Citing weak Chinese demand, cost deflation and a flattening of the cost curve from expansion projects, the report said that copper prices are likely to sink below $2 per lb next year and in 2017 despite more consensually bullish forecasts from analysts for the same period.
"A wave of new mine supply, further cost deflation, lower physical demand from copper financing deals, and especially weak Chinese demand are likely to drive copper prices below $2 per lb per lb. Prices are likely to overshoot on the downside as high-cost mines are unlikely to shut down right away," the report noted.
"We think prices will moderately recover in 2018 as Chinese demand somewhat rebounds and excess supply leaves the market," it added.
The move below $2 per lb will come as China's requirements for copper fall amid fading real estate activity and power spending shifts away from copper-heavy distribution to copper-light...