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Goldman Sachs has slashed its 2025 forecast for the copper price by a third, clouding the profit outlook for leading miners.
The US bank warned this week that the expected rally in the copper market would not materialise as the Chinese property rout depresses demand for commodities. It now expects copper to average $10,100 a tonne next year, sharply lower than its prediction four months ago that it would hit an all-time high of $15,000.
“The copper rally is delayed,” Goldman analysts wrote in a note, citing a drop in Chinese metal consumption that has deepened over the past several months.
“As a result, and given the continued weakness in China’s property sector, we believe that copper inventory depletion — and its accompanying price rally — will probably come much later than we previously thought.”
The pullback for copper adds to the drag on profitability for the world’s largest miners such as BHP and Rio Tinto, which are grappling with a slide in the price of iron ore — their foremost profit generator.
Copper’s 2.1 per cent fall on Tuesday sent shares in Freeport-McMoRan tumbling 6 per cent, while Anglo American and Glencore shed more than 4 per cent.
Used for electric wiring and batteries that are crucial as the world tries to decarbonise, the red metal rallied to an all-time high above $11,000 in May as BHP pursued a £39bn takeover of rival Anglo American, which eventually collapsed.
While it has been at the centre of investor focus because of the expected surge in demand, BHP acknowledged in its annual commodities outlook released last week that the copper market would be in a marginal surplus this year and an even bigger one next year.
The metal has sunk almost 20 per cent since May to about $8,950 per tonne, sparking a wave of pessimism among the biggest lenders about the medium-term outlook for a metal used in everything from renewables to power grids.
The price decline is likely to weigh on miners’ profits going forward. For example, Freeport-McMoran, a leading US copper miner, estimates that a $220 per tonne change in copper prices would result in its expected core earnings to move by $430mn on average.
Global inventories of copper have risen to their highest level in four years as weak demand has led to a glut of metal entering into warehouses, according to Bloomberg data. In China, inventories rose in June to the highest level since March 2020 when Covid-19 ground Asia’s largest economy to a halt.
Goldman’s new forecast follows the departure of former metals strategist Nicholas Snowdon who has now joined commodities trader Mercuria.
Other banks have also tempered their copper market outlook. Macquarie said last month that strong supply and depressed demand “have pushed the market to a surplus sooner than expected, with the market expected to remain in surplus in 2025 and 2026”.
The Australian bank expects a lowest quarterly average price of $8,000 per tonne in 2026.
While BHP predicts near-term weakness, the Australian mining group is bullish in the medium term. It warned about the possibility of “systematic excess of demand over supply” as clean energy booms in the final third of the 2020s, resulting in a “fly-up” pricing regime.