Goldman warns on copper as Iran war threatens global economy
Most base metals have come under growing pressure in the past month
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COPPER is vulnerable to further declines if the Strait of Hormuz remains blocked, Goldman Sachs warned, as metals markets brace for US President Donald Trump’s deadline for Iran to agree a deal or face sweeping attacks on civilian infrastructure.
“We see the near-term risks as skewed to the downside if strait flows remain disrupted for longer than our base case, which would keep energy prices higher for longer and likely slow global economic growth,” analysts, including Aurelia Waltham, said.
Most base metals have come under growing pressure in the past month, as soaring oil and gas prices threaten to stifle economic growth and erode demand for industrial commodities. There’s intense uncertainty across markets on Tuesday (Apr 7) as investors weigh Trump’s escalating threats against Teheran.
While Goldman’s base case is for the strait to begin re-opening from mid-April, the analysts said that copper was already trading well above its estimated fair value of about US$11,100 a tonne. Prices have already fallen about 7 per cent since the US and Israel launched attacks on Iran.
Copper is still getting support from a tight market outside the US and the prospect of widespread strategic stockpiling, the analysts said. But those factors could become less decisive in the event of the bank’s “severely adverse” scenario for the global economy, they added.
“The copper price is not being supported at the current level by fundamentals, making it vulnerable to another move lower should the economic outlook deteriorate and investors de-risk,” they wrote. The bank trimmed its base-case forecast for copper this year to an average of US$12,650 a tonne, down from US$12,850. The metal has averaged about US$12,850 a tonne so far this year.
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Copper was up 0.3 per cent at US$12,400 a tonne on the London Metal Exchange at 11.25 am in Shanghai, while other metals were mixed. BLOOMBERG
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