UBS Global Research has identified copper as the top pick among base metals, citing favorable supply-demand dynamics and a bullish long-term price outlook. Despite recent pressures, including rising inventories and weaker-than-expected manufacturing data, copper remains the most attractive metal due to several key factors.
Copper: Market Dynamics and Projections
Copper’s supply side is characterized by significant constraints, particularly with expected production shortfalls from major mines such as Quebrada Blanca in Chile and Antofagasta. These shortfalls suggest that the expected growth in mine supply may not fully materialize by 2025. UBS projects that this constrained supply environment will lead to a market deficit, which is expected to persist into 2025.
“For now we stick to our estimate of global copper consumption to grow by 3% in 2024 and 3.3% in 2025, supported by significant investments in renewable energy sources,” said analysts at UBS Global Research. Although there are short-term concerns, especially regarding demand from China, UBS maintains a target price of $12,000 per metric ton by the first half of 2025, reinforcing their recommendation for long positions in copper.
Supply and Demand Balance
Following copper, UBS sees aluminum as a strong contender, supported by its cost structure and anticipated demand recovery. Aluminum production, particularly in Europe, is unlikely to see significant restarts at current price levels, according to UBS. Additionally, Chinese production is expected to plateau, contributing to a tighter market. Global refined output growth is projected at 1.9% in 2024 and 2.6% in 2025, which should keep the market balanced.
Demand for aluminum is expected to grow by 2.6% in 2024 and 2.8% in 2025, driven by sectors such as renewable energy and infrastructure in China. UBS forecasts that aluminum prices will recover to the $2,700 per metric ton range by the first half of 2025.
A Cautious Yet Optimistic Outlook
Zinc is ranked third by UBS, with a cautiously optimistic outlook driven by supply-side factors and potential demand recovery. UBS points to the possibility of increased zinc mine supply, particularly from new projects in Africa and South Africa. This increase could push the market into surplus by 2025. However, UBS remains cautious about the robustness of this supply growth, noting that it may not be as strong as expected.
With expected increases in refined output and the possibility of a supply surplus, UBS anticipates that zinc prices will trend higher once macroeconomic concerns diminish. Any positive developments in Chinese property data could further support zinc prices.
Overall, UBS Global Research’s analysis highlights the potential investment opportunities in copper, aluminum, and zinc. Investors looking for long-term growth and stability in their portfolios should consider these base metals as part of a diversified investment strategy. By understanding the market dynamics and projections for these metals, investors can make informed decisions to maximize their returns and secure their financial futures.
