The global copper market is on track to achieve equilibrium as rest-of-the-world (ROW) demand recuperates and supply constricts, as per a report from JPMorgan.
Vital signals include a 1.2% upsurge in global output during the year leading up to November, with the robust performance in Chile during December signaling a sturdy 2023 production.
Also Read: Experts Predict Copper Prices Set To Soar Over 75% By 2025, Thanks To Renewable Energy Transition, Supply Disruptions
Optimistic Forecasts Sustained by Recovery in Rest of the World (RoW)
Despite tepid demand from the rest of the world, resilient consumption in China has offset the balance. Spot treatment charges have seen a drastic decline from $90/t in August 2023 to below $30/t, pointing to a taut concentrate market.
Copper inventories are lingering at multi-year lows, and JPMorgan foresees a balanced market in 2024, transitioning to a shortfall in 2025 following recent supply disruptions such as those at Cobre Panama.
As copper fundamentals bolster, recent copper prices have moved sideways due to a lackluster macroeconomic backdrop. JPMorgan’s bullish outlook hinges on a 3.5% expansion in China’s demand, further buttressed by a recovery in the RoW in the latter part of 2024.
Investor Ramifications
Investors are greeted with an auspicious backdrop. The prevailing market conditions, encompassing tightening supply and resurging demand, signify a favorable environment for potential returns. The sector’s enticing valuations and dividend yields further amplify the allure for investors seeking exposure to the favorable copper market dynamics.
Stock Opportunities: JPMorgan’s global copper miner stock ratings align with a positive inclination based on the sanguine copper outlook. The enticing valuation of the sector is underscored by a 2025 estimated EV/EBITDA of 5.6x and an estimated dividend yield of 5.1% for 2025. Notably, two U.S. traded stocks spotlighted in the report demonstrate promise:
- Freeport-McMoRan Inc FCX — Analyst Bill Peterson envisions an 11% potential upside with this stock. Presently trading at approximately $38.7, Peterson has set a price target of $43 for the stock.
- Ivanhoe Electric Inc IE — Analyst Bill Peterson anticipates a 120% upside associated with this small-cap copper play. Ivanhoe Electric boasts a market cap of just under $1 billion and trades at around $8.2. Peterson has set a price target of $18 for the stock.
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