Copper Outlook: Surplus Concerns Limit Upside

seekingalpha11-05

The price of copper plummeted from its all-time high in May amid concerns of surpluses and high global inventories, and despite strong long-term demand projections driven by the energy transition....

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2481573787?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/169952310/image_169952310.jpg","is_english":true,"pubTime":"2024-11-05 18:02","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2481573787","market":"sg","top_or_hot":-1,"title":"Copper Outlook: Surplus Concerns Limit Upside","media":"seekingalpha","content":"<div>\n<p>The price of copper plummeted from its all-time high in May amid concerns of surpluses and high global inventories, and despite strong long-term demand projections driven by the energy transition....</p>\n\n<a href=\"https://seekingalpha.com/article/4733044-copper-outlook-surplus-concerns-limit-upside\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Copper Outlook: Surplus Concerns Limit Upside</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCopper Outlook: Surplus Concerns Limit Upside\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-05 18:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4733044-copper-outlook-surplus-concerns-limit-upside><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The price of copper plummeted from its all-time high in May amid concerns of surpluses and high global inventories, and despite strong long-term demand projections driven by the energy transition....</p>\n\n<a href=\"https://seekingalpha.com/article/4733044-copper-outlook-surplus-concerns-limit-upside\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"JJCTF","symbol_name":"彭博铜分类指数总收益ETN-iPath","start_time":0,"source_url":"https://seekingalpha.com/article/4733044-copper-outlook-surplus-concerns-limit-upside","article_id":"2481573787","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/169952310/image_169952310.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2481573787","pubTimestamp":1730800950,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The price of copper plummeted from its all-time high in May amid concerns of surpluses and high global inventories, and despite strong long-term demand projections driven by the energy transition.Chin","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"JJCTF":"彭博铜分类指数总收益ETN-iPath","CPER":"美国铜指数基金"},"translate_title":"铜展望：过剩担忧限制上行空间","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CPER":0.9,"JJCTF":0.9},"content_text":"The price of copper plummeted from its all-time high in May amid concerns of surpluses and high global inventories, and despite strong long-term demand projections driven by the energy transition.China's stimulus plan and improvements in production boosted the copper price, although widening surpluses have weighed on the short-term and long-term outlook.This article reviews consensus copper price forecasts (2024-2028) and market fundamentals underpinning the long-term bull case.   fmajor  The price of copper hit an all-time high in May, a run fueled by the anticipation of Fed rate cuts, before plunging back to earth based on the real-world supply and demand situation. The volatile run stabilized, but the near-term outlook is uncertain due to concerns over projected market surpluses and high inventory levels, offsetting positive economic news out of China. However, the long-term bull case remains intact for the \"metal of electrification,\" with significant shortages projected in coming years due to the expected boom in demand from the global energy transition. This article reviews recent price trends, long-term market fundamentals, and price forecasts. Copper's Wild Ride: Current Situation The price of copper has tumbled since hitting an all-time high on May 20, a record run driven largely by interest rate cut anticipation. The price soared by about 40% in the first five months of the year to $5.20/lb, then sank to below $4.00/lb by August. Copper is still up 18% in the past year and +12% YTD, and has been hovering between ~$4.35/lb to $4.45/lb (as of 11/4/2024). Copper Tumbles After Hitting All-Time High in May Copper Price Performance Since 5/20/2024 (SA Premium) The price of copper, a highly conductive base metal with a wide range of applications, fluctuates on a daily basis based on a complex myriad of market forces and factors, which have the potential to fuel major price swings, including:  Market balance Chinese economic conditions Global warehouse inventory levels  Other important drivers include macroeconomic factors such as currency, inflation, interest rates, unemployment claims, and GDP growth. Other key developments that can impact copper prices immediately are government regulations and policies, geopolitical events, and speculation. If we take a quick glance at recent developments in the market balance, Chinese demand, and inventories, it is not too shocking that the price of copper has gone sideways. Although long-term shortages loom, which we shall see, the International Copper Study Group (ICSG) in its forecast released on 9/26 projects 2024 to end with a refined copper surplus of 469Kt, or 1.7% above forecast usage; and +194Kt in 2025, or 0.7% above expected usage. In the recent historical data update, the surplus in the first 8 months of the year is already at +601Kt. World Refined Copper Forecast (ICSG) Meanwhile, copper stocks at all three key global exchanges, the London Metal Exchange (LME), Shanghai Futures Exchange (SHFE), and COMEX, remained elevated as of the end of October. Global exchange totals were at 521Kt combined, up 308Kt versus the start of the year. Global Copper Inventories (Reuters) Copper has been boosted by the Chinese $1.4 trillion stimulus plan and solid production for the month of October. China is the world's largest consumer of copper, accounting for 55% of annual global usage, fueled by the real estate and construction sectors. Another complicating factor is the extent to which China can satisfy its own copper requirements, an issue that will impact the market balance. Despite near-term struggles, the big picture for copper remains solid, largely due to macrotrends like the global green transition, among others. But the long-term view explains why some are calling copper \"the new oil.\" Long-Term Demand: The Energy Transition's Indispensable Metal A boom in global copper demand, driven by the energy transition, has been forecast by many sources, from economists, analysts, to government agencies. Copper is indispensable to a wide range of clean energy applications, including EVs, wind and solar power technologies, and grid storage, among other uses. These emerging clean tech requirements will come on top of demand from traditional end uses like building construction, industrial machinery, and equipment. In addition, so-called digital demand for copper, resulting from AI-enabled tech requirements, is on the rise, BHP reported in September. 