Base Metals

The subject of whether the red metal will be in surplus or deficit in the near term remains a contentious issue. A number of firms have recently released opinions regarding the outlook for copper, and while some have cut price forecasts, others see things looking a little brighter.

Though most are positive on the medium-term outlook for copper, the question of whether the metal will be in surplus or deficit in the near term remains a contentious issue. A number of firms have recently released opinions regarding the outlook for the red metal, and while some have cut their price forecasts, others see things looking a little brighter.

For its part, Goldman Sachs (NYSE:GS) has lowered its outlook for copper prices on the back of “actual and anticipated US dollar strength, cheaper energy and other input costs, and [an] expectation of an improvement in mining productivity,” as cited by Mining Weekly. The firm sees copper averaging $5,542 per tonne this year, down from its initial call for $6,400. It has also downgraded its forecasts for other base metals, such as lead, nickel and zinc.

Likewise, Moody’s changed its outlook from “stable” to “negative” for the base metals sector last week, and released a report entitled “Global Base Metals Industry: Economic Weakness and Copper Price Plunge Turn Outlook Negative.”

“Slowing growth in China’s GDP, continued weakness in Europe and falling copper prices have all contributed to our revised outlook,” explains Carol Cowan, Moody’s senior vice president and author of the report, in a press release. “Although the US economy is strong and consumption of base metals remains robust, it’s not enough to counter weakening global trends.”

However, there is another side to the copper story — according to Mineweb, Credit Suisse (NYSE:CS) recently noted a proposed US$68.7-billion investment in China’s power transmission lines and lower scrap supply as factors that could drive copper demand growth this year. The firm also identified a number of potential supply disruptions to watch for, and said it has found about 240 kilotonnes of known disruptions in total.

“There are several key watch factors in 2015 including Indonesia export policy, Zambia elections and taxation policy, Codelco performance, Escondida and a number of large new projects (including Sentinel, Toromocho, Las Bambas, Katanga, Sierra Gorda, Kansanshi and Buenavista),” the firm said. Similarly, Lawrence Roulston of Resource Opportunities recently pointed out that even if growth rates in China slow, a slightly slower rate of growth on a larger population base still means more copper consumption overall.

Overall, Credit Suisse is still a bit hesitant, and has advised investors to pick copper stocks carefully due to “potential demand (and price) risks.” However, the firm is certainly still somewhat positive. It will be interesting to see if any of those potential supply disruptions come to fruition and how they will affect the copper price in 2015.

On that brighter note, a few junior copper stocks saw slight share price gains on the market today: VMS Ventures (TSXV:VMS) was up 3.57 percent at $0.29; Tintina Resources (TSXV:TAU) was up 6.25 percent at $0.085; and  Western Copper and Gold (TSX:WRN) gained 1.67 percent to trade at $0.61.

 

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 

Related reading:

Don’t Get Hung Up on Short-term Copper Prices: Lawrence Roulston

Ross Beaty: ‘This is the Kind of Time to be Buying Metal Stocks’

 

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