Copper Prices Drop Below $9,000/mt
Copper prices recently fell below $9,000/mt for the first time since April due to rising inventories, disappointing manufacturing data, and China’s Third Plenum outcome.
Analysts Remain Bullish
Despite the downturn, UBS Global Research remains optimistic about copper’s medium-term prospects, suggesting that $9,000/mt presents an attractive entry point.
Supply Constraints Support Prices
UBS highlights several factors for its positive outlook:
– Although visible inventories have increased, they remain low historically, indicating potential future supply-demand imbalance.
– Major copper miners reported weaker-than-expected production in Q2, with Codelco’s production down 7% year-to-date.
Speculative Positions Decrease
The price correction saw reduced speculative positioning, indicating the market’s shift from frothiness. The decline reflects cyclical and policy-related issues rather than a fundamental market change.
Short-Term Demand Headwinds
UBS notes near-term demand has been softer than expected, leading to inventory build-up. This is primarily attributed to weak interest from Chinese end-users, mid-stream destocking, and state grid purchase delays.
Investment Recommendation
UBS recommends considering copper at the current price of $9,000/mt as a medium-term investment strategy and suggests selling downside price risks to generate additional yield over the next six months.
Comments (0)