Copper prices were working lower during December, but late in the month fund buying picked up to drive prices to a multi-year high of $7,203 per tonne. There was little fundamental justification for this and we should consider it a warning that speculators and investors may force prices to overshoot on the upside. We have recently tightened our supply-demand balance to show a deeper deficit, due to a higher risk of mine and scrap-related supply disruptions, but also as the demand outlook appears robust given global economic growth. Investors seem eager to front-run the auto industrys shift to electric vehicles. This has bullish medium- to long-term demand implications for copper coming at a time when well-telegraphed mine supply shortages are due to emerge. Investors are getting bullish already and seem eager to use New Year fund allocations to increase their exposure to copper. The current rally may, therefore, have further to run and we have raised our Q1 cash price forecasts to $7,185 per tonne.
Analysis by Andy Cole, base metals analyst and editor of MBRs Base
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