Goldman sees a massive run brewing for copper amid falling stockpiles to critically low levels

Goldman Sachs said copper is “sleeping towards a stockout” in a note last Friday. 

The investment bank flagged that global exchange copper stocks fell through March during what is traditionally a seasonal surplus phase. 

A combination of strong demand from developed markets, a recovering China, underperforming Chilean mine supply and scrap tightness were viewed as factors driving the “extreme fundamental turn” for copper markets. 

Goldman analysts doubled their forecasted refined copper deficit to 374,000 tonnes, followed by “enlarged deficit projects for 2023 and 2024.”

“Without any apparent softening adjustments already underway, we believe higher prices are an inevitability - required to stimulus substantially more scrap supply as well as accelerate demand destruction to balance this market.”

Get long

Copper prices have risen just 5.6% year-to-date to US$4.71/lb.

Copper briefly broke out on 4 March to an all-time high of US$5.04 before reversing back to the US$4.6 to US$4.8 level.

Source: TradingView

"Despite these tightening tailwinds, copper prices have only risen modestly this year and positioning has remained flat, offering a clear entry point for investors to get long."

“This clear sequential tightening trend in copper market conditions already and ahead leads us to raise our price targets to US$11,500, US$12,000 and US$13,000 a tonne on a 3, 6 and 12 month basis.”

Covering the price targets back to lb, this equates to:

• 3 months: US$5.2/lb

• 6 months: US$5.44/lb

• 12 months: US$5.9/lb

We recently covered broker views on several large cap ASX-listed copper players including Oz Minerals (ASX: OZL) and Sandfire Resources (ASX: SFR).