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COPPERUSMAY21 - HG Copper CFD
HGK1 - HG Copper future
COPX:arcx - Global X Copper Miners ETF
Copper trades higher for a third day but still within its recently established consolidation range between $4 and $4.2/lb. The trigger behind the latest upside attempt came in response to a report from Goldman Sachs titled "Green Metals - Copper is the new oil". In it they raised their price forecasts now saying LME Copper will hit $15,000/t from the current $9,200/t by 2025. A 66% price increase that would set HG Copper on course for $6.5/lb from the current $4.15/lb.
The green transformation remains the key source of increased demand as usage in EV’s and renewable energy-energy projects such as solar and wind surges. At the center of the forecast is a warning from both Goldman’s and Trafigura Group that the market will be ‘drastically’ short of copper in the next few years unless prices rise sharply to spur supply. High start up capex and the 5 to 10 year period from investment decision to production could create a prolonged period of mismatch between surging demand and inelastic supply.
In the report the analysts at Goldman Sachs writes: “Copper is so integral to the green transition - a global effort underpinned by government support - that the supply requirements necessitate a spike in copper prices,”. Going on to say that “Copper prices must rise now to incentivize enough supply to solve prospective deficits, or risk chronic scarcity pricing in the second half of the decade.”
Following a 120% rally from the pandemic low last March, copper ran into a small correction and for the past six weeks the metal has been trading sideways within a relative range. Despite the loss of momentum which has attracted a 50% reduction in speculative longs held by CTA's and hedge funds, the behavior during this time points to a well supported market underpinned by strong fundamentals.
A renewed push beyond $4.20/lb is likely to drive a renewed focus on the 2011 record high at $4.65/lb as the next target.