After the recent rally, the spotlight has been on and analysts have been busy assessing their forecasts for copper prices. These reflect a complex set of factors, from supply constraints and geopolitical factors to evolving demand trends across sectors.
Copper prices are rising
While copper prices fell on Wednesday, the metal has staged a significant rally in recent months, with prices hitting record highs on Monday this week.
Copper, a key industrial metal whose price movements have significant implications for global markets and industries, reached an intraday record of $5.1990 per pound or $11,460 per tonne. This year, copper is up 27%.
The rally was fueled in part by traders betting on weak supplies of the metal in coming months as miners’ production cuts began to take effect.
Copper prices forecast for 2024
Despite the rally, Citi analysts expect copper prices to consolidate over the next three to six months.
The bank’s forecast for a stabilization in prices comes with LME prices currently trading close to their zero-to-three-month point price target of $10,500 per tonne, after hitting their six-to-12-month target of $11,000 per tonne last week .
Citi believes that “investors have been right to see copper rise from $8-8.5k/ton to $10.5k/ton over the past three to four months.”
However, they explained that they think machines are likely to make up a large portion of the ~$30 billion in additions to copper funds this year.
“In the coming months, some of this volume is likely to be transferred to consumer hedge funds, along with macro and commodity-specific hedge funds, for whom we view sub-$10,000/ton as cheap,” Citi said. Indicators (such as visible inventories, spreads and premiums) will not look good in the near future as Chinese semi-manufacturers reduce their inventories of refined metal and global scrap traders reduce their inventories.”
The current price level is considered sufficient to avoid major shortages in the copper market this year as the scrap market responds.
Meanwhile, JPMorgan analysts believe price expectations are exceeding fundamentals, with copper stocks currently trading at fair value.
“Copper has been on a tear so far this year, up 27% YTD, amid what we view as relatively over-refined supply-side concerns,” JPMorgan said. “This has translated into a strong rerating for copper supplying stocks FCX (+20% YTD) and TECK (+24%), with near-term investor sentiment now seemingly more bearish compared to the start of the year. ”
“Price sentiment appears to have exceeded underlying fundamentals, which are healthier than recent price momentum suggests, largely driven by resilient Chinese sophisticated supply and apparently elastic demand,” they added.
The bank also notes that the latest copper futures curve now exceeds both the base case and JPM’s Commodities team’s copper price forecast for the rest of the year and next year, suggesting further upside potential if bullish expectations materialize.
