Copper needs to reach $12 000 a ton — a 20% jump from this week’s high — to incentivize large-scale investments in new mines, said Olivia Markham, who co-manages the BlackRock World Mining Fund.

The metal’s price hit a two-year high near $10 000, but Markham said further gains are necessary to encourage miners to sign off on projects required to avoid major deficits during the energy transition.

“When I look at the price today, I think it’s well below the pricing levels we need to incentivise new greenfield production,” Markham said in an interview Wednesday. “Structurally, we need more copper units, and currently I don’t see those big blocks of new supply coming through.”

BlackRock has been among the most bullish voices in the copper market for years, and by degrees that sentiment is echoing across the industry as buyers contend with an unprecedented shortage of mined ore. Demand has been alarmingly soft in China this year, but a broad consensus has nevertheless emerged that the worsening squeeze on mine supply may jolt prices.

Markham’s forecast is underpinned by an analysis of the soaring costs miners incurred in building copper projects recently, with an average spend of about $30 000 for each ton of production capacity.

For a mine producing 300 000 tons a year, that would translate to a ballpark price tag of $9-billion. Incentive-pricing analysis indicates that miners would need $12 000/t copper to make a 15% post-tax return on future investments, she said.

Anything below that, and they may be reluctant to go ahead.

Together with signs of improving manufacturing sentiment, the shortage of mined copper that’s emerged this year has led some to ask if now is the beginning of a bull run that could see the metal smash price records.

Copper traded 1.2% higher at $9 818.50 a ton on the London Metal Exchange as of 3:48 p.m. local time Wednesday, lifting the year-to-date gain closer to 15%.