Goldman Sachs has issued a warning that this year's rally in base metals could soon face headwinds, as soaring prices and bullish sentiment clash with the reality of weak demand from manufacturers.
According to a January 29th report from the metals information platform Mining.com, Goldman Sachs cautioned that the surge in base metals may quickly encounter resistance, with the sharp price increases and optimistic market mood conflicting with tepid demand from industrial consumers.
Trina Chen, Co-Head of Equity Research at Goldman Sachs, stated in an interview with Bloomberg Television, "We are starting to see a negative reaction from actual producers, and we are witnessing a pullback in demand."
Since the beginning of 2024, prices for metals like copper and aluminum have continued to rise, driven by global investor bets on tight supplies, a weaker US dollar, and anticipated interest rate cuts by the Federal Reserve.
The LMEX Index, which tracks six key metals on the London Metal Exchange (LME), has climbed approximately 7% this year, nearing the record high set in 2022.
Benchmark copper prices rose 0.6%, settling at $13,086.50 per ton, close to the record set earlier this month.
Aluminum hit a three-year high in London, and all other metals advanced except for lead.
However, more cautious analysts have pointed to a weakening in manufacturing activity in China.
A recent Goldman Sachs survey of the copper market revealed that orders for copper fabricators have fallen by 10% to 30%, as users in sectors like consumer electronics and hardware reduce their consumption.
Chen added, "Grid orders are also slowing down," noting that the power grid is one of the major end-use sectors for copper in China.
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