Copper prices are expected to sag in the coming months, as physical demand has not kept up with the wave of speculative buying that has propelled the metal to its highest levels in two years, according to a Reuters poll.
Benchmark copper prices on the London Metal Exchange (LME) have gained 17% so far this year, rising above $10,000 per metric ton last week. However, analysts warn that this rally may have been overdone, as underlying demand in top metals consumer China and other regions remains weak.
“While we see more upside for copper in the long term, we believe that prices may have moved a bit too far, too fast,” said Carsten Menke, an analyst at Julius Baer in Zurich. “The recent rally was triggered by signs of improving manufacturing activity in the Western world, which still needs to be manifested by increasing copper demand.”
The median forecast of 22 analysts surveyed by Reuters shows the cash copper contract on the LME is expected to average $9,155 per metric ton in the second quarter of 2024, which is 7.1% lower than the closing price of $9,853 per ton on Friday.
Analysts have also adjusted their supply forecasts, now expecting a copper deficit of 125,000 tons this year, more than triple the deficit of 35,000 tons expected in the January poll. This tighter supply outlook is due to disruptions and lower production at major mines.
However, the surge in speculative and fund buying has outpaced the underlying physical demand, leading to concerns that the copper rally may not be sustainable. As the hot money flows out of the market, prices are likely to sag in the coming months, according to the analysts.