Investing In This Metal At Any Chance Is Worth Considering, According To Analysts

CelsiusPro CEO Jonathan Barratt advises investors to buy copper on dips when they present themselves.

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“The outlook for 2023 and 2024 for copper prices is that when they dip, it is a good asset to have in your portfolio,” Barratt told Trade Algo, citing the insufficient supply of copper and the high demand for copper in the renewable energy sector.

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Among the most important components in electricity-related technology, copper is considered one of the linchpins of the energy transition.

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“A lack of supply is the only problem. When we take a look at everything that is happening in the environmental space today, renewable energy, everything, and copper is a key components in everything that is going on. Therefore, if you get a chance to buy on a dip at any time, you should do so."

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Due to higher demand pressures in South America and the challenges facing the supply chain, the world is currently experiencing a global copper shortage.

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The International Energy Agency reports that in 2021, sales of electric cars have more than doubled, bringing the total number of EVs in this world to around 16.5 million, which is the highest number on record. As a result, EV-charging ecosystems will have to be ramped up in order to keep up with demand.

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As of last week's close, copper futures were trading at $4.14 per pound, an increase of 8.34% over the past year.

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Iron ore prices set to fall

Barratt forecasts that iron ore will trade at about $115 to $110 per ton, which is about 9% lower than what they are currently trading at, due in large part to the regulatory crackdown in China that is taking place.

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During the last trading session, iron ore with a 62% grade was trading at $126.70 per tonne.

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"In terms of price regulation, I think the most important thing we are focusing on at the moment is what the Chinese regulators are doing at the ports in terms of price regulation... The fact that the company really does not want too much [iron ore] inventory at the ports is something that they do not wish to see,” he stated. Barratt indicated that if this would happen, the amount of iron ore in inventory could drop from 160 million tons to 120 million tons, a significant reduction.

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Recently, the Chinese National Development and Reform Commission (NDRC) issued a response to the rising price of iron ore in China, stating that regulations and crackdowns on illegal activities would be implemented in order to strengthen the supervision of the iron ore market prices in the country.

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“There is a possibility that as a result of that, we can see a significant fallback in that inventory build-up in Chinese ports, and I think that will put a flavor of less demand into the equation as a result of that," said Barratt.

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Iron ore prices could also be affected by falling prices for crude steel production on a global scale.

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Research from the Commonwealth Bank of Australia's Mining and Energy Commodities Research team indicates that steel production is the primary demand driver for iron ore and coking coal.

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“Global crude steel production fell modestly last month compared to the same month last year... Almost all of the world's largest steel producers decreased their output, resulting in the results."

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There was a 3.3% decline in the world crude steel output in January compared to the same period last year, according to the World Steel Association.

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Lithium may continue to trade higher

The Chinese regulations also seem to be impacting lithium prices, a key component of electric vehicle batteries, according to Barratt, who expects the metal to trade higher as a result of these regulations.

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The lithium hub in Yichun, China, is currently under investigation for illegal mining in the area, which is home to the world's largest mine for lithium-bearing mineral lepidolite.

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“Chinese officials have also come out [in recent months] to review their environmental issues with regard to the [lithium] industry, and this might take away about one-tenth of the supply of lithium from the market,” said Barratt.

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In 2022, China was the third largest producer of lithium in the world, trailing only Australia and Chile in terms of production.

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