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Citi analysts expressed optimism about the future of copper prices, noting that they anticipate further increases following a surge to 11-month highs. They emphasized their positive stance on copper due to a more constrained supply forecast. The recent rally in copper prices was attributed to potential output reductions by major Chinese copper smelters, which could lead to a shortage of refined copper. This development coincided with ongoing disruptions in copper mining in Chile and Peru, two of the world’s largest copper ore producers.

On Thursday, copper prices on the London Metal Exchange reached $8,977.0 per metric ton, the highest level since April 2023. Similarly, one-month U.S. copper prices hit a near one-year peak at $4.0810 per pound.

Citi analysts are bullish on the tightening supply of copper and anticipate an improvement in demand as well. They view the break above $8,600 per tonne as a significant milestone for copper. Additionally, they are actively investing in a call spread for June 2024, ranging from $9,000 to $9,500.

The analysts also foresee a positive shift in copper demand, attributing it to signs of recovery in the global manufacturing sector. They expect increased consumption due to factors like a growing equity bubble, which is likely to boost copper demand. Furthermore, they noted that China’s support for industries linked to metal demand, particularly in the automotive sector, is a positive signal for copper markets.