Copper prices have retreated significantly after a short-lived surge in May, according to a report by financial services firm Macquarie. The price of copper reached an all-time high of nearly $5.20 per pound in Chicago in mid-May, but has since fallen back to around $4.85 per pound.
The surge was attributed to a short squeeze, a scenario where traders who had bet on copper prices falling were forced to buy the metal to cover their positions as prices rose. However, this momentum has faded, with copper futures volumes returning to pre-surge levels.
Macquarie’s report, titled “Panama Hold’em,” predicts that copper prices will continue to decline in the near term, with average prices in the September quarter expected to be around $9,800 per tonne. The report also forecasts a long-term price of $9,000 per tonne (adjusted for inflation) – a significant downward revision from earlier, more bullish predictions.
This outlook is in contrast to some analysts who believed copper prices were entering a “supercycle” driven by factors like artificial intelligence and increased demand for renewable energy. However, Macquarie argues that trend demand growth is likely to remain around 2.5%, similar to the past two decades, with the energy transition replacing China’s urbanization as the main driver of growth.
Bullish Bets on Copper Fall Flat as Prices Slide
The recent rally in copper prices appears to be losing steam, with experts downgrading their forecasts in the wake of market corrections. The price of copper surged to record highs in May, fueled by a short squeeze. However, this momentum has proven short-lived, with copper prices retreating significantly in recent weeks.
Financial services firm Macquarie issued a report titled “Panama Hold’em” that predicts a decline in copper prices in the near future. The report estimates average prices to fall to around $9,800 per tonne in the September quarter. This downward revision is a stark contrast to earlier predictions of a copper supercycle driven by factors like artificial intelligence and renewable energy.
Macquarie’s report argues that long-term copper demand growth is likely to stay around 2.5%, mirroring the trend of the past two decades. The energy transition is expected to take over from China’s urbanization as the primary driver of demand, but not necessarily lead to a surge in overall growth.
The uncertainty surrounding the Cobre Panama mine also presents a wildcard factor. A restart of the mine, anticipated by Macquarie for late 2024, could result in copper surpluses emerging sooner than expected. This development could further dampen copper prices.
Source: Mining.com
