Investment Banks Turn Bullish On Copper Over The Long Run!

Major Investment firms/ banks such as Citi, Goldman Sachs seem to be turning bullish on copper with Morgan Stanley joining them recently, amid expectation of recovery in global economy. China and the U.S. said this month that progress had been made in resolving some of the key issues, such as U.S. intellectual property issue. The statement prompt optimism that the stand-off may be ending. In the recent development related to U.S-China trade war, U.S. President Donald Trump said he could let talks go past March 1 deadline without raising tariffs, which was initially set to increase from 10% to 25% on $200 billion worth of Chinese goods.

The trade talk between the U.S. and Chinese representatives in Beijing is still in progress ahead of the March 1 deadline of 90-days trade truce to further resolve the issue and U.S. President Donald Trump said that he could allow more time for negotiations if Beijing and Washington can make a real deal, which in turn can provide a boost to both the major economies. In the past, the U.S.-China trade war had exerted a great amount of pressure on both the economies, which caused a slowdown in these two major economies and exerted massive pressure on the commodities market and copper prices. Copper acts as a major leading indicator of the global economy, and past global events have impacted the prices, which fell drastically. However, the progress in the U.S.-China trade talk is expected to show signs of respite in the slowdown of global economies.

Several big banks, including Citi and Goldman Sachs, are thus turning bullish on copper amid these signs of progress. Citi said that it expects copper prices to reach $6,700/tonne in 2019 at the back of a 2% increase in Chinese demand. Citi also forecasted that the electric vehicle demand in China would offset the dropping number in car sales and in-turn will provide impetus to copper as it is a raw material for anode construction in electricity storage batteries used in electric vehicles. Citi also stated that inventories of copper are at 10-year low levels and are all set to fall further in the second quarter of this year. This is enough to keep the market in a deficit of 200,000 tonnes in 2019 and 2020.

According to the Goldman Sachs, copper costs on the London metal trade (LME) will hit $7,000/mt towards the finish of 2019. Goldman also revised its downward forecast over the next three months to $6,100/mt from $6,500/mt and six months to $6,400 from $7,000/mt but remains bullish for the end of 2019.

Joining the major investment banks’ upper crust, Morgan Stanley forecasts a 14% upside in the metal amid a supply-deficit prediction at the end of 2019. As per Morgan Stanley, a year of weak grades at major operating mines more than offsets limited growth from green and brownfield projects across the globe.

Some analysts remain pessimistic on the copper as they believe that the banks are forecasting amid electric vehicle revolution, which is unlikely to emerge until the mid of the 2020s and the deficit is also due till 2020-mid amid several counts of big projects signed off over the past 12 months while many projects are well underway.


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