LME copper prices have experienced a strong rally and are now trading around the $9,000/mt mark, but according to analysts at UBS, it is "just the beginning."
The bank said in a note Tuesday that they continue to believe copper is structurally undersupplied and advised investors to stay long, with tightness in the copper concentrate market building up, as reflected in lower treatment charges.
"The prospect of greater Chinese smelter maintenance in 2Q24—up to 3 million metric tons of capacity—has triggered a surge in the metal's price as processed production not bound to longer-term contracts tightens copper supplies," said UBS analysts.
They added that "with ongoing production challenges on the mining side (e.g., like in Latin America and other places)," they don't think the tightness in the concentrate market will disappear anytime soon.
UBS also doesn't expect demand to be weak either. They see it expanding by over 3% this year, saying structural drivers are still in place.
As a result, UBS has brought forward its forecasts by a quarter and raised its March 2025 estimate by $500/mt to $10,500/mt.
"Potential cuts at Chinese smelters strengthen the case for the start of tightening in the global market, reinforcing our view of a 73,000mt deficit this year and elevating risks of an even larger shortfall in 2025," concluded the bank.