Copper is experiencing the kind of investor interest it hasn’t seen for a decade, with the metal reaching its highest prices in seven years.
Prices are up more than 70% for an intraday low back in March, with this year’s rally in the metal beginning to resemble a spike in prices seen in the early 2000s.
“This rally hasn’t even started yet,” said Luke Sadrian, chief investment officer at Commodities World Capital. “The market’s looking like it did in ’04 and ’05 and the world didn’t get the memo.”
Goldman Sachs (NYSE: GS) agrees and said in a note out this week that the bull run for the industrial metal is just starting to heat up.
“The bull market for copper is now fully underway with prices up 50% from the 2020 lows, reaching their highest level since 2017,” the Goldman analysts said. “This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper.”
As of this writing, copper sits at $7,679 per ton.
The Goldman analysts raised their 12-month price forecast for the red metal from $7,500 to $9.500—nearly 24% higher than the current price—with a higher average price for 2021 and 2022. The firm estimated copper prices will average around $8,625 next year before rising to an average of $9,175 in 2022.
But by the first half of 2022, the firm’s analysts said that it is “highly probable” that copper will test the existing record high of $10,170 set back in 2011.
Copper had its eighth straight monthly advance in November, its longest rally since 2011. The metal has been climbing higher on a wave of bullish drivers including a weaker dollar, vaccine optimism, and a global move toward low-carbon power sources.
However, risks of supply disruptions in key mining countries has tightened the market, with analysts warning of “unmanageable” global deficits in the coming years.
“Low inventory, a deficit market, a strong support from macroeconomic drivers are expected to send copper to fresh highs in 2021,” Morgan Stanley (NYSE: MS) analysts including Susan Bates wrote in a note from Monday.
The analysts at Goldman cautioned that copper’s path to $10,000 would not be without its hurdles, given a seasonal slowdown in demand and several periods of price consolidation among other factors.
Still, the firm believes the speculative length in the rally is still “some way from its limit,” and higher copper prices will be needed to incentivize new supply and help balance the market over the coming months.