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Stronger Q2 emerging after disappointing Q1

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Copper prices have enjoyed a decent rebound since the start of Q2, trying to re-establish themselves back above the $7,000 per tonne level after drifting throughout Q1 and reaching a low of $6,523 per tonne in late March. The poor first-quarter performance was due to a less supportive macro backdrop, softer demand, resilient supply, and the normalisation of overly bullish speculative positioning in late 2017.

The stronger tone now reflects a recovery in risk appetite and tighter fundamentals on the back of a seasonal pick-up in demand and some disruptions to refined supply. We are of the view that the correction in copper prices during Q1 has come to an end, giving way to an uptrend that should dominate Q2 and beyond if, as we expect, the oversupply and stock-build of Q1 is behind us. Our supply-demand model suggests that quarterly deficits lie ahead in Q2-Q4. Our current Q2 base-case LME cash price forecast is a slightly upwardly-revised $7,090 per tonne.

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