Analysts Forecast Mixed Futures for Aluminium and Copper Markets

Analysts Forecast Mixed Futures for Aluminium and Copper Markets

Morgan Stanley Projects Strength in Aluminium Sector

The energy-intensive production of aluminium, vital for decarbonisation initiatives, has been marked with a positive outlook by Morgan Stanley. Despite the environmental impact of its production, Morgan Stanley identifies the metal as a top choice in the transition to a greener economy. This stance is backed by significant moves towards sustainable production by key industry players.

Rio Tinto has introduced a carbon-free smelting process, underscoring aluminium as its second-largest revenue source. South32 is pushing forward with decarbonisation at its Hillside aluminium site, a significant portion of its aluminium output. Aluminium’s diverse applications in sectors from electric vehicles to data centres further solidify its demand prospects.

Anticipating a supply deficit starting in 2024, Morgan Stanley expects the London Metal Exchange (LME) aluminium price to soar to US$2,650/t by 2026, a significant increase from present levels. The firm maintains Overweight ratings on both Rio Tinto and South32, highlighting their potential in the market.

Copper Demand Outlook Shows Caution Amidst Potential Supply Surplus

In contrast, the copper market faces uncertain demand dynamics. Citi predicts that in 2024, demand might falter due to slower growth and the impact of decarbonisation initiatives. Additionally, a surplus is anticipated, potentially limiting price falls.

Concerns include weakened demand outside China and a sluggish property market within the country. Furthermore, the prospect of slower electric vehicle demand could present a downside risk, with a probable revision of growth rates.

However, Citi notes that copper might see a short-covering rally if US economic downturns or spikes in Chinese demand occur, hinting at potential market sensitivity to macroeconomic shifts.

Both aluminium and copper markets exhibit complexities as they navigate through global decarbonisation efforts and shifting demand landscapes. Industry professionals will be monitoring these metals closely as their roles in technology and infrastructure continue to evolve.

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