Investing.com — Copper prices will see some volatility in the near term after rising to record highs in recent sessions, Morgan Stanley analysts said in a note, although the red metal is still expected to rise this year.
A mix of strong supply-demand fundamentals and excessive speculative trading fueled stellar gains over the past few sessions, pushing prices to all-time highs.
Bulls expect copper demand to increase in the coming months due to a greater global push for green energy and electrification, and that copper mines will be unable to meet this increased demand.
This idea was a key driver of copper gains and also caused a short squeeze on the Comex, fueling copper’s rally. on the London Metal Exchange hit a record high of $11,101.50 per tonne on Monday.
But copper prices fell sharply from these records on Tuesday, with MS analysts saying the red metal would see some near-term volatility after the abrupt gains.
Still, they expect the red metal to rise further in 2024 and presented a bull case of $13,125 per tonne for LME copper, along with a base case of $10,500 per tonne.
MS analysts said the physical copper market was likely tighter than initially expected, mainly due to low U.S. inventories and diversified Chinese shipping.
The growing popularity of artificial intelligence and the industry’s high energy needs are also expected to increase copper demand. Copper plays a key role in electricity transmission infrastructure.
“We remain bullish on copper as continued supply challenges increase our 2024 deficit, which is expected to persist into 2025. Demand and narrative tailwinds from data centers/AI should also drive participation, while long positioning increases,” MS analysts wrote in a note. .
China is the world’s largest copper importer and is expected to experience an economic recovery in 2024 thanks to continued stimulus support from Beijing. Such a scenario is expected to increase the country’s interest in copper, although weakness in the real estate market may limit demand.
