on higher copper prices to cover operational costs may face financial strain. Miners with high-cost operations or those expanding aggressively may find it difficult to generate the returns they need to justify continued investment in new projects.

In response, many miners are expected to implement cost-cutting measures. This could include reducing workforce numbers, scaling back operational expansions, or delaying new projects to conserve cash flow. For larger companies, these measures could also include capital expenditure reductions, as they focus on maintaining profitability in a lower price environment. Major mining firms that were planning to expand production or explore new areas may be forced to reconsider those investments, potentially slowing growth in global copper supply.

Outlook for the Commodity Sector

The ripple effects of the lower copper forecast are likely to extend beyond the copper market, influencing other industrial commodities. Metals like zinc, aluminum, and nickel, which are also tied to global industrial production, could face downward pressure as slowing demand affects the broader commodity sector. Investors who have been bullish on commodities due to the energy transition may now reassess their exposure to industrial metals, especially as market uncertainty grows.

Investor sentiment in the mining sector could also shift significantly. With reduced profitability and potential cutbacks in capital investment, mining stocks may come under pressure. Investors might begin seeking safer bets or diversify into other sectors that offer more stable returns. The commodity futures market may also see increased volatility as traders adjust to the new price expectations.

However, despite the immediate challenges, there remains the possibility of a long-term recovery in copper prices. If governments around the world implement large-scale infrastructure projects or stimulus packages, demand for copper could rebound. Additionally, the acceleration of the energy transition—especially in electric vehicles and renewable energy—could revive copper demand over the next decade. Supply chain disruptions or geopolitical tensions could also unexpectedly reduce global copper supply, driving prices higher.

Conclusion

Goldman Sachs’ downward revision of its copper forecast to $10,100 per tonne in 2025 presents a significant challenge for the copper mining sector. With lower-than-expected demand from major global economies and rising operational costs, miners will likely face tighter profit margins and be forced to reconsider expansion and investment plans.

Despite the bleak outlook, there may still be opportunities for investors who are willing to take a long-term view on the copper market. The potential for a recovery in demand—whether through infrastructure spending or accelerated energy transition efforts—means that copper could rebound in the coming years, though the near-term forecast remains uncertain. For now, the mining sector faces a tough road ahead, with profitability challenges and a global economic slowdown placing significant pressure on copper producers.

Author: Ricardo Goulart