Goldman Sachs has good news for ASX 200 copper shares

ASX 200 resource shares have largely outperformed since the global recovery took off. And ASX copper shares could keep running higher.
The post Goldman Sachs has good news for ASX 200 copper shares appeared first on The Motley Fool Australia. –

A happy minner does the thumbs up in front of an open pit copper mine, indicating a surging share price in ASX mining shares

ASX 200 resource shares have largely outperformed the S&P/ASX 200 Index (ASX: XJO) itself since the global recovery took off mid-last year.

That’s particularly true for some of the leading ASX copper shares.

OZ Minerals Limited (ASX: OZL), for example, has seen its share price surge 178% over the past 12 months. And the Sandfire Resources Ltd (ASX: SFR) share price has gained 54%. The ASX 200, by comparison, is up 31% at that same time.

The question many investors are asking now is whether the leading ASX copper shares can continue to outperform in the year – and years – ahead.

And the answer, based on Goldman Sachs latest copper price forecasts, appears to be that they certainly might.

Blue skies ahead for the red metal?

Demand for copper, as you may know, has been growing strongly on several fronts.

First, copper is used in many construction projects, from wiring to plumbing and more. And as global governments and corporations turn to infrastructure and real estate projects to lift their post-pandemic economies, they need more copper to do so.

Second, copper is a key component in electric vehicles, including their wiring and batteries. As the number of EVs – along with home and municipal battery storage – take off, the industry will demand ever more copper. Which spells good news for the copper price, and the share prices of leading ASX 200 copper producers.

According to Goldman Sachs (quoted by the Australian Financial Review) the increased demand for copper (and many other commodities, including oil), is “a change which supply cannot match“.

Goldman’s Jeffrey Currie and colleagues wrote:

The commodity supply is near inelastic in the short run – you cannot dig another mine or grow another crop in a matter of months…

Precisely because commodities depend upon the level of demand, and only the level of demand exceeding the level of supply can create a physical scarcity premium in markets, can we be confident that sustained backwardation is showing us how commodity markets are becoming progressively tighter today.

Backwardation, if you’re wondering, is when the current price of copper (or any asset) is higher than its futures price.

As for its outlook for copper prices, Goldman forecasts the red metal will trade at US$11,000 per tonne inside of 12 months. That’s about 11% higher than the current US$9,884 per tonne.

And from there, Goldman sees at least 2 more years of price gains ahead for copper, forecasting a price of US$11,875 in 2022 and US$12,000 in 2023.

If Goldman is correct, that would put the 2023 copper price up more than 21% from today’s prices. Music to the ears of ASX 200 copper producers…and their shareholders.

ASX 200 listed OZ Minerals and Sandfire Resources snapshot

ASX 200 listed copper producer OZ Minerals has continued to outperform in 2021. Shares are up 1.3% in intraday trading today for a gain of 26.4% year-to-date. OZ Minerals has a market cap of $8.0 billion and pays an annual dividend yield of 1.0%, fully franked.

Sandfire Resources has also continued on its upwards trajectory this year. Shares are up 4.4% in intraday trading today and up 26.2% year-to-date. Sandfire Resources has a market cap of $1.2 billion and pays an annual dividend yield of 3.5%, fully franked.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Goldman Sachs has good news for ASX 200 copper shares appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!