Goldman Sachs: Copper: Sleepwalking Towards A Stockout

Goldman Sachs note that “copper is sleepwalking towards a stockout. For the first time in a decade, global exchange copper stocks fell through March instead of rising during what is this metal's main seasonal surplus phase. Despite such an extreme fundamental turn underpinned by strong developed market demand, a recovering China, underperforming Chilean mine supply and scrap tightness, prices have barely moved and, in our view, this market is sleepwalking toward a stockout. In fact, we now expect the 2022 refined copper deficit at 374kt, double our previous estimate, enough to deplete visible stocks by Q4. Moreover, this is also followed by enlarged deficit projections for 2023 (estimate of 161kt vs. 28kt previous) and 2024 (estimate of 366kt vs. 187kt). Without any apparent softening adjustments already underway, we believe higher prices are an inevitability - required to stimulate substantially more scrap supply as well as accelerate demand destruction to balance this market. 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 $11,500/12,000/13,000/t on a 3-/6-/12-month basis.”