Copper prices broke US$10,000 per metric ton this week, hitting highs not seen in two years. The last time they crossed the threshold was in March 2022 amid tensions following Russia's invasion of Ukraine.
Although concerns about demand from China remain, worries over dwindling global supply are heating up.
Copper has also been gaining momentum on anticipation of interest rate cuts from the US Federal Reserve.
Looking at supply, Goldman Sachs (NYSE:GS) has warned of intensifying stress, with analysts at the firm projecting a possible "stockout episode" by the fourth quarter due to growing deficits. Notably, the investment bank has boosted its year-end copper forecast to US$12,000 from US$10,000, strengthening its bullish stance.
“We continue to forecast a shift into open-ended and mounting metal deficits from 2024 onwards,” analysts including Nicholas Snowden wrote in note quoted recently by Bloomberg.
BHP's (ASX:BHP,NYSE:BHP,LSE:BHP) potential takeover of Anglo American (LSE:AAL,OTC Pink:AGPPF) has raised prospects of tighter control over global copper supply. If realized, the merger would create an entity commanding 10 percent of global copper supply, surpassing major players like Chile's Codelco and Freeport-McMoRan (NYSE:FCX).
The closure of Canadian miner First Quantum Minerals' (TSX:FM,OTC Pink:FQVLF) Cobre Panama copper mine last year has heightened concerns about supply shortages, further accelerating copper's price momentum.
Despite copper's gains, skepticism lingers, with some observers pointing to soft indicators in China, such as falling import premiums and cautious purchasing behavior among buyers.
As of the end of Thursday (May 9), three month London Metal Exchange copper was at US$9,904.50.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.