Copper prices have hit a two-month peak, reaching their highest levels since the beginning of August.

On Wednesday, copper futures for December delivery erased earlier losses to trade at $4.499/lb, for a gain of 4.0%. The price rebound comes after short-term concerns over China and its debt-saddled real estate sector, in addition to the growing power crisis gripping the world.

An impact of this price rise has been a renewed interest from major diversified miners in countries they previously considered too risky to invest in. BHP has already signaled its intent to look at “tougher jurisdictions” to secure reserves of essential transition materials.

However, some observers have argued that these high prices are unlikely to continue. Citigroup recently warned Bloomberg that prices could fall another 10%, with demand shrinking over three months.

“What tipped me over the edge in terms of becoming outright bearish was the power, coal, and gas crisis,” said Max Layton, managing director for commodities research at Citigroup in London, told Bloomberg. “The concern is that it gets a lot worse.”

A threat to the energy transition

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The price surge of copper poses significant issues for renewable developers. Renewable energy is highly dependent on base metals, including copper, which is extensively used in the production of electric vehicles, wind turbines, and solar panels.

Due to their extensive cabling, offshore wind farms are particularly copper-intensive, requiring 9.6 tonnes of copper per megawatt of energy capacity. Therefore, the surge in prices has a knock-on impact on many clean energy projects, erasing the margins and making it very difficult to turn a profit.

Citigroup estimates that the global copper market will reach a 521,000 metric ton deficit in 2021, a gap that only threatens to deepen as the green transition accelerates. If this trend continues unchecked, many renewable projects might become financially unfeasible for all but the biggest companies with the deepest pockets.