supply is likely to exceed demand – Shaw & Partners

The price of copper has jumped about 30% since the start of the year. It hit its all-time high of 4.8845 in mid-May before retreating. Peter O’Connor of Shaw & Partners has indicated that prices may soon normalize below $ 4.53 per pound ($ 10,000 per tonne) as the metal supply closes the current gap with demand.

In an interview with CNBC’s Commodity Corner, analyst declared,

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“The elasticity of copper supply has been able to keep up with the growth of copper over the past two decades… over the next two or three years, 2023 to 2024, we should see the supply exceed the demand after this COVID pulse and see prices normalize again to a level below 10,000.

Much of the current surge in copper prices is due to liquidity, the analyst said. Countries such as the United States and China have taken advantage of significant stimulus packages in an attempt to boost economic recovery from the coronavirus pandemic. Certainly, proposed infrastructure spending in the United States and the growing focus on the green economy has also boosted the price of copper.

In the short term, the price of copper finds support in the probable disruption of the metal supply in Chile and Peru. The two Latin American countries are the main copper producers in the world. In Presidential elections in Peru, Pedro Castillo is getting closer to victory. Castillo said his administration would take 70% of the revenue generated by mining companies in the copper-rich Andes region. In Chile, the proposed tax on copper sales is also likely to disrupt supply, thus supporting the price of copper.

Technical outlook for copper prices

Copper price rebounds after hitting an intraday low of 4.4420. At the time of this writing, the red metal was down 0.89% to 4.4905. On a two hour chart, it is trading slightly below the 25 and 50 day exponential moving averages.

I expect the copper price to experience resistance along the 25 day EMA at 4.5000. Above this resistance level the next target will be Wednesday’s high of 4.5395. On the other hand, it could decline to find support at Thursday’s low at 4.4420.

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About Aldrich Stanley

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