The global copper market is on the cusp of balance. Recent data suggests a potential recovery in Rest of the World (RoW) demand, accompanied by a discernible tightening of supply, as noted in a JPMorgan report.
Key indicators show a 1.2% year-to-date increase in global output through November, with robust December data from Chile hinting at strong 2023 production.
Also Read: Predictions Suggest Copper Prices to Surge Over 75% by 2025, Fueled by Renewable Energy Transition and Supply Disruptions
Boost in Confidence Backed by RoW Recovery
Despite a sluggish RoW demand, resilient consumption in China has offset the equilibrium. Spot treatment charges have plummeted sharply from $90/t in August 2023 to below $30/t, an indicator of a constricted concentrate market.
Copper inventories persist at multi-year lows, and projections anticipate a balanced market in 2024, transitioning to a deficit in 2025 due to recent supply disruptions, such as those at Cobre Panama.
Even as copper fundamentals strengthen, recent price movements have meandered in the face of an uninspiring macroeconomic backdrop. JPMorgan’s bullish stance hinges on a 3.5% upswing in China’s demand, buoyed by a recovery in the RoW in the latter half of 2024.
Investor Perspectives
Investors stand at the precipice of an optimistic horizon. The prevailing market conditions, underscored by tightening supply and resurging demand, signal a propitious environment for potential returns. The sector’s inviting valuations and dividend yields further accentuate its allure for investors seeking exposure to the favorable dynamics of the copper market.
Equity Opportunities: JPMorgan’s global copper miner stock ratings reflect a positive bias based on the constructive copper outlook. Emphasizing the sector’s appealing valuation, the report highlights a 2025E EV/EBITDA of 5.6x and a 2025E dividend yield of 5.1%. Notably, the report identifies two U.S.-traded stocks with promising prospects:
- Freeport-McMoRan Inc FCX — Analyst Bill Peterson envisions an 11% potential upside for this stock. Currently trading at approximately $38.7, Peterson has set a price target of $43 for the stock.
- Ivanhoe Electric Inc IE — Analyst Bill Peterson anticipates a remarkable 120% upside associated with this small-cap copper play. Ivanhoe Electric boasts a market cap just shy of $1 billion and is trading at around $8.2. Peterson projects a price target of $18 for the stock.
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