The outlook for copper prices in 2019 is largely positive, according to research and consultancy group Wood Mackenzie.
In its annual copper outlook report, Wood Mackenzie said despite a volatile 2018, copper prices were expected to trend higher in 2019.
“As anticipated, copper prices were highly volatile during 2018,” Wood Mackenzie said.
“At the beginning of the year, prices were supported by expectations that the renegotiation of labour contracts would lead to significant supply interruptions.
“As these labour disruptions failed to materialise, sentiment and prices trended lower.”
Wood Mackenzie said while softer demand growth, constrained mine supply growth, ongoing disruptions at smelters and additional uncertainly around changes to Chinese policies towards copper scrap imports were likely to have an impact, the outlook for 2019 was still good.
“In the absence of a major economic downturn, copper’s supportive fundamentals should keep prices skewed to the upside,” the report said.
“The market is set to register a sizeable deficit and, with stocks drawn down to well below average levels, from a fundamental perspective we expect average annual copper prices to trend higher through the year.
“The fundamental outlook for copper in 2019 remains very positive.”
However, Wood Mackenzie suggests much will hinge on the Chinese economy.
“Copper’s fortunes will continue to be influenced heavily by developments in the world’s second largest economy, not least due to the tariff issues but also the additional uncertainty around the Chinese government’s decisions to revise its policy on scrap again,” Wood Mackenzie said.
“Participants will look carefully for Chinese macro news flows and clarity on scrap.”
A possible global economic slowdown and a slowing in mine production are also key factors Wood Mackenzie says will need to be watched carefully in 2019.
It says recent developments in Germany illustrate concern about how some of the world’s biggest economies will function in 2019 and what impact that will have on copper prices.
“Whispers of economic slowdown and even recessionary forces are beginning to gain traction across a number of economies and regions,” the report says.
“Europe’s engine room, Germany, seems to be misfiring following disappointing industrial output and orders results for November 2018.
“While a bounce-back in auto production and sales is expected following vehicle emission testing changes, strong headwinds are forecast.”
Wood Mackenzie said it expected copper mine production to grow only slightly in 2019.
“(We expect) growth of only 0.3 per cent after applying a 5 per cent disruption allowance,” Wood Mackenzie said.