Goldman Sachs said it expects copper to underperform other base metal prices over the next 12 months, citing the red metal's heavy exposure to China's property sector, which it expects to remain bearish this year and next. The bank also said copper has entered a once-in-20-year supply cycle, which started in the second half of 2012 and is set to last through to 2016/17, following a decade of high capital expenditure investment in the industry, raising trend supply growth to about 4-5 percent from about 2 percent over the past decade.
Goldman lowered its 2015 average copper price forecast to $6,400 per tonne from $6,600, in a note to clients dated July 23. The investment bank also cut its 2016 outlook to $6,600 per tonne from $7,000 partly due to expectations of lower marginal production costs. Goldman Sachs, however, said it is bullish for nickel, zinc and aluminium on a 12-month view.
The bank said it estimates that the global aluminium market has moved into deficit this year, primarily supported by undersupply in markets outside China. Goldman raised its 2014 aluminium price forecast to $1,869 per tonne from $1,727 and its 2015 view to $2,075 per tonne from $1,900. The bank said nickel is being boosted by the Indonesian government's attempts to encourage value-add capacity within the country. Until this year, Indonesia was the world's top exporter of nickel ore. But a ban in January on exporting unprocessed ore and an escalating tax on metal concentrates have paralysed shipments.
The outlook for zinc over the next couple of years is increasingly bullish as solid global growth in zinc demand meets significant slowdown in mine supply growth, with the world's biggest zinc mine Century, in Australia, slated for closure in mid-2015 due to depleted reserves, Goldman Sachs said. It lifted its 2015 zinc price view to $2,425 per tonne from $2,200 and 2016 forecast to $2,400 per tonne from $2,300.