When metals are mentioned most traders immediately think of gold and silver, but there may be a massive rally building in the more common copper, which is currently trading at a two-year low.
The fall in copper came as the trade war between the U.S. and China heated up, before that the metal was in the midst of a strong two-year long bull rally. However, the fears over slowing economic growth caused by the trade war pulled copper down, and it’s been retreating since.
Some analysts are now saying that supplies are tightening, and it won’t be long until traders focus more on the supply side than the demand side, and copper prices will begin to rise again.
Copper hasn’t been able to trade above $3 a pound since July 2018, and as of the close Friday, copper was at $2.59 a pound, or right near a 26 month low.
Demand fundamentals may not be as bad as traders currently think. The increased need for copper to support the growing electric car market has some analysts suggesting that global demand for copper could be at 5 million metric tons by 2030, and that’s 2.5 times current production levels.
Indeed the copper industry is already looking at supply deficits. In 2019 it is expected there will be a copper deficit of 190,000 metric tons, and in 2020 the deficit is expected to expand to 250,000 metric tons. That alone could spark a rally, especially with net positions in copper being overwhelmingly short. Short covering alone could cause a fantastic rally.