Goldman Sees Bleak Future For Copper

A new report by Goldman Sachs analyst Max Layton is full of bad news for copper investors. Despite a steep collapse in copper prices, Layton believes that copper investors will be waiting for years for copper prices to recover.

The 3 Ds

Layton believes that the “three Ds” weighing on copper prices throughout 2015 will continue to do so in the foreseeable future: Divergence between U.S. and non-U.S. growth, Deflation of energy costs and Deleveraging in emerging markets.

China is a particular problem for copper, as Goldman’s China Metals Consumption Index continues to indicate a hard landing for commodity prices due to weakness in Chinese construction numbers. “We do not see these bearish drivers changing for some time, and as such producers are set to remain under pressure and likely rationalize global production,” Layton explained.

Related Link: Carube Copper Corp. Announces AGM Results, Management Restructuring

Forecast

The latest global demand trends indicate to Goldman that the world will maintain a copper market surplus of about 500kt through at least 2019. With that number in mind, Goldman forecasts year-end 2015 copper prices of $4,800/t and year-end 2016 prices of $4,500/t with risk remaining mostly to the downside.

Negative Catalysts

If things weren’t already bad enough for copper bulls, Goldman sees several potential negative catalysts on the way between now and March of next year. Catalysts include a Federal Reserve rate hike, lower oil prices, lackluster Chinese demand and a continued unwind of global speculative long positions.