The global copper market is expected to balance as ROW (Rest of the World) demand recovers and supply tightens, according to a recent report. Key indicators include a 1.2% year-to-date increase in global output through November, with strong December data from Chile indicating solid 2023 production.
Also Read: Experts Predict Copper Prices Set To Soar Over 75% By 2025, Thanks To Renewable Energy Transition, Supply Disruptions
Recovery Fueling Bullish Outlook
Despite a weak RoW demand, robust consumption in China has offset the balance. Spot treatment charges have sharply dropped from $90/t in August 2023 to below $30/t, signaling a tight concentrate market. Copper inventories remain at multi-year lows, and a balanced market is anticipated in 2024, shifting to a deficit in 2025 following recent supply disruptions.
While copper fundamentals improve, recent copper prices have moved sideways due to an uninspiring macroeconomic backdrop. The bullish outlook relies on a 3.5% growth in China’s demand, further supported by a recovery in the RoW in the second half of 2024.
Investor Optimism
Investors are presented with an optimistic backdrop. The current market conditions, with tightening supply and recovering demand, suggest a favorable environment for potential returns. The sector’s attractive valuations and dividend yields further enhance the appeal for investors seeking exposure to the positive copper market dynamics.
Equity Opportunities: A positive bias in JPMorgan’s global copper miner stock ratings is highlighted by the constructive copper outlook. The sector’s attractiveness is supported by a 2025E EV/EBITDA of 5.6x and a 2025E dividend yield of 5.1%. Notably, two U.S. traded stocks found in the report offered promise:
- Freeport-McMoRan Inc FCX — Analyst Bill Peterson sees an 11% upside potential with this stock. Currently trading at around $38.7, Peterson has a price target of $43 on the stock.
- Ivanhoe Electric Inc IE — Analyst Bill Peterson sees a 120% upside associated with this small-cap copper play. Ivanhoe Electric has a market cap of just under $1 billion and trades at around $8.2. Peterson has a price target of $18 on the stock.
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