Copper prices, traditionally a barometer of the global economy, are expected to rise over the next year

Copper, traditionally viewed as a leading indicator of economic health, unsurprisingly had a tough year. However, analysts expect a rebound in 2023, even if the global outlook remains highly uncertain.

Some of Wall Street’s biggest banks have been suggesting in recent weeks that a combination of near-term supply constraints and longer-term demand related to the energy transition will propel the red metal north from here.

The downward pressure in 2022 came in part from continued market expectations for an excess bend in the metals market, driven by expectations of sluggish demand amid slowing global growth and an acceleration in mining activity, strategists at Goldman Sachs said in a week-to-date report Message.

However, this has not materialised, and Goldman emphasized that the cathode market has remained in a “significant deficit (GS estimate 210kt vs. 131kt previously) with global apparent inventories falling to a 14-year low” said metals strategist Nick Snowdown said.

“Equally important, the surplus that we previously expected for 2023 (169kt surplus) is now also gone in our last balance iteration (GSe 178kt deficit),” he added.

The metal – used in many sectors – is also having a tough year due to tighter US monetary policy, the energy crisis stemming from Russia’s war in Ukraine and China’s combination of strict Covid-19 lockdowns and a weak real estate market 2022 behind. LME copper prices peaked at over $10,600/t in March this year.

Should China’s easing of its zero-Covid restrictions move further towards a reopening of the economy, there will likely be a restocking of inventories, Goldman believes.

“If China were to bring its copper inventory-to-consumption ratio back to pre-2020 levels, it would mean an increase in physical demand of up to 500kt,” Snowdown said.

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Three month copper futures

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