After a brief but glorious spike above $5 a pound, or $11,000 a tonne one month ago, copper prices have retreated, with New York futures trading either side of the $4.70 a pound ($10,362 a tonne) mark.
The record intraday high set March 7 came on the back of historically low global inventories of the bellwether metal and in a research report released on Thursday, Goldman Sachs said copper is “sleepwalking towards a stockout”.
It’s not the first such warning by Goldman, which is the most bullish investment bank on where copper prices are heading by comfortable margin.
In February, Goldman flagged a “scarcity episode” by the end of the year as global stocks shrunk to just over 200,000 tonnes – scarcely enough to cover three days of global consumption.
In Thursday’s report, Goldman points to “an extreme fundamental turn” for the metal, as for the first time in a decade stocks on exchanges declined through March “instead of rising during what is this metal’s main seasonal surplus phase.”
The analysts doubled the deficit of refined metal expected for this year from previous estimates to 374,000 tonnes and also increased substantially the shortfalls projeted over the next two years.
“Without any apparent softening adjustments already underway, we believe higher prices are an inevitability – required to stimulate substantially more scrap supply as well as accelerate demand destruction to balance this market.
“Despite these tightening tailwinds, copper prices have only risen modestly this year and positioning has remained flat, offering a clear entry point for investors to get long.”
Goldman also upped its three, six and 12 months price targets and now expects a new record high within three months and a steady climb in prices to $13,000 a tonne in a year’s time.