Deutsche Bank raises copper price forecasts but stays 'neutral' on miners
(ShareCast News) - Greater confidence on China's plans for grid investment and revised forecasts for air conditioning and electric vehicles in China led analysts at Deutsche Bank to bump up their medium-term copper price projections.
However, they stuck to a 'neutral' recommendation on shares of copper miners (albeit with a couple of exceptions), telling clients they first wanted to see greater 'self-help' improvement before moving to an 'outperform'.
Previously, the broker had expected the copper market to remain in a surplus over the near-term, but now they envisaged a medium-term deficit.
Their revised price forecasts called for copper futures on COMEX to rise from $2.6 a pound in 2018 to about $3.0 in 2019, with Chinese demand seen growing by about 3.5% a year, up from 2.0% beforehand.
They also cautioned clients that there was scope for greater supply disruptions in Chile in 2018 because the country was facing more mine supply labour negotiations.
Geopolitical factors in the African Copperbelt required monitoring as well.
First Quantum remained its top-pick in the sector, Deutsche said. The broker also lifted its target price for KAZ Minerals (Sell) from 350.0p to 400.0p.
"Copper miners have yet to demonstrate they will not repeat the same mistakes of the last cycle, in our view. Instead, we believe copper miners need to focus more on opex performance, where they have lagged behind their bulk peers over the past several years (ie labour & equipment productivity)."