LME Copper: Tactically bullish 1H17 copper outlook still ‘in-play’ – Goldman Sachs

The near term outlook for copper fundamentals remains solid, according to analysts at Goldman Sachs with the improving global macroeconomic backdrop set against a likely future tightening in refined supply.

Key Quotes

“The recent state of the physical market has been of softness, though there are some early signs of physical tightening in recent weeks (falling exchange inventories and a move to a positive Chinese domestic premium to SHFE pricing). A loose scrap market has been widely blamed for the recent physical softness, however we believe that the main driver has been historical strong mine supply growth during 2H16 which was hitting the refined market with its normal lag. Going forward the recent disruptions and lack of mine supply growth evidenced by mine to trader TCs moving sub $60/t point to tightening refined supply.”

“Price Outlook: We reiterate our tactically bullish view for copper over the next 3 months (target is $6,200/t, +c7%). We continue to see the risks surrounding our 6-month copper price forecast of $5,600/t as skewed to the upside, given the potential for power related supply disruptions in the Congo during the 3Q17, which produces c.6% of world mine supply, and the strong China property sales volumes data for Jan-Feb.”