©Reuters. UBS forecasts the price of copper in an environment of supply difficulties
Copper prices continue to hover above the $8,200/tonne (mt) mark, defying weaker investor sentiment in China, while a series of mine supply downgrades drive analysts’ forecast of a persistent copper deficit. market in 2024.
UBS analysts forecast a target of $9,500/mt for , recommending investors to seize buying opportunities in market dips. Alternatively, they suggest taking advantage of the options market’s relatively low volatility to secure upside participation in copper.
A key factor contributing to the copper narrative has been the constant review of supply growth. Major copper producers such as Anglo American (JO:) and First Quantum (NASDAQ:) have revised down their production guidance for 2024, signaling difficulties in expanding production. The recent collapse in treatment costs reflects a narrower concentrated market, which could lead to less refined supply. UBS analysts globally target a refined 3.5% supply increase in 2024, with concerns rising as global stockpiling remains below seasonal norms.
Despite weak demand from traditional sectors in the United States and weakness in Europe, strong demand from China in 2023 played a crucial role in offsetting these challenges. Global decarbonization efforts are expected to spur demand for copper for power grids and transportation. While the construction and appliance sectors may face challenges due to the slowdown in construction completions in China, the country’s ongoing stimulus measures are expected to provide underlying support.
UBS analysts expect global copper consumption to rise 3.3% in 2024, as a likely recovery in production in Europe and the United States helps overcome inventory drawdown challenges. With limited visible copper supplies on hand, prices are expected to rise to USD 9,500/ton or more towards the end of 2024, according to UBS forecasts.