LONDON (Reuters) – This year’s London Metal Exchange (LME) Week has been a virtual affair of webinars and Zoom calls but the buzz of bullish excitement around copper has been very real.
Nickel won the LME Week beauty parade for the past two years as the market collectively reassessed the role of the stainless steel component in electric vehicle (EV) batteries.
That electric tingle is still there, as it is with other battery metals such as cobalt and lithium.
But it was copper that lit up the virtual space this time around thanks to the market’s current bullish optics and a future narrative of green infrastructure, with copper wiring at its core.
The two metals also topped this week’s Reuters poll of metals analysts in terms of price expectations for next year.
All LME metals are seen recovering from this year’s COVID-19 demand collapse but large supply surpluses are expected to cap the upside for the likes of aluminium and zinc.
One word of warning for metals bulls, however.
Analysts’ median forecasts for 2021 are all below current cash prices with the single exception of under-performing lead. The good news may already be baked into prices after their stellar bounce from the depths of lockdown.
Even assuming the pandemic can be controlled in the months ahead, recovery outside China could be, to quote research house CRU’s chief economist Jumana Saleheen, “a long, hard slog”.
COPPER’S GREEN CREDENTIALS
“Our pick is copper,” Citi’s Max Layton told the LME’s virtual seminar on Monday.
“I do think it’s a stand-out across the complex not just because it’s topical (but also because) it’s the one that has the highest probability of (supply) deficits,” he said.
Other panellists agreed and so does just about every other analyst, judging by the latest Reuters poll. A median forecast for a cash price of $6,800 per tonne next year represents a 12.5% rise from an expected average of $6,043 this year.
Analysts are rapidly revising their copper demand projections as they factor in green stimulus packages in China, Europe and, if Joe Biden wins the presidential election, the United States.
Whichever way you view the global drive to decarbonise, whether through the prism of electric vehicles, renewable energy or smart power grids, it translates into more copper wiring.
Copper’s new green credentials are being reinforced by robust current market dynamics as China soaks up the rest of the world’s excess metal.
The International Copper Study Group is forecasting a global market deficit this year, largely due to the statistical quirks of how China’s huge imports are counted. A significant portion may be going into invisible inventories in mainland China, but the effect is still to drain Western surplus.
EV METALS TAKE BACK SEAT
Nickel will register the second strongest price performance next year relative to this with a median forecast of $15,157