Copper's upward surge shows no signs of slowing down, according to bullish insights from Citi analysts. In a recent note, they emphasized their positive stance on the red metal, attributing it to a tightening supply forecast.
Positive Supply Outlook Drives Copper Prices
Recent market dynamics have propelled copper prices to impressive heights, marking an 11-month peak. Citi analysts underscored their overweight position on copper, citing a shift towards a more constrained supply landscape.
Supply Constraints Trigger Price Rally
The surge in copper values this week follows reports indicating deliberations among China's major copper smelters regarding potential production reductions. Such deliberations could potentially induce a shortage in refined copper supply. Furthermore, ongoing disruptions in copper ore production from key players like Chile and Peru have exacerbated the situation.
Price Records Broken
On Thursday, three-month copper futures on the London Metal Exchange soared to $8,977.0 per metric ton, marking the highest level since April 2023. Simultaneously, one-month U.S. copper futures reached a nearly one-year pinnacle at $4.0810 per pound.
Citi's Bullish Stance on Copper Supply
Citi analysts highlighted the significance of copper surpassing the $8,600 per tonne mark, considering it a pivotal moment for the metal's trajectory. They reaffirmed their bullish outlook and disclosed their long position on a June 2024 $9000/$9500 call spread.
Anticipated Demand Resurgence
In addition to supply factors, Citi anticipates a resurgence in copper demand. Signs of improvement in the global manufacturing cycle suggest a potential turnaround, with indications of reaching a bottom. Moreover, Citi predicts a surge in consumption driven by an expanding equity bubble, further bolstering copper demand.
China's Role in Copper Markets
Contrary to previous concerns, China's stance is evolving positively in the copper market. Citi analysts observed a shift in China's approach, indicating a willingness to support industries reliant on metal demand, particularly the automotive sector.
In conclusion, Citi's bullish outlook on copper underscores the metal's enduring appeal as an investment option, fueled by both supply constraints and anticipated demand resurgence. As market dynamics evolve, keeping a close eye on these developments could offer valuable insights for investors navigating the copper landscape.