The copper bulls are off and running once again with confidence growing that the latest price breakout will not be another false alarm.
A squeeze on supply caused by production outages such as the closure of a big copper mine in Panama is combining with strong demand to lift the price back over the $9000 per pound mark with another 22% increase to a record $11,000/lb seen as likely.
Copper packed on pallets at Antofagasta, Chile. Photo by Oliver Llaneza Hesse/Construction … [+]
Multiple investment banks, including Citi, Goldman Sachs and Morgan Stanley have jumped aboard the copper express.
But even as they recommend increased copper exposure to their clients there is an element of uncertainty because a similar set of circumstances evolved two years ago, prompting optimistic forecasts which flopped alongside the copper price.
Back in 2022 it was Goldman Sachs which led the way with a forecast of copper hitting $13,000 a ton during 2023, only for copper to do the opposite and sag to $7150/t.
After that low point, copper has been steadily climbing to its latest price of $9200/t, an upward trend which is expected to continue if not as a boom but more as a steady “melt” upwards.
New Technologies Needed
The latest assessment of the copper market from Goldman Sachs is that a significant shortfall in supply will see the price rise to $9900/t from 2028, driving a rush to find new copper production technologies focused on squeezing metal out of low-grade ore.
But even if an extra one million tonnes of copper can be found from new forms of processing it will be “insufficient to close our commodities team’s five million tonne deficit in 2030,” Goldman Sachs said.
Morgan Stanley’s view is that the tight supply and demand fundamentals of the copper market has lifted the metal to the top of its commodity order of preference.
“Copper has broken above $8700/t for the first time since August as expectations for a large deficit have accelerated,” Morgan Stanely said. “We stay bullish on copper, forecasting $10,200/t by the third quarter of 2024.
Copper cable at rolling mill in France. Photo by Denis Charlet/AFP via Getty Images
Citi, which has been the biggest gold bull among the banks, has tempered its optimism with a new forecast that sees a rise to $12,000/t taking longer than previously expected.
“Citi’s global commodity team now sees the red metal rising more gradually to $12,000/t over the next two years ($10,000/t by the end of this year) as deficits support copper outperformance in what is likely to be a choppy macroeconomic environment,” the bank said.
Smaller banks and broking houses are also lining up behind copper but with greater caution than the U.S. banks.
ING, a Dutch financial institution with global reach, said last month that “copper’s bull run is only just beginning”. It sees supply tightness as the current price driver with more to come as the demand side improves.
Wilsons, a boutique Australian advisory firm said that in a challenging year for the resources sector as a whole copper has been one of the standout commodities with spot prices approaching a 12-month high.
“With interest rate cuts from the Federal Reserve expected this year and a soft-landing scenario likely for the global economy demand for copper should be supported given its range of industrial uses in construction, consumer goods and machinery” Wilison’s said.
