Copper to drop just below $5,400/t – TDS

After having its best quarter since 2010, copper has surged again in early-June to reach a two-year high just above $6,600/t. Nevertheless, as the pace of demand growth normalizes and disrupted supply returns to the market, the red metal could be set to revert lower. Therefore, strategists at TD Securities see copper prices falling toward $5,400/t.

Key quotes

“TD Securities model projects that demand will still be lower in 2021 than it was in 2019, with a surplus growing to some 850k t over the next eighteen months. Based on the fundamentals, which include supply, demand, inventories and cost structure, the red metal should average at around $5,600/t not the current $6,500/t.”

“A catalyst which is likely to come in the form of economic data disappointments, after numerous beats, as US coronavirus infections slow the normalization process, will be needed to force prices lower. We suspect that the reopening of mining facilities later in the year, after a flurry of mine disruption in Peru and Chile amid COVID cases rising in the region over the past couple of months and the sharp reversal in seasonally-driven demand growth, will add to the negative price moves later in the year.” 

“Based on recent normal volatility of $1,000/t peak to-trough from the fundamentally determined levels, copper could easily drop to just below $5,400/t, if not lower.”