(Kitco News) - Analysts look for copper to start benefitting from a supply-demand deficit in 2019 after being held back during 2018 by issues such as worries about the U.S.-China trade war.

“We have been in a deficit position,” said John Gross, publisher of The Copper Journal and metals-industry consultant. “The inventories have continued declining, and yet the price hasn’t responded in any meaningful way to that.”

The longtime market veteran compared the situation to the 1980s, when the global economy was weak. Inventories were also low, but prices remained soft until around 1987.

“We are running a parallel in the market today to that period in time,” Gross said. “We have been in a deficit, and the forecast for 2019 is for a further deficit. At some point, the price is going to respond to that.”

And that, analysts said, is what should start happening next year, especially if the U.S. and China resolve their trade differences, thereby avoiding a protracted trade war that could otherwise slow the global economy and industrial metals.

Robin Bhar, metals analyst with Societe Generale, projected that copper will rise to $6,800 a tonne, or $3.08 a pound, in six months. He listed a 12-month outlook of $7,100, or $3.22.

“We would expect a gradual rise in price,” Bhar said, suggesting that price dips will be buying opportunities in a market that will be in a supply deficit. “A lot will depend on ongoing negotiations between China and the U.S.”

Worries about the impact of the trade war hurt industrial metals in 2018; thus a resolution should push copper higher, analysts said. “We would argue copper is oversold,” Bhar added.

Gross looks for copper to average around $2.95 to $3 a pound in 2019, or $6,500 to $6,600 for three-months copper on the London Metal Exchange.

Barclays sees copper averaging $6,263 a tonne in 2019, rising to an average of $6,550 in the second quarter. However, the bank then sees a retreat later in the year on slower economic growth. Commerzbank sees copper rising to an average of $6,800 in the second quarter and ending 2019 at $6,500.

Edward Meir, commodities consultant with INFL FCStone, projected a full-year average price of $6,190, although he looks for copper to hit a high for the year of $7,220. He commented that the market is “not overloaded” with copper stocks as it was back in 2015-16, yet weaker demand from slower growth could replenish inventories by late 2019 and “keep outsized rallies in check.”

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