Copper (LME) resumed its bull run final week and additional spiked to $9,436/t this morning. In response to economists at ING Financial institution, macro tailwinds, lingering dangers to produce and a cyclical uplift that’s driving demand might see upside dangers to copper costs dominate over the second quarter.
Upside dangers dominate within the second quarter
“We predict upside dangers to costs might dominate over 2Q21. The present inflationary setting and unfavourable actual rates are tailwinds to the commodities sector, and copper stands out due to its constructive fundamentals, particularly the sturdy narrative of medium to longer-term demand linked to power transition. An extra weakening within the buck might nicely present an additional enhance.”
“From a fundamentals perspective, elements which were fuelling the bullish optics nonetheless have room to run within the short-term. Firstly, there hasn’t been a significant enchancment to mine provide but, and the state of affairs continues to be weak to disruption. Secondly, demand restoration from main economies exterior of China using the continuing restocking cycles, and pent-up demand ought to stay a key theme all year long. The brand new wave of COVID-19 instances from some European international locations shouldn’t derail the general demand restoration path.”
“Macro tailwinds, mixed with copper’s constructive fundamentals and a ‘inexperienced’ narrative in medium to longer-term demand, might see upside dangers dominate for copper throughout 2Q21, suggesting the purple steel might be on a parabolic run, testing earlier highs. Nevertheless, this energy could dampen as the present restocking cycle approaches an finish and slowing credit score development in China weighs on funding demand, which can grow to be extra evident within the second half of this yr.”