Investors are asking when they should buy copper but, according to analysts at UBS, it is not quite time yet.
“Our China copper predictor (about 80% historically accurate) suggests that demand will grow around mid-single digits year-over-year through mid-year from a low (Covid-lockdown) base,” the analysts wrote in a note to clients.
“But demand weakness in the US and Europe, and the rise in supply (SA production normalizing, treatment charges are back in the 90s from mid-70s earlier this year) is balancing the market for now.”
Further, the analysts cautioned that the impact of renewed Chinese property stimulus may not be as great as signalled.
“Specifically, new policies support property affordability, but consumer concerns are centred at lack of price appreciation, where our [China property] team cites the likelihood of policy easing is low,” they wrote.
“In the meantime, property completions (read; fitted copper demand) could come under further pressure (UBS estimate negative 15% and negative 20% in 2H23 and 2024).”
The analysts estimate that copper prices, currently at about US$3.75 per pound, will reach US$3.89 per pound by the year-end and US$4 per pound in 2024 to 2025.
When it is the right time to buy copper, stocks favored by the UBS analysts are Glencore PLC (LSE:GLEN) and Zijin Mining, two companies on which they have ‘Buy’ ratings.
Investors looking for junior copper companies with high-growth potential can turn to Fabled Copper Corp. (CSE:FABL), Majuba Hill Copper Corp (CSE:JUBA), NorthWest Copper Corp (TSX-V:NWST) and World Copper Ltd (TSX-V:WCU, OTCQX:WCUFF).
Nevada Copper Corp (TSX:NCU, OTC:NEVDF), C3 Metals Inc (TSX-V:CCCM, OTC:CARCF), Cordoba Minerals Corp (TSX-V:CDB, OTCQB:CDBMF), Los Andes Copper Ltd (TSX-V:LA) and Kodiak Copper Corp. (TSX-V:KDK) are other copper-focused companies to watch.
Contact the author at emily.jarvie@proactiveinvestors.com
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