Copper recently touched its lowest price level in more than two years, reflecting investors’ worries about muted economic growth and the temperamental trade dispute between the U.S. and China.

As supplies of the red metal tighten, however, analysts think commodities traders could overcome concerns about the economy, prompting copper prices to move higher.

“The current stagnant-to-declining copper price is accurately reflecting a slowing global economy,” says Brent Cook, an economic geologist and co-editor of the newsletter Exploration Insights. “The numerous central bank [interest] rate cuts support this conclusion as well.”

Copper futures settled at $2.544 a pound on Aug. 5, the lowest for a most-active contract since June 2017, according to FactSet data. Prices for the metal had dipped below $3 in June of 2018 as threats by the U.S. and China to impose reciprocal import tariffs heated up; copper hasn’t been able to trade above that level since.

“Copper was in a steady two-year bull market right up until the trade war escalated,” says Matt Badiali, senior research analyst at Banyan Hill Research, adding that the current troubles with copper are more about global economic woes than China’s impact on copper.

Sentiment for copper, however, could turn bullish because demand fundamentals show strong support for higher prices, Badiali says. Basing his estimates on reported figures, Badiali thinks that the world will need to produce 5 million metric tons of copper per month by 2030—about 2.5 times more than it will produce this year—in order to meet projected demand from the electric-vehicle industry.

But world refined copper is expected to see a supply deficit of about 190,000 metric tons in 2019, with that deficit widening to 250,000 metric tons in 2020 as refined production lags behind usage, according to an International Copper Study Group report released in May.

With an increase in the world’s population and climate change, demand for base metals will grow because electric vehicles are environmentally friendly, says Stan Bharti, CEO of Forbes & Manhattan, a private merchant bank focused on the global resource sector. “Demand for electronic cars will only keep demand high for copper as the cars become more mainstream.”

“Delays in production from the large Oyu Tolgoi underground copper/gold mine in Mongolia” suggest a potential supply risk for copper concentrates, says Joe Mazumdar, an economic geologist and co-editor of Exploration Insights.

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Resource Commodities

Name Last Change
Gold 1497.30 0.42%
Silver 17.73 0.39%
Copper 2.60 2.596
Platinum 901.00 0.67%
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Natural Gas 2.64 1.18%
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