UBS Global Research has just identified copper as the top pick among base metals, with a bullish long-term price outlook. Despite recent challenges, copper remains the most attractive metal due to key supply-demand dynamics.
Copper: Market Dynamics and Projections
Copper's supply side is facing significant constraints, with expected production shortfalls from major mines like Quebrada Blanca in Chile and Antofagasta. This constrained supply environment is projected to lead to a market deficit, persisting into 2025.
UBS forecasts global copper consumption to grow by 3% in 2024 and 3.3% in 2025, supported by investments in renewable energy sources. Despite short-term concerns, UBS maintains a target price of $12,000 per metric ton by the first half of 2025.
Supply and Demand Balance
Following copper, UBS sees aluminum as a strong contender, with its cost structure and anticipated demand recovery. Aluminum production in Europe is unlikely to see significant restarts at current price levels, while Chinese production is expected to plateau, contributing to a tighter market.
Global refined output growth is projected to keep the market balanced, with demand expected to grow by 2.6% in 2024 and 2.8% in 2025. UBS forecasts aluminum prices to recover to the $2,700 per metric ton range by the first half of 2025.
A Cautious Yet Optimistic Outlook
Zinc is ranked third by UBS, with a cautiously optimistic outlook driven by supply-side factors and potential demand recovery. Increased zinc mine supply, particularly from new projects in Africa and South Africa, could push the market into surplus by 2025.
UBS anticipates that zinc prices will trend higher once macroeconomic concerns diminish, with any positive developments in Chinese property data further supporting zinc prices.
Analysis:
This article highlights UBS Global Research's top pick in base metals, which is copper, due to favorable supply-demand dynamics and a bullish long-term price outlook. The projected market deficit for copper, along with growth in global consumption driven by investments in renewable energy sources, indicates a positive trend for copper prices.
Additionally, the analysis of aluminum and zinc markets provides insights into potential investment opportunities in these metals. Aluminum prices are expected to recover, driven by demand growth in sectors like renewable energy and infrastructure, while zinc prices may trend higher with increased mine supply and potential demand recovery.
Overall, understanding these trends and projections can help investors make informed decisions and capitalize on the opportunities presented by the base metals market. It is essential to stay updated on market dynamics and projections to optimize investment strategies and maximize returns.