Citigroup: Copper prices are expected to return to the ten-thousand yuan mark in the next few weeks, with the fourth quarter being the real show

The once bullish copper market this year seems to have cooled down a bit.

Market data shows that London copper futures have fallen more than 9% from the historical high of $11,100 per ton set in May, now breaking below the $10,000 mark to $9,957 per ton.

An analysis by Wall Street News previously pointed out that tightening demand and speculative positions have jointly driven up copper prices. What will be the future trend of copper prices?

Citigroup analysts Shreyas Madabushi, Tom Mulqueen, and others stated in a report released on July 4 that although copper demand weakened in May, it remains overall strong.

The report predicts that copper prices in the third quarter will continue to range between $9,500 per ton and $10,500 per ton. If the Federal Reserve cuts interest rates as scheduled in the fourth quarter, copper prices are expected to rise to $12,000 per ton and continue to rebound until 2025.

Copper prices may rebound in the fourth quarter

The report believes that in an environment of contracting manufacturing activity and weak cyclical consumption, overall metal prices have recently performed poorly, with copper prices experiencing a pullback.

Thanks to the recovery growth in decarbonization, the total copper consumption in the first half of the year increased by about 4% annually, but the annual growth rate of copper consumption in June dropped to 3.3%. Weak global manufacturing data in the same month indicates a possible weakening of cyclical copper consumption in the previous month.

High interest rates, weak consumer confidence, and political uncertainties in election years have had a significant impact on the manufacturing sector.

In addition, a wave of profit-taking has also exacerbated the decline in copper prices.

Data shows that partial closing of long positions in the past few weeks has helped drive copper prices down by more than 10% during the same period.

Citigroup expects that there will be no major turning point in global manufacturing activity before the rate-cut cycle begins. The bank's economists previously expected the Federal Reserve to cut rates for the first time in September.

Specifically, before the third quarter, base metal prices will broadly consolidate, and once the rate-cut cycle begins to support confidence in sustained global growth and manufacturing recovery, prices will turn bullish.

Before that, the report believes that copper prices will hover between $9,500 and $10,500, and favorable policies from the Chinese market in the coming weeks are expected to push copper prices above $10,000

The key support for the Fed rate cut

Citigroup expects copper prices to reach $12,000 per ton in the next 6-9 months.

The report believes that the Fed's loose policy path in the second half of the year will support expectations for the continued recovery of cyclical demand and catalyze copper prices to rebound to new highs.

Optimism in manufacturing growth, tightening spot market demand, and other factors will drive copper prices to reach $12,000 per ton or higher in 2025.

The report also adds that while the stabilization of the Chinese real estate market and expectations of rate cuts provide support for copper prices, the demand for copper in consumer electronics may continue to be weak throughout the year, mainly due to factors such as high interest rates, soaring freight costs, and political uncertainty