Goldman’s “Favorite” Commodity: Copper Prices Record a Remarkable Resurgence

Goldman’s “Favorite” Commodity: Copper Prices Record a Remarkable Resurgence Copper prices which plunged at the end of March have experienced a remarkable resurgence last week, hitting two-year highs, while Goldman Sachs believes the rally has further to run. The spot price has recovered rapidly from $2.1195 a pound on the New York Mercantile Exchange on March 23 to $2.9580 a pound on Friday. It is up 5.87% for the year and 9% for the quarter, initially buoyed by a sharp pickup in Chinese demand. Copper remains Goldman’s “favorite” commodity on the basis of cyclical and structural support and ongoing supply issues, with Glencore and BHP the companies best positioned to benefit from rising copper prices, according to the bank. “Recent data points have been supportive, with a tight demand picture increasingly emerging as persistent on-shore demand in China has seen LME (London Metals Exchange) inventories fall to the lowest level since 2005 and falling treatment fees signaling a tight concentrate market,” the note said. “Our view remains that copper can remain stronger from here as Chinese property demand remains at elevated levels, and the supply-side continues to deal with the effects of Covid-19.” On the other hand, BofA strategists pointed out that copper concentrates production in 2020 hovering at roughly the same levels as in 2016, as baseline mine supply growth had fallen steadily in recent years. They also highlighted that copper mine supply had been in decline, while refined supply has increased. They suggested that this divergence is not sustainable, given the usual causal link between the two, while a lack of staff on sites raised the risk of disruptions to mining companies. “While output should rebound next year, we remain concerned that unexpected losses may increase as miners especially in Chile have had only essential staff on site in recent months,” they said.   You might also be interested in:

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