There continues to be strong growth in wind and solar power capacity, however, and robust output of air-conditioner units and electric vehicles. As investors pursue copper exposure, we note rising valuation premiums.'Īlthough reluctant to call the peak just yet, as supply risks in Peru and elsewhere keep the market tight and push exposed equities higher in the near term, Morgan Stanley only sees aggregate upside of 6% to 12% using spot/bull price projections.➤ In China, the real estate sector continues to labor, and demand weakness also came from slowing infrastructure investments in April. 'Outlook updates have been negative across the board as 1) unit costs came in 12% higher on average and up 7% y/y 2) capex was 8% above expectations and 3) volume guidance missed by 4%. 'With global equity capital chasing a shrinking investable copper universe, investors appear willing to overlook operational disappointments,' Morgan Stanley metals and mining analysts said in a research note outlining the sector's 'scarcity value.' The Wall Street giant believes sentiment and supply risks could carry the sector higher in the short term, suggesting a 'scarcity value' is driving capital towards miners. 'Overall we see copper settle into a USD3.75 to USD4.75 range during the coming months before eventually breaking higher to reach a new record sometime during the second half.' Copper stocks carrying 'scarcity value'Īfter benefiting from the climb in copper prices in January, valuations of copper mining stocks appear 'stretched,' according to Morgan Stanley. 'Once the initial rally is over, the hard work begins to support those gains, with an underlying rise in physical demand needed to sustain the rally, not least considering the prospect of increased supply in 2023 as several projects go live,' he said.

Hansen suggested that the strong start to the year was primarily driven by 'technical and speculative traders frontrunning an expected pickup in demand from China in the coming months.'

Speculation has also abounded that Beijing - as the world's top consumer - will ramp up its fiscal support to the economy on a scale similar to that seen in 2003 after its entry to the WTO, in 2009 after the global financial crisis, and following the 2016 currency devaluation. 'In addition, the new geopolitical environment will mean a massive boost for the European defence industry which should see double-digit growth rates close to 20 percent per year over the next economic cycle as the European continent doubles its military spending in percentage of GDP,' Hansen said. 'Enormous political capital'Ĭhu's comments were partly echoed in a Tuesday note from Saxo Bank Head of Commodity Strategy Ole Hansen, who said industrial metals such as copper, aluminum and lithium would undoubtedly benefit from the 'enormous political capital' being invested in achieving the 'green transformation.' 'But there's only so much those markets can do because the incremental demand from renewables isn't a small bump up in demand, it's almost a multiyear tsunami of demand coming through that we're not thinking about, so it's going to be all hands on deck but absolutely, the price has to go up,' Chu said. A lot of people focus on lithium as the kind of energy transition metal, but I think we should be much more focused on copper, because I think that is the real pinch point, the real choke point for the energy transition story.'Ĭiting the old economic adage of 'the best cure for high prices is high prices,' Chu said there will always be short-term cyclical volatility, but that the price of copper will likely keep rising until it incentivises much larger exploration cycles or a ramp-up of secondary markets and copper recycling. 'When you look at the long-term secular story, you can just see strong demand. 'A lot of these reserves and deposits are found in very, very hard places to produce – Congo, Inner Mongolia – these are not in very developed regions where you say 'oh it's really easy, let's build a mega-mine',' he said. Personal Loans for 670 Credit Score or Lowerīeyond the quantities of copper that are likely to be required to achieve net-zero goals, Chu also highlighted a decline in the grade of the metal over the last 20 years, as well as the length of time it takes to get major mining projects online. Personal Loans for 580 Credit Score or Lower

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Index price of copper cathode