Following the recent rally, the spotlight is on copper, and analysts have been busy assessing their forecasts for copper prices, reflecting a complex set of factors from supply constraints and geopolitical factors to evolving demand trends in various sectors.
Copper prices rally
While copper prices slumped on Wednesday, the metal has experienced a significant rally over the past couple of months, with prices hitting record highs on Monday this week.
Copper, which is a vital industrial metal whose price movements have significant implications for global markets and industries, hit an intraday record of $5.1990 a pound or $11,460 a tonne. This year, copper is up 27%.
The rally was fueled in part by traders betting on a soft supply of the metal in the coming months as miners' production cuts began to take effect.
Copper prices forecast for 2024
Despite the rally, analysts at Citi believe the price of copper is set to consolidate over the next three to six months.
The bank’s forecast for a stabilisation in prices comes with LME prices currently trading close to their zero to three-month point price target of $10,500 a ton after reaching their six to 12-month target of $11k a ton last week.
Citi believes “investors have been right to push copper up from $8-8.5k/t to $10.5k/t over the past 3-4 months.”
However, they explained they think machines are likely a large share of the ~$30bn of copper fund length additions this year.
“In the coming months, some of this length is likely to turn over to consumer hedgers, along with macro and commodity-specific hedge funds, for whom we consider sub-$10k/t as inexpensive,” said Citi.”Indeed, physical indicators (such as visible inventories, spreads and premiums) aren’t going to look great for some time as China semi-fabricators de-stock refined metal and as global scrap dealers de-stock scrap.”
The current price levels are seen as sufficient to avoid huge deficits in the copper market this year as the scrap market responds.
Meanwhile, JPMorgan analysts believe pricing expectations are overshooting the fundamentals while copper stocks are currently trading at fair value.
“Copper has been on a tear thus far this year, rising 27% YTD amid what we view as relatively overdone refined supply-side concerns,” said JPMorgan. “This has translated into strong re-rating for copper-levered stocks FCX (+20% YTD) and TECK (+24%) with near-term investor sentiment now seemingly more bearish relative to the start of the year.”
“Pricing sentiment appears to have overshot underlying fundamentals, which are more sound than recent pricing momentum infers, largely driven by resilient China refined supply and seemingly elastic demand,” they add.
The bank also notes that the latest copper forward curve now exceeds both their base case and JPM’s Commodities team’s copper price forecast through the remainder of the year and into next year, suggesting further upside potential should bullish expectations materialize.