UBS – Gains Likely After Consolidation: CIO View: Copper

This report provides an analysis and outlook on copper prices and market dynamics.

Copper price momentum has stalled around USD 13,000 per metric ton due to high prices reducing Chinese demand and increasing inventories in the US and Asia. Near-term caution is advised due to high speculative positioning and soft Chinese macroeconomic data. The long-term outlook remains positive with a year-end target price of USD 14,000 per metric ton. Persistent resource nationalism and supply challenges are expected to support demand and pricing. Recommended strategies include going long on copper or using volatility selling strategies to generate yield. Supply constraints in Chile and Peru are limiting production growth. Chinese demand is weak recently but expected to recover after the Chinese New Year and with anticipated stimulus measures. Inventory trends at Shanghai Futures Exchange and New York COMEX are influencing price dynamics.