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Copper to hit $7,000/mt in 2019 despite weak start: Goldman Sachs

Tokyo — Global financial institution Goldman Sachs forecasts copper prices on the London Metal Exchange will hit $7,000/mt in 2019 despite weak prices at the start of the year, according to its research note seen by S&P Global Platts.

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LME three-months official copper prices marked $5,855-$5,860/mt on January 3, which was lower than the 2018 low of $5,862-$5,864/mt.

Goldman Sachs revised down its near-term copper price forecast for the next-three months to $6,100/mt from $6,500/mt, next six-months to $6,400/mt from $7,000/mt, but maintained that the price will hit $7,000/mt at the year end. The LME three-months copper last traded above $7,000/mt in February 2018.

"With our economists forecasting China growth bottoming in March-April and heightened uncertainties associated with the timing and magnitude of policy responses, industrial metals are likely face material headwinds and remain volatile in the first quarter of 2019," Goldman Sachs Commodity Research note said.

The bank, however, said Chinese policies to further restrict copper scrap imports from July 2019, and domestic housing demand would render support to copper prices. It forecast copper prices to average at $6,450/mt in 2019, almost at the level of the 2018 average. "For copper prices to drop to $5,000/mt, it would require a scenario where US dollar strengthens 5% and Brent crude drops to $42/bbl," the research note said.

"Copper held over $6,000/mt mostly in 2018 so starting the year below it was a shock," said one Japanese producer.

A Japanese trader said he agreed with the forecast. "Compared to what the prices are currently, this forecast may seem bullish. But I agree with the outlook. Supply and demand are balanced. The annual average price seen at $6,450/mt is sensible," he said.

Goldman Sachs revised down forecast for nickel and zinc too. Despite the rising nickel demand for electric vehicles, there are new supplies available from Indonesia, and revised down its twelve month nickel price forecast to $12,500/mt from the previous $18,000/mt.

Tomomichi Akuta, senior economist at Mitsubishi UFJ Research & Consulting, said he was seeing economic environment improving provided that US-China trade war comes to a resolution.

"If so, the global economy will return to expansion phase fueled by the US and China growth," Akuta said, adding that the Brexit and Italian politics are possible risks. "If the UK economy turns bleak, it will have impact in the rest of Europe. At this moment, Italian politics are not sending strong negative signals but it could possibly drive instability should Italy want to leave the European Union," he added.

"The possibility of aluminum recovering to $2,000/mt by June, is half," he said. Goldman Sachs also forecast aluminum will trade below $2,000/mt in the first six-months of the year.

It saw aluminum trading at around $1,900/mt for the next three months and $1,950/mt in the next six-months before hitting $2,000/mt possibly in the second half.

--Mayumi Watanabe, mayumi.watanabe@spglobal.com

--Edited by Ikhhlaq Singh Aujla, newsdesk@spglobal.com