Market participants were expecting copper to have a bright 2017, and for 2018 most forecasts for the base metal remain bullish.
Copper prices climbed in the second half of the year, breaking the $7,000-per-tonne-level, and they have traded in that range since then. A strong Chinese demand forecast, supply worries and speculation supported prices this year. On Tuesday (December 12), the red metal was changing hands at $6,663.
But as the year comes to an end, what can investors expect in 2018? Read on to learn more about the copper outlook for 2018, from supply and demand information to prices.
Meanwhile, copper’s lowest point of the year came in May, when prices were trading at $5,465.50 due to a rise in stockpiles, a stronger US dollar and risk aversion caused by geopolitical tensions.
At this time last year, Thomson Reuters GFMS base metals analyst Karen Norton believed copper prices had bottomed out in 2016, and that prices would rise only at a low double-digit rate in 2017. “Increasingly, however, speculative involvement has tended to exaggerate moves such that copper has outperformed from a fundamental perspective,” she said.
Similarly, Dan Smith, head of commodities research at Oxford Economics, said base metals prices generally surprised to the upside this year.
One of the key copper trends in 2017 has been supply disruptions. The strike at BHP Billiton’s (ASX:BHP,NYSE:BHP,LSE:BLT) Escondida, the largest copper mine in the world, and the suspension of concentrate exports from Freeport-McMoRan’s (NYSE:FCX) Grasberg, the world’s second-largest copper mine, kept the markets nervous.
“A higher-than-usual level of supply disruptions, coupled with slightly better-than-expected Chinese demand due to the property sector slowdown have resulted in a tighter market than we expected,” Norton said. She still expects a surplus for the year, albeit a relatively modest one.
Another factor supporting prices was the news that China would limit copper scraps imports. “In our view, however, it was an excuse rather than a reason for the rally” in the second half of the year, Norton added.
For Smith, China’s strong economic activity, a weaker US dollar and supply constraints supported by Escondida’s strike and Grasberg’s permit issues were the main price drivers. “[But] the biggest single news in the industry this year has been the idea that the electric vehicle market in China will take off soon and that it will as a result potentially increase demand in copper as well as other metals,” he said.
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