Copper voted as the metal with most upside potential in 2024-25

Every year, the global metals industry turns its attention to London for one of the most anticipated events in the commodities calendar – LME Week.

This high-profile gathering brings together a diverse mix of industry heavyweights, from mining executives to commodity traders and industry analysts. It serves as a crucial barometer for the state of the metals market and the broader macro outlook.

Morgan Stanley's Key Takeaways

Morgan Stanley analysts have highlighted key takeaways from various private conversations and public presentations.

China stimulus: China's surprise stimulus fueled optimism, particularly in metals markets. The sentiment from China's onshore participants was more positive than those offshore. The focus now shifts to details from an expected supplementary budget in late October and any signs of improvement in property sales and prices.

Energy Transition: The pace of electrification has hit some headwinds but the energy transition remained a strong theme across the presentations. Copper remains central to the theme. Government policy was flagged as a key driver to the pace of transition, and the addition or removal of policies could drive volatility in demand.

Upstream vs Downstream: Record low copper, zinc and lead treatment charges are linked to mine supply tightness and smelter expansions. Tightness in concentrate looks likely to continue, especially in copper. In aluminium markets, bauxite and alumina markets are set to face more supply challenges.

M&A: A pickup in M&A is likely to be an ongoing trend. Copper viewed as a conduit for energy transition exposure and portfolios will continue to be realigned to copper. Scarcity of copper projects drives continued preference for buy over build.

Ex-China: Discussions focused on rate cuts, the US election and trade barriers. Rate cuts may boost construction and auto sales, while more tariffs could weaken metals demand.

Metals Focus: Growing interest from the investment community is driving attention toward metals, with both precious and industrial metals supporting market performance.

Everyone's Favourite Metal

Copper remained everyone's favourite metal, with the highest share of participants voting for it as the metal most likely to rally into 2025.

Source: International Tin Association, LME

"However, positioning has been more neutral than long and many participants had been on the sidelines before China's stimulus announcement," notes Morgan Stanley

Copper demand growth was widely recognised, even with lowered EV forecasts. Factors such as grid spend, renewables and charging infrastructure were viewed as key drivers, alongside a potential recovery in the construction sector due to falling interest rates.

However, the recent rise to U$10,000 a tonne (US$4.5/lb) raised concerns about demand destruction and the sustainability of high prices.

From a supply perspective, participants held mixed views. A key factor was the return of First Quantum Minerals' Cobre Panama Project, which was estimated to produce around 1.5% of the global copper supply and contribute 4-5% of Panama's GDP. However, the mine now sits idle due to nationwide protests sparked by environmental concerns and a disagreement over a new royalty agreement. The Panamanian government has demanded higher payments, leading to a dispute over mining rights.

Although prices are expected to rise, participants acknowledged that price volatility will continue to be a feature, spurred by short-term supply squeezes and sensitivities to macro data.

Morgan Stanley's Take

The investment bank says it is bullish on copper, with inventories likely to draw into year-end, demand picking up in China, and positioning lighter than it has been.

Their price forecasts remain relatively modest, with expectations that copper averages US$4.18/lb in 2024, rises to US$4.47/lb in 2025 and remains US$4.31/lb from 2026-29.