(Bloomberg) — The price of copper, a barometer for the global economy, could jump in 2020 with capital spending for new production down and stockpiles tapped out at a time when U.S.-China trade tensions are easing.
The threat of a long trade war limited mining activity and kept manufacturers from adding to their stocks. The result: Inventories at warehouses tracked by the three international exchanges, a last resort for supply, have shrunk by about 37% since July to just shy of 300,000 tons, equivalent to just 1.2% of global consumption. Meanwhile, mine production fell 0.4% last year from 2018.
That has large international banks largely bullish on the metal. Citigroup Inc. sees demand in China, the top consumer, jumping 2.6% after barely rising in 2019, powered by power grid and automaker investments. Goldman Sachs Group Inc. analysts see prices at $7,000 a metric ton in 2020, according to a December report. That follows a 3.5% gain to $6,174 in 2019.
“Europe and developed Asia have been destocking pretty aggressively over the past six months or so,” said Colin Hamilton, an analyst at BMO Capital Markets, by phone. “You can’t do that forever.”
Copper, a malleable conductor of both heat and electricity, serves as a barometer of global economies because of its broad use in wiring and motors, construction materials, electronics, and in vehicles for everything from radiators and connectors to brakes and bearings.
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