(Kitco News) – The copper market is experiencing renewed volatility, but analysts believe a perfect storm is forming as rising demand and decreasing supply could push prices to record highs later this year. He points out that this continues to happen.
At the beginning of the week, high-grade copper futures for July rose to $4.6945 per pound. However, short-term momentum is shifting as prices have fallen to initial support at $4.50 per ounce, down nearly 4% from recent two-year highs.
Some analysts say the drop in prices is not surprising as investors are taking away some of the profits. Despite falling 4%, copper prices are still up more than 21% from their mid-February lows.
Analysts are warning of a possible pullback, as the rise in copper prices has been driven largely by speculative interest. The adjustment comes amid concerns that weaker demand is boosting China’s copper supply as economic activity remains weak.
Ole Hansen, head of commodity strategy at Saxo Bank, said copper inventories monitored by the Shanghai Futures Exchange had recently surged to 300,000 tonnes. Inventories are at their highest level in four years, when demand collapsed during the global COVID-19 pandemic.
“While some of the rally appears to be due to traders buying up metals to hedge against the risk of a weaker yuan, overall it does not support short-term price increases,” Hansen said. Note. “Until we see an improvement in the data mentioned, a period of adjustment, or even a more severe adjustment, seems increasingly likely.
Commodity analysts at Bank of America are also paying close attention to China’s copper supplies. Analysts said that although inventories are rising, the overall picture remains at multi-year lows. However, he added that it could take several more weeks for traders to get a full picture of inventory levels, which could keep prices subdued in the short term.
“Both SHFE and bonded inventories will need to decline in order to increase to the next level. Due to the impact of COVID-19, inventories increased until mid-May, but we believe this is due to the recent uptrend. “We would view this as the latest turning point to confirm fundamental support for the “As the spot market continues to be depressed, the LME’s latest trader report confirms that the rally is being driven by investors, with commercial long positions decreasing as a share of open interest. This is a concern. Is it a matter? Yes, and it reminds us how important it is for the cash market to corroborate the rally.”
Copper prices may struggle in the short term, but some analysts say they view the decline as a buying opportunity as market fundamentals point to higher prices.
In a recent interview with Kitco News, Robert Minter, director of ETF strategy at abrdn, said in a recent interview with Kitco News that copper will remain strong for some time to come as investors underestimate the impact that global economic activity and the transition to green energy are having on demand. He stated that he has a bullish view on the
He added that he expects the world to see the beginning of a new commodity supercycle, led by copper and industrial metals, with gold and silver prices also rising.
Commodity analysts at BCA Research said in their latest copper outlook that supply and demand models point to a physical shortfall of 370,000 tonnes of refined copper this year as demand continues to outstrip supply.
BCA expects year-end prices to be around $4.50 a pound, but analysts expect volatility to increase.
“Geoeconomic fragmentation will exacerbate copper price volatility. The rush to build new supply chains to reduce domestic economic risks from over-reliance on economically hostile states will This is already clear on all fronts,” analysts said.
Despite the near-term correction, Hansen said he remains bullish on copper over the long term.
“Overall, we have a long-term view on this metal, especially in anticipation of strong demand for electric vehicles, grid infrastructure and AI data centers, while production from existing miners is expected to decline over the next few years. We maintain a positive outlook.”
In its latest price forecast, the World Bank predicts a relatively modest 5% price increase this year.
“Global demand for copper, a key input for construction and equipment manufacturing, will decline modestly this year, reflecting slowing global GDP growth and lingering challenges in China’s real estate sector,” the World Bank said in a report. It is likely that the increase will remain at a modest rate.”
Disclaimer: The views expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation for the exchange of products, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept liability for losses and/or damages arising from the use of this publication.
