Goldman warns copper faces downside risk if Hormuz disruption persists

[Pile of Scrap Copper Rod]
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Copper faces further downside risk if the Strait of Hormuz remains blocked, Goldman Sachs Group warned, as metals markets assess President Donald Trump’s deadline for Iran to strike a deal or face broader attacks on civilian infrastructure.

“We see the near-term risks as skewed to the downside if strait flows remain disrupted for longer than our base case, which would keep energy prices higher for longer and likely slow global economic growth,” Bloomberg reported, citing a Goldman Sachs research note.

The bank trimmed its base-case forecast for copper this year to an average of $12,650 a ton from $12,850. Copper has averaged about $12,850 a ton so far this year.

Base metals have come under increasing pressure in recent weeks as surging oil and gas prices threaten to weigh on economic activity and dampen demand for industrial commodities.

Goldman’s base case assumes the strait begins reopening from mid-April, but analysts noted copper is already trading well above its estimated fair value of about $11,100 a ton. Prices have declined roughly 7% since the U.S. and Israel launched attacks on Iran.

Copper was last down 0.6% at $12,359 a ton on the London Metal Exchange, while other base metals traded mixed. U.S. copper futures (HG1:COM [https://seekingalpha.com/symbol/HG1:COM#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]) were up 0.4% at $5.61 per pound at press time.

While tight supply conditions outside the U.S. and expectations of strategic stockpiling continue to offer support, Goldman said those factors may weaken under a “severely adverse” global economic scenario.

“The copper price is not being supported at the current level by fundamentals, making it vulnerable to another move lower should the economic outlook deteriorate and investors de-risk,” they wrote.

Copper and Copper Mining ETFs: (CPER [https://seekingalpha.com/symbol/CPER]), (COPX [https://seekingalpha.com/symbol/COPX]).

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