Critical minerals, western security and the case for US leadership
The International Energy Agency estimates an extra $800 billion of investment in new mining projects is needed by 2040 to meet the 1.5 °C target.
Goldman Sachs Group Inc. exited a long-term bullish position on copper and slashed its price forecast for 2025 by almost $5,000, citing shrinking demand in China.
The bank has been one of the biggest cheerleaders of the industrial metal, but the increasingly disappointing economic recovery in China will delay an expected rally, analysts including Samantha Dart and Daan Struyven said in an emailed note. They expect prices to average $10,100 next year, compared with a previous target of $15,000 a ton championed by former analysts Jeffrey Currie and Nicholas Snowdon.
Copper surged to fresh highs above $11,000 a ton in May as funds piled in. At the time, Currie — who joined Carlyle Group Inc. last year as chief strategy officer — described the metal as the best trade he’d ever seen. But prices have since slumped by about 18%, with ballooning inventories and a rare surge in exports from China sending alarms about consumption in the world’s top consumer.
“Softer-than-expected China commodity demand, as well as downside risks to China’s forward economic outlook, lead us to a more selective, less constructive tactical view of commodities,” the bank said.
While the analysts are closing out its long-standing bullish recommendation well short of the prior target, clients could have made 41% on the trade, they said. The bank is likely to reopen the position at a later date as it still sees the market heading for a steep supply deficit.
Goldman’s reversal comes as China’s persistent property downturn, and growing headwinds for its manufacturing and export sectors make Beijing’s target of 5% annual economic growth increasingly tough to reach. China’s apparent copper demand started to shrink in March, and a subsequent surge in inventories means that the country is now much further away from the “stockout” scenario that underpinned the bank’s prior forecasts, Goldman said.
The bank also downgraded its 2025 price prediction for aluminum to $2,540 a ton from $2,850. It maintained bearish views on iron ore and nickel and said gold was its preferred near-term hedge against geopolitical and financial risks.
Gold stands out as “the commodity where we have the highest confidence in near-term upside,” Goldman said. It maintained its $2,700 an ounce target for early 2025. The precious metal will be driven by increased flows from managed money players in the West as the Federal Reserve prepares to cut rates. Ongoing voracious demand from central banks will also continue to add support.
Copper traded down 2.6% to $8,947.50 a ton on the London Metal Exchange as of 3:13 p.m. local time. Other industrial metals were also lower.
(By Sybilla Gross and Mark Burton)
Read More: China’s bulging commodity stockpiles show depth of economic woes
Comments