Haywood Securities raises price forecasts for copper, nickel

In a new research note entitled, Making a Comeback, Haywood Securities’ Pierre Vaillancourt has adjusted his price outlook for copper and nickel “to reflect the improving economic conditions,” although the mining analyst cautions that he remains “wary of the extent of the recovery.”

Vaillancourt has raised its outlook for copper this year to US$2.60 per lb. from his previous US$2.45 per lb. (US$2.50 per lb. in Q2, US$2.60 per lb. in Q3, and US$2.70 per lb. in Q4.)

In 2021, he expects the copper price will average US$2.80 per lb., and US$2.90 per lb. in 2022. In 2023 it should hit US$3.00 per pound.

He also lifted his nickel price forecast to US$5.87 per lb. in 2020 from his earlier US$5.65 per lb.

“Since the height of the Covid pandemic, prices for base metals have rallied as fiscal and monetary measures have been implemented by national governments to revitalize the global economy,” he wrote in a June 23 research note to clients. “Recently, China has signalled plans to maintain liquidity in the financial system for the rest of the year, raising hopes of improved demand and rising prices for metals.”

Overall, he noted, copper and nickel have appreciated by 23.2% and 13.7% from their lows on March 23. “In turn, the post-Covid metals price recovery has boosted the S&P/TSX Global Base Metals Index and the Copper Miners Global X ETF by 53.1% and 70.1%, respectively, compared to the S&P/TSX index gain of 37.9%.”

Copper, he said, has enjoyed its fifth straight week of gains, and “copper inventories in warehouses tracked by the Shanghai Futures Exchange (ShFE) dropped to their lowest level in 17 months with increasing industrial activity, as cancelled warrants have increased to levels not seen since December 2019.”

But Vaillancourt emphasized that uncertainty remains.

“China’s economy has recovered to 80-85% of pre-pandemic levels, but the lack of demand reflected in falling imports and exports could hamper further recovery,” he wrote. “Base metals remain vulnerable to a second wave of Covid-19 infections, and factory activity in the rest of the world remains depressed. Economic projections from the World Bank call for the global economy to contract by 5.2% this year, levels not seen since World War II.”

“Our concern for the price upside is that once virus-related supply constraints fade in leading producers, the copper price will be almost entirely reliant on China’s stimulus measures for a boost in demand. If China fails to meet expectations, and demand from western economies does not recover, prices could come under pressure.”