Copper ‘sleepwalking towards a stockout’, Goldman says in latest scarcity warning

Goldman Sachs has repeated its concern regarding an imminent ‘scarcity episode’ in global copper inventories, which could propel prices to a new high after copper briefly spiked at US$11,000 a tonne last month.

In a new research report published yesterday, Goldman said copper is ‘sleepwalking towards a stockout’, after the record intra-day high set on March 7 came on the back of historically low global inventories of the bellwether metal.

This came little under a month after the investment bank first flagged a scarcity episode by the end of the year as global stocks shrunk to just over 200,000 tonnes – or scarcely enough to cover three days of global consumption.

Goldman’s latest warning referenced ‘an extreme fundamental turn’, as for the first time in a decade copper stocks on exchanges declined through March ‘instead of rising during what is this metal’s main seasonal surplus phase’.

“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,” the report read.

“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 has accordingly 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 within a year’s time.

@RGNonline