Copper How Low Can It Go?  Citi

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Copper
How Low Can It Go?
 In the short term – We expect copper to trade down to $7,000/tonne on a 0-3 month view, driven by a weakening global
economic outlook and financial uncertainty. We believe that a fundamental support for copper could emerge around $6,400/t;
this is based on the cost of production and a buy versus build analysis. Interestingly, on our calculations, this would be
consistent with Chinese GDP growth of around 5.6%. We have not adjusted our annual average forecasts, which remain at
the bottom end of consensus, but note that the current copper price of around $7,373/t implies downside risk to these
forecasts.
 Longer Term – We have completed a detailed analysis on the short- and medium-term outlook for copper. We have extended
out our supply and demand balance to 2020 and are forecasting a copper price of $7,077/t in 2015 and $7,266/t in 2020. Our
copper price forecasts are based on the next leg of demand drivers and our detailed analysis of all new potential mines over
the next ten years.
 The copper market conundrum – In this report we aim to address the short-, medium- and longer-term outlook for copper.
We have completed a snapshot of the top 22 mining projects and current mine supply. While in the short term we believe that
copper could trade lower due to macro uncertainty, in the longer term the copper market looks well supported by a structural
demand story and the difficulty of bringing on new supply.