Research agency Fitch Solutions Country Risk & Industry Research has revised its copper price forecasts for this year and 2022 to $9 200/t and $8 800/t respectively, from its previous forecasts of $8 700/t and $8 370/t, as prices continue to be elevated on the back of tight inventories, despite having stabilised in the second half of this year.
Fitch Solutions says it holds a neutral outlook on copper prices from spot levels for the rest of the year and it retains its slightly bearish bias for 2022, as it expects global refined supply to improve as concentrate supply strengthens, while demand will ease from the high seen in the first half of this year, dragged by China.
In line with its expectations, copper prices have edged lower, but have not collapsed, since the highs reached in May, and Fitch Solutions expects prices to trade sideways over the coming months, within the $8 700/t to $9 500/t range.
The factors influencing this positive view are that global copper inventories are tight, with stocks on the Shanghai Futures Exchange hovering near 12-year lows, which Fitch Solutions expects to ease only minimally in the fourth quarter of this year, if at all.
Moreover, idiosyncratic supply issues in Latin America continue to persist, keeping seaborne concentrate supply tight and preventing global copper mine output from reaching pre-Covid levels.
However, Fitch Solutions expects the market to loosen going into 2022, as current supply issues ease and Chinese demand continues to weaken.
On the supply side, once winter is over, the research agency expects curbs on power consumption to be lifted in China, allowing smelters to increase production once again.
Fitch Solutions believes it is likely that Latin American mine output and refined copper production will further pick up in 2022.
On the demand side, slowing global growth and declining Chinese copper demand will further narrow the global copper deficit in 2022, the agency states.
Despite weakening fundamentals in the coming months, positive long-term investor sentiment towards the green metal will continue to place a floor under prices and prevent them from returning to levels seen before this year, Fitch Solutions states.
Over the long term, to 2030, Fitch forecasts that the copper market will remain in deficit as consumption continues to outpace supply, driving prices higher amid the green transition.
Fitch Solutions says that, while copper consumption growth will slow in 2022, green copper demand will experience robust growth of 10.5% year-on-year.