Commodity Strategy - Scenario: Setting The Scene For Copper Prices At USD10,000/tonne - FEB 2018

BMI View: We forecast copper prices to continue on an upward trend over the coming years, averaging USD7,000/tonne by 2021 , driven by sustained deficits. However, given several upside risks to this view, we evaluate a scenario in which copper prices continue to see strong gains over the coming quarters and reach USD10,000/tonne by 2020.

Our core view for copper prices, in line with the broader outlook for base metals, is to see more subdued gains in 2018 following the strong rally over 2017, as Chinese demand growth eases ( see 'Copper: Prices To Resume Uptrend By H218', December 8 2017). We forecast copper prices to average USD6,300/tonne, implying near-term weakness, underpinned by our Country Risk team's expectation for less aggressive fiscal policy to weigh on fixed asset investment (FAI) growth and hence economic growth in China ( see 'Broad Based Investment Slowdown Amid Financial Risks Containment ' , January 4). Over the longer-term, copper will increasingly stand out as an outperformer among industrial metals, given a relatively stronger demand outlook, due to its role in low carbon systems, such as electric vehicles and renewable energy infrastructure.

However, we highlight a number of factors that pose considerable upside risk to our copper price outlook, the confluence of which would warrant prices reaching all-time highs of USD10,000/tonne by 2020:

  • Upside Risks Bring USD10,000/tonne Into Sights
    LME 3-Month Copper (USD/tonne)
    Source: Bloomberg, BMI

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