UBS updated its forecast for copper prices, citing ongoing supply concerns and robust demand as key drivers.
The firm noted that a recent pullback in copper prices followed a significant rally, which was influenced by a short squeeze in copper futures in the United States and supply tightness in copper concentrate.
The difference in prices between the COMEX and the London Metal Exchange (LME) is seen as supportive of LME prices amid market consolidation.
The market has experienced tightening since the fourth quarter of 2023, primarily due to the Cobre Panama mine shutdowns and reduced output guidance from various producers.
Moreover, Chinese copper smelters are likely to advance their maintenance schedules, which could further constrain near-term refined copper output. UBS has adjusted its forecast for the refined copper supply increase to 2.1% for this year, down from the previous 3.5% estimate, and anticipates a 3.3% increase in 2025.
Demand for copper in China remains strong, bolstered by the country's energy transition efforts. Stimulus measures are expected to sustain the growth of copper demand, with potential manufacturing recoveries in Europe and the United States also contributing to the demand.
UBS projects a 3% rise in global copper consumption this year, slightly lower than the previous estimate of 3.3%, with consumption growth reaching 3.3% in 2025.
Based on revised supply and demand calculations, UBS forecasts a copper deficit of 390,000 tons for 2024, a substantial increase from the earlier estimate of a 73,000-ton deficit.
The deficit for 2025 is also projected to be 391,000 tons. Reflecting these updated supply and demand balances, UBS has raised its copper price forecast by $1,000 to $1,500 per metric ton across various forecast periods.
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