Jefferies updates on #copper: The fundamental outlook for #copper is improving faster than we had previously anticipated. Based on our supply and demand forecasts, the #copper market is entering an extended period of deficits now. We expect this to lead to declining inventories and higher prices sooner than we had previously anticipated. The supply response to these higher prices will take too long to balance the market as the lead time to bring new capacity online is 5+ years for brownfields and 10+ years for greenfield projects. If growth in supply lags growth in underlying demand, as we expect, then demand destruction will be needed for the market to balance. This demand destruction will require a significantly higher price. Ultimately, we believe the #copper price will need to rise enough to incentivize the development of new greenfield projects that the world will need to meet demand, but that incentive price is well above $5/lb. *
If #copper goes from $4/lb to $6/lb, as we expect over the next 2-3 years, #copper mining equities should roughly double, on average. This leverage to the #copper price in a cyclical upturn is clearly the reason to own the equities, in our view.
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