Copper price ‘building towards a breakout’, says Goldman Sachs

In a new research note, Goldman Sachs has indicated that the copper price is ‘building towards a breakout’, as the global economy – driven primarily by China’s property market – shows further signs of recovery.

At the start the year, investors will have been hoping for similar gains the copper price made in 2021, when it rose by 26%. But, the copper market has been characterised by an uneven trajectory throughout the first months of 2022.

Goldman, however, pointed to a ‘diversified set of demand drivers’ – from EVs to electrical grids – sustaining a very tight micro into 2022. “We believe that copper will reprice once these broader macro concerns abate,” it said in the report.

The investment bank also flagged the risk of an ‘extreme scarcity episode’ by the end of the year, as global copper inventories dip to record low levels. Inventories are currently sitting at just over 200,000 ounces, which is barely enough to cover three days of global consumption.

As such, Goldman reiterated its bullish forecast for copper to average US$11,875 a tonne in 2022, rising steadily to $15,000 during 2025. Today, benchmark copper on the London Metal Exchange actually shed 2.5% to $9,995 a tonne in official open outcry trading.

Goldman also estimated that the copper market has just two years of primary production growth left. After fresh tonnes from the likes of Ivanhoe Mines Kamoa-Kakula in the Congo, Anglo American’s greenfield Quellaveco project in Peru and Teck Resources’ Quebrada Blanca Phase 2 in Chile hit the market, the bank sees ‘an open-ended decline in mine supply’.