Copper is undervalued by the market, along with most of technical metals.

Previously, we’ve seen that several producers plan to further increase their copper production levels this year. Freeport-McMoRan (FCX) and Southern Copper (SCCO) expect to produce more copper in 2016 compared to last year.

There are some visible cuts, as we saw in the 2016 guidances of Glencore (GLNCY) and Teck Resources (TCK), but overall, mined copper production could rise in 2016 compared to last year. However, opinions seem divided over whether the copper market will be in a surplus or a deficit in 2016

While the ICSG (International Copper Study Group) expects the refined copper market to be in a deficit this year, Goldman