Analysts at UBS Global Research see the recent drop in the price of copper as an entry point for investors. Even with lower-than-expected demand for copper from Europe and China along with challenging macroeconomic conditions, the long-term fundamentals for the red metal remain strong.
Between late this year into 2025, UBS expects the market to tighten, driven by limited growth in supply and a rebound in demand.
The red metal’s market saw a correction this year, with prices decreasing by almost 20% from the highs recorded in Q2. This drop erased almost 90% of gains recorded to date and was mainly fueled by speculative unwinding. As the price of the metal approached near-record highs in May, speculation played a crucial role in driving prices. However, as corrections in the market escalated, the prices reversed.
Despite this, analysts see no fundamental or macroeconomic triggers that may cause a sharp rebound in price or rapid market tightening with Q3 this year. Still, copper’s outlook remains optimistic with present levels expected to attract more buyers, especially when prices drop to the $8,000–$8,500 range.
On the supply side, the production of copper at mines continues facing considerable limitations. UBS analysts expect minimal growth to be recorded in mine supply globally this year. This is based on guidance from major miners of copper, most of which have reduced their production predictions. In 2025, analysts expect moderate growth in the supply of copper, adding up to 2.5%. This, they posit, shall be driven by the scaling up of major projects such as Oyu Tolgoi and Kamoa-Kakula. Cobre Panama’s situation remains unpredictable, with analysts assuming it will resume operations in 2026.
In the long-term, the supply outlook remains limited because of a limited pipeline of new projects. This bolsters the analysts’ view of a tightening physical market over the next year and a half.
Demand for the red metal has been lower than anticipated, especially in China, where economic conditions remain shaky following a buyer strike in Q2 of this year. While demand from the east Asian country does appear to be returning to normal, there isn’t much confidence in the probability of a strong rebound in the near-term or significant economic stimulus.
In the United States, it isn’t expected that copper’s demand will drive the metal’s demand globally in the near-term. In Europe, the metal’s demand is stagnating with no significant signs of improvement.
UBS analysts expect that in the medium-term, copper’s demand will rebound, fueled by improved sentiment and the global shift toward renewable energy, among other factors. Exploration companies such as Arizona Metals Corp. TSX: AMC) (OTCQX: AZMCF) will be instrumental in finding new deposits that can meet the copper demand of the future.
NOTE TO INVESTORS: The latest news and updates relating to Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are available in the company’s newsroom at https://ibn.fm/AZMCF
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