Copper prices and copper mining stocks continued to rise on Friday due to concerns about supply shortages.
COMEX New York copper futures rose to US$4/lb for the first time since 2011, and LME London copper futures once rose by more than 4%, exceeding US$8,900/ton, a new high since September 2011. The increase in international copper in domestic futures expanded to 5.3% in night trading, and the main Shanghai copper contract rose by more than 4% in night trading, rising above 66,000 yuan, continuing to hit a new high since October 2011. The main contracts of copper futures in both internal and external markets hit their highest levels in more than nine years.
On the news, two days after Citigroup raised its copper target price to US$10,000 per ton, Goldman Sachs went a step further on Friday, raising the 12-month copper target price to US$10,500 per ton, higher than the price set in early December. The target price was significantly raised by nearly US$1,000/ton, which means there is still room for growth of about US$1,800/ton, which directly triggered the strengthening trend of the A-share non-ferrous metal sector in the afternoon of that day.
At the beginning of the US stock market on February 19, global X copper miner ETF (COPX) rose as much as 6.2%. If the increase continues to the close, it will hit the highest level since February 2013. Copper-related miner stocks all rose and outperformed the market. Among them:
Canadian gold, silver, copper and zinc mining company Hudbay Minerals rose more than 11% after announcing positive financial results. Canada's Lundin Mining also rose more than 9% after its fourth-quarter report exceeded expectations.
Freeport-McMoRan Copper and Gold Company (Freeport-McMoRan), the world's largest copper and molybdenum producer, rose more than 10%. Teck Resources, the world's third largest zinc producer, rose more than 8%, with analysts saying that the potential of copper has not been fully recognized by the market.
First Quantum Minerals, an international medium-sized copper company, rose by more than 10%. Investment bank Canaccord called it one of the "pure copper" producers that benefited from investment demand in the green economy.
In addition, Copper Mountain rose by more than 8%, Nevada Copper rose by more than 15%, Southern Copper rose by more than 5%, Ero Copper rose by more than 7%, Turquoise Hill once rose by 8%, and Capstone Mining rose by nearly 8%.
Goldman Sachs reiterated in its latest research report that the global copper market is facing the largest supply shortage in a decade, and there is a "high risk" of copper falling into a supply deficit in the next few months. Therefore, it will increase its outlook for the next 3, 6 and 12 months. The copper target prices are set at US$9,200, 9,800 and US$10,500/ton respectively, compared with previous expectations of US$8,500, 9,000 and US$10,000/ton respectively.
As early as December 1 last year, Goldman Sachs had announced that "copper prices are on the way to US$10,000." At that time, copper prices had just risen for four consecutive days and exceeded US$7,700. Goldman Sachs said that this was only the first phase of a structural bull market for copper. In the first stage, the copper supply gap is expected to narrow only slightly in 2022, and there will be a supply surplus until 2023. Therefore, copper prices need to rise sharply to balance this tight fundamental supply situation.
On Wednesday, Citigroup also raised the target price of Lun Copper for 6 to 12 months, up to US$10,000 per ton, and believed that it is expected to reach US$9,000 within 3 months. The bank said that copper prices are entering the second stage of the bull market, which is characterized by spot prices being higher than futures and futures near-month contract prices being higher than far-month contracts. Citi analysts believe "the outlook for copper and aluminum's extended cycle is real."
analysis pointed out that copper prices are about to rise for three consecutive weeks and repeatedly hit nine-year highs. This is related to the synchronized recovery of the global economy in the post-epidemic era and the market's generally optimistic expectations for demand boosting. It is also related to the global efforts to realize the trend. The transition to green energy is closely linked to the increased demand for commodities.
Copper, used in electrical wires, for example, is expected to benefit from rising electricity demand as fossil fuels phase out. A large portion of future electricity generation is expected to come from renewable sources, while wind farms typically use more copper.
Brian Kloss, fund manager of Franklin Templeton, one of the world's largest listed fund management companies, said that in the long term, copper is an important component of renewable energy and electric vehicles and is expected to see amazing economic growth this year. and a supportive environment for the copper market and investors. Brokerage Bernstein also believes that if the world can achieve the goal of zero net greenhouse gas emissions, demand for copper from renewable energy and electric vehicles is expected to increase more than sevenfold by the 2050s.
But with few new large-scale copper mines coming online over the next decade, investors may begin to realize the lack of copper mine capacity.Some analysts said that recent copper price trends have also benefited from the weakening of the U.S. dollar and rising inflation expectations, and commodities are often used as inflation hedging tools.
Led by copper, LME London nickel futures rose to their highest level since September 2014 on Friday, while LME aluminum futures prices hit their highest since late 2018. Mainstream Wall Street analysts such as Citigroup and JPMorgan Chase are predicting that a new commodities super cycle is coming.
However, Commerzbank "played devil's advocate" on Thursday, saying that the soaring oil prices and copper prices are "completely divorced from reality." The surge in copper and aluminum prices is largely due to people's expectations for a sharp recovery in the global economy, but there has been no change in recent weeks. New economic data supported the stunning gains. Therefore, there are more speculative factors behind the rally, with the relative strength index showing that copper and aluminum are now overbought again.
In addition, LME broker Kingdom Futures said that in the metals industry, short-term anxiety is very obvious, " More and more clients are buying put options to protect themselves from a price collapse, especially for copper and nickel ". Reuters columnist Andy Home reminded that the current combination of rising prices and declining liquidity in futures contracts is often a warning that some kind of adjustment is coming.
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