Global copper supply will outpace demand over the next two years, helped by several upcoming large mine projects, RBC Capital Markets analysts said on Wednesday.
The brokerage in a note said it expects the industrial metal’s price to be at $4.32 per pound in 2022, and then drop to $3.75 in 2023 and 2024 on a “small” surplus in the market.
Large untapped copper mining projects like Quellaveco in Peru, Timok in Serbia, and Quebrada Blanca Phase 2 in Chile are set to begin production in mid-2022 and in early 2023, normalizing demand growth.
Aggressive US rate hike bets, lockdowns in China, and a batch of poor economic readings from major nations have led to slowdown concerns and weighed on industrial metals.
“Slowing demand and new supply could balance the market in 2023, while the medium-term outlook remains positive,” RBC said.
Copper, often used as a gauge of global economic health, has fallen more than 13% since scaling a record peak of $10,845 in March.
“Government stimulus in China should also help although it is unlikely to have the same impact as in 2020 due to challenges in the property market and less external pull for exports,” the brokerage said.
China’s cabinet on Tuesday announced a package of 33 measures covering fiscal, financial, investment and industrial policies to revive its pandemic-ravaged economy.
The normalization of existing copper supply and elevated prices offer incentives to increase production, RBC said.
Demand and anticipation of deficits in the future will support elevated prices as available copper inventories remain low by historic standards, according to the brokerage.
“Copper equities remain well-positioned to drive strong FCF (free cash flow), despite rising costs, and valuations are now closer to historic averages,” the brokerage said.
(By Siddarth S and Aniruddha Ghosh; Editing by Maju Samuel)