UBS forecasts copper pricing amidst supply challenges

Copper prices continue to stand above the $8,200/metric tonne (mt) mark, defying weaker investor sentiment in China, as a series of mine supply downgrades drive analysts’ prediction of a persistent market deficit in 2024.

Analysts at UBS foresee a target of $9,500/mt for , recommending investors seize buying opportunities on market dips. Alternatively, they suggest capitalizing on relatively low option market volatility to secure upside participation in copper.

A key factor contributing to the copper narrative has been the constant revision to supply growth. Prominent copper producers such as Anglo American (JO:) and First Quantum (NASDAQ:) have revised down their production guidance for 2024, signaling challenges in expanding output. The recent collapse in treatment charges reflects a tighter concentrated market, potentially leading to a lower refined supply. Analysts at UBS globally target a refined supply increase of 3.5% in 2024, with concerns rising as global exchange inventory builds remain below seasonal norms.

Despite lackluster demand from traditional sectors in the US and weakness in Europe, robust demand from China in 2023 has played a crucial role in offsetting these challenges. Global decarbonization efforts are expected to drive electrical network and transportation demand for copper. Although the construction and appliances sectors may face headwinds due to easing building completions in China, ongoing stimulus measures in the country are anticipated to provide underlying support.

Analysts at UBS forecast a global copper consumption increase of 3.3% in 2024, as a likely manufacturing recovery in Europe and the US aids in overcoming destocking challenges. With limited visible copper inventories at hand, prices are expected to surge to USD 9,500/mt or higher in late 2024, according to UBS’s outlook.