For much of 2013, copper has been fighting an uphill battle, with lack of demand and oversupply keeping prices well below 2011′s record highs. Now, with the new year on the horizon, investors may have high hopes for the red metal; however, those anticipating big moves — in either direction — might want to think again. It looks 2014 will be a lot of the same for copper.
Copper beats expectations
In May, Shanghai Cifco Futures released a technical analysis report for the copper market that was none too positive for the red metal. The firm speculated that the red metal was headed for a 16-percent drop by the end of September. The then $7,240-per-tonne copper was expected to continue on its uptrend until the end of June before getting pulled down to around $6,040.
Well, September has come and gone and the red metal is still standing its ground amidst an ebb and flow of data from the United States and China that has had the metal bouncing up and down on the price chart. Following the most recent arrow aimed at the red metal’s heart — the US Federal Reserve scaling back its monthly bond purchasing by $10 billion to $75 billion — copper suffered its biggest fall in three weeks, losing almost 1 percent to close at $7,201, down from the previous session’s $7,270.
PwC: 2014 to repeat 2013; faith in long-term fundamentals
In its most recent survey, PwC said it expects that in 2014 copper will fall victim to many of the same issues that plagued it during 2013: demand and supply imbalances. That being said, producers are bracing themselves for another challenging year as inventories climb and the global economy tries to stabilize.
However, KGHM CEO Herbert Wirth told PwC that he believes “the commodities super cycle is not over yet” and that “there is still some room for prices to increase in the future.” Wirth went further to admit that he believes in copper’s positive price outlook in the coming years.
Speaking to PwC, Wirth said that he sees signs of global economic recovery, which could bode well for overall copper demand. However, “copper stocks are down and the number of cancelled warrants is high, global financial institutions anticipate many mining projects will add supply to the market.” Furthermore, additional output, if delivered without a hitch, could also add downside pressure on prices in the coming months.
Based on its survey, PwC concludes that roughly two-thirds of copper miners surveyed believe that the red metal is going to be bound to current levels for at least the next year. Meanwhile, roughly 20 percent expect a decrease in price on the horizon. On the whole, the firm believes that regardless of the metal, the long-term fundamentals supporting the price remain strong. While copper might not reach any record-breaking price points in the near future, the firm does believe that prices will increase alongside the global economy.
Move over Goldilocks, it’s copper’s turn to be a little wishy-washy. Overall, the sentiment with copper seems to be that the red metal won’t get too hot, but it also won’t get too cold in 2014. Speaking with Kitco News, Standard Bank analyst Leon Westgate admitted to being “not super bearish,” but not “super bullish either.” Westgage is expecting an average price of $7,200 per tonne for copper in 2014, and that could translate to a stronger first quarter that the rest of the year.
Echoing the sentiment was Bank of America Merrill Lynch, which is also on the fence about copper. “As such, we believe copper is not too hot and not too cold, i.e. next year’s average may be close to quotations seen this year,” the firm said.
With copper prices so in tune with the global economy, when the economy picks up then inevitably demand for the red metal will follow suit. But until it is clear that the economy has stabilized and is on the road to recovery, it seems that copper is going to be stuck in the same rut we’ve seen throughout 2013.
Goldman Sachs: a Debbie-downer for copper
Bet against copper. That’s what Goldman Sachs told investors in a note earlier this month. Bearish Goldman called for significant declines in copper and gold prices in 2014. The firm believes that increased downside risks will weigh down some commodities in the future.
Meanwhile, according to Goldman, investors should be paying more attention to stocks and leaving commodities like copper, iron and gold to fend for themselves. Goldman believes that for the coming year, betting against copper will be a wise choice if China’s economic growth is stable.
Moody’s copper price average
Considering that copper futures for March are currently in the range of $3.304 in New York, perhaps Moody’s price forecast for copper for 2014 isn’t as bad as it looks. Regardless, the firm sees copper prices averaging “at most $3″ per pound in the coming year.
MarketWatch reported that Moody’s Vice President Carol Cowan explained the firm’s stance, citing that “[c]ontinued slow global economic growth, surplus inventory and investors’ subdued interest in the metals commodity sector will prevent any material upward movement in [base metals] prices in the next year or so,” adding that the firm thinks that “2013’s price decline has bottomed, but prices in 2014 will on average be lower than 2013 levels.”
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.