'Digital’ demand refers to the growth from the expected ramp-up in demand for digital infrastructure, as the world creates and consumes massive amounts of data, enabled by copper-hungry data centres. The IEA expects copper demand to reach as high as 40Mt annually by 2050, driven by significant growth in clean tech requirements, in order to achieve a net zero emissions scenario (NZE). Copper Demand to 2050 (IEA) Long-Term Supply: Enough Copper for Everyone? Under its surface, the earth contains about 5.6 billion tons of copper, with over 60% still yet to be discovered, according to ICSG, which appears plenty to meet forecast annual usage of 27.15Mt in 2024. The world has 2.1 billion tons of identified resources and 1 billion in mineral reserves - the portion deemed economically mineable by feasibility studies. Global copper mineral reserves are highly concentrated geographically, with 190Mt (19% of the total) located in a single country - Chile, according to USGS data.   Copper World Resources (ICSG) However, although there are plenty of copper resources in the ground, extracting them in a timely manner is another story. In fact, a potential lack of mining capacity could lead to significant shortfalls. Mines are aging, grade quality is sinking, and not enough is being invested to find new sources and develop current assets. S&P Global projected annual copper supply deficits could reach as high as 10Mt by 2035. Although secondary sources will fill some of these gaps, it won't be enough - even based on an optimistic view of scrap supply and development of all possible projects analyzed by Wood Mackenzie and BHP. Primary Copper Supply vs. Demand to 2035 (BHP Research Report - September 2024) Optimism about copper investments is not irrational - based on the laws of supply and demand. Moreover, the price does have to be high enough in order for copper miners to justify investing in exploration and development efforts. In the end, it is a vicious cycle that is impossible to predict, and why mining executives are often huge copper bulls. Ivanhoe Mines CEO Robert Friedland has said copper must rise to $15,000/t ($6.80/lb) to incentivize firms to build expensive mines to meet the world's critical mineral needs. Copper Price Forecasts 2024-2028 S&P Global consensus estimates for Q4 released in October had copper at $4.33/lb, implying the red metal will finish the year roughly flat from its current mark. Massive shortfalls are not expected to hit until 2027, but even then, the consensus commodity price targets gathered by S&P Global seem, well, rather tame. The annual copper price is projected to grow by a 5Y CAGR of 4.2% to $4.75/lb during the period 2023-2028.   S&P Global Consensus Copper Price Targets (Data: S&P Global) S&P Global explained that concerns over refined copper supply surplus have dampened enthusiasm over long-term copper prices, noting that China has been feeding its own cooper cathode needs through domestic production and new smelter projects are poised to boost supply further. The refined copper supply overhang has weighed on the consensus price outlook, which has been downgraded an average of 0.6% over the five-year forecast horizon. Among some of the largest copper bulls, Citi forecast in a note earlier this year that copper would reach $5.44/lb by 2026, arguing that \"only higher prices\" will solve the looming deficit crisis. UBS projects copper to be at $4.76/lb in 2024 and $4.99/lb in 2025. Goldman Sachs on September 3 cut its 2025 copper price projection by over 30% overnight from $6.80/lb to $4.58/lb, citing China's increasingly weak economic recovery. The bank projects the price to reach $5.44/lb post-2025. On the bearish side, Fitch Ratings price assumptions are downright depressing, suggesting copper could fall to $3.40/lb in 2026 from $3.99/lb in 2024. The credit agency also challenged the certitude around the green transition's magnitude and velocity. Longer-term copper demand growth is driven by the energy transition, the pace and scale of which are highly uncertain. Copper consumption will depend on EV adoption rates and copper intensity per vehicle, which has been declining markedly. I suspect daily exigencies of the market will keep the copper price from ever rising as highly and as quickly to efficiently address the long-term copper supply-demand balance dilemma. It will not reach the heights of the copper bulls in the next couple of years, but the consensus long-term estimates strike me as conservative, from 2026-2028, assuming the supply/demand gap projections are reasonable. And somewhere in the middle perhaps reality may lie. Copper Exposure Investors who are not metals traders interested in gaining exposure to copper can do so through ETFs that invest directly in the commodity itself or indirectly via copper mining stocks. The  United States Copper Index Fund, LP ETF (NYSEARCA:CPER) has a portfolio that consists of copper futures contracts. The Global X Copper Miners ETF (COPX) has a portfolio of 48 mining companies, including pure play copper stocks and diversified miners from around the world. Finally, investors can buy mining stocks, which can be found using the SA Top Copper Stocks screener. If users filter, they can view a total of 47 copper stocks, only 9 of which have Quant Ratings. A security lacks a Quant Rating usually because it lacks Wall Street analyst coverage, is listed on a non-US exchange, has traded for less than a year, and/or is bankrupt, among other reasons. Top Copper Stocks (SA Premium) Downside Risks Some downside risks to the long-term copper bull case include the possibility of demand destruction. When shortages persist, customers tend to adapt and find alternatives to filling end use requirements. Hence, the favorable long-term market fundamental picture painted above is not inevitable. Secondly, commodities are vulnerable to volatility and highly exposed to macroeconomic and geopolitical risks. Commodity trading is highly speculative and not suitable for all investors, even through ETFs. For example, CPER has a Strong Sell Quant Rating, largely due to poor momentum and sky-high risk driven by high annualized volatility relative to all other quant-rated ETFs. Conclusion  The long-term market balance situation is potentially favorable for the price of copper, largely due to the global green energy transition and AI-fueled data center requirements. However, copper prices may see limited upside in the near-term in the face of projected refined copper surpluses in 2024 and 2025, offsetting positive developments in China.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2481573787"}