2014 was certainly not a breakout year for copper, and for 2015, Stefan Ioannou of Haywood Securities expects more of the same. Overall, he predicts that a turnaround is still a few years down the road.
2014 was certainly not a breakout year for copper. For 2015, Stefan Ioannou of Haywood Securities expects more of the same, and predicts that a turnaround is still a few years down the road. Despite a lot of excitement surrounding shadow banking in China, Indonesia's mineral export ban and a flurry of M&A activity, copper prices dipped lower in the second half of 2014, and sat below $3 per pound for most of December. On Monday, prices fell to their lowest level in over four years, and are now at around $2.85 per pound. Ioannou to some extent made that call back in November. While he predicted that prices would moderate between $3 and $3.25 per pound for 2015, he also stated that the metal could very easily dip below $3 for "some period of time" next year. "With the copper price, just given where inventories are at and the current supply stream that we have from existing mines, we don't see any sort of breakout year ... for copper," Ioannou said. However, that might not necessarily be a bad thing. Though low copper prices might make investors anxious, they don't necessarily mean a nail in the coffin for copper producers. "Even at $3 per pound copper, basically everyone in production is making money. Even the highest-cost copper producers are producing copper at $2.50, $2.60 per pound," said Ioannou. "The copper price could arguably dip below $2.75 per pound, and you wouldn't see a major impact on current demand fundamentals." On the other hand, he pointed out that if copper gets to $2.75 per pound, it will be difficult for producers to justify new development, which could lead to a supply crunch down the road. "Development that should be taking place today in anticipation of the need for new copper isn't happening," he said, noting that many producers have started to focus on cutting costs at existing mines rather than developing new projects in light of lower prices.