Citi expects the commodity’s fundamentals to turn more supportive after the Chinese New Year in mid-February.
“As policy momentum could gather speed ahead of the National People’s Congress in March, we see rising upside catalysts into the second quarter from both macro expectations and strengthening fundamental,” Ms Yao said.
Base metal and iron ore prices are also expected to be supported as Chinese policymakers broaden the scope of the urban village redevelopment. This forms part of China’s ‘three major projects’ intended to offset weakness in the nation’s property sector.
Citi increased its three-month copper price forecast to $US8800 a tonne, from $US8500 a tonne because of the potential for more policy easing by Beijing, and tighter supply of the metal.
Goldman Sachs in a separate report was even more bullish on the base metal with the broker reiterating its 12-month target at $US10,000 a tonne. The copper price has climbed around 2 per cent since the People’s Bank of China’s surprise 50-basis-point cut to the reserve ratio requirement.
“The cut signals that policymakers are ready to step [in] to stabilise the market and investor confidence amid weak domestic macro conditions,” Goldman analyst Aditi Rai wrote in the report.
While the analyst said copper already had “exceptional fundamentals” that were not directly dependent on the cut to the RRR, the policy adjustment would “help boost sentiment and support credit extension … which we think should in turn reduce the left tail risks to China’s traditional copper demand”.
Elsewhere in commodities, Goldman wrote that the latest reporting season had put the focus back on the supply of battery metals in 2024. The broker said it expected the entire battery metals markets to be in a “significant surplus” this year.
“We continue to target LME nickel price at $US15,000 a tonne on a 12-month horizon, which would move around 190kt of class 1 supply into loss-making territory,” it warned. “The impact of such meaningful excess material is further intensified by weak Chinese demand.”
On lithium, the broker wrote that “a lack of intermediaries and appropriate long-term storage” could extend the cycle of weak pricing “until marginal producers respond with sharp supply cuts”.
