Global metal prices are on fire due to inflation expectations and there is a huge demand for metals like copper as the electric vehicle (EV) project unfolds across the globe.
Archie Hunter, Base Metals Editor at Fastmarkets said that there is buying in copper on expectations of demand pick up.
“We had China markets come back last week and saw really big appetite for buying futures based on what we are seeing as low stocks and expectations that demand is going to pick up. Demand at the moment for consumer goods, electronics, and housing in the US are really big factors boosting expectations for copper demand boom at the moment and supply is trying to keep up. It constantly expands as prices come up, but there is a lag,” he said in an interview to CNBC-TV18.
He said that reports of Chinese smelters planning to cut copper production and bullish positioning in options market has also helped fuel the rally.
On the demand-supply deficit, he said, “Our channels at Fastmarkets are forecasting a deficit in the refined market of 575,000 tonne for 2021. That is kind of peaking in the second quarter where they are forecasting that about 4% of refined consumption globally, there will be a deficit there.”
According to Hunter, strong dollar and fruition of demand are risks for metal rally. “I think the dollar is a big factor – whether we get a stronger dollar. But I think more pressing is demand. People are thinking about spending big on things when they get out of lockdown, but is this going to be products or is it going to be experiences? If we were bullish copper, that would have me staying at home and buying new microwave every 5 minutes. This is one of the questions, can that big electronic demand sustain and we are talking about years here and people are talking super cycles. So can that be sustained going forward is the real question,” he said.
He said that many big industry analysts have revised their price targets higher. However, Fastmarkets is more cautious and expect LME copper price of $9,600 per tonne in Q2CY21.
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