Ivanhoe Mines Ltd T.IVN

Goldman research on metals

[ororosso]

7. Copper - The end of surplus. Throughout 2022, despite the expectations of surplus, the market has remained in clear deficit (-200kt), leaving stocks at less than a week of consumption by the end of the year. Into 2023 the China reopening and property stabilisation will set the stage for a further tightening of copper balances, in our view. Indeed, we expect this year's deficit to now reach 287kt (vs 178kt prev.) on the back of stronger global copper consumption growth, now at 3.2% y/y (vs 2% y/y GSe prev.). The main driving factor there remains improved Chinese demand, accounting for 90% of global demand growth in 2023 and which should start to materialize once past the current seasonal CNY stocks build up, in 4 to 5 weeks’ time, in our view. Overall we expect China's copper demand will grow by 5.9% (vs 4% prev.) thanks to reopening, an improved outlook of the property sector with our analysts estimating completions grow by 8% y/y (vs 5% prev.), and continued strength in green demand (57% y/y vs 41% prev.). We have also upgraded our Europe demand expectations in the aftermath of an improved economic outlook thanks to the decrease in gas prices; we now see Europe demand remaining flat y/y vs previous -1.4% y/y, translating into +35kt, mainly driven by increased stronger green demand (+25kt). We continue to expect modest supply growth (+3.6% y/y) in 2023, yet expect disruptions to persist in the Latam region, with political unrest in Peru and delayed shipments in Chile currently disrupting supply from the region. Moreover, mine supply growth will remain short-lived, in our view, with peak supply fixed in 2024 leading to a 332kt deficit, on our estimates. In this context, we maintain our 3/6/12M targets to $9,500/10,000/11,000/t along with 2023/2024 averages at $9,750/12,000/t and continue to recommend investors hold a long position in copper via the long GSCI Copper Sub Index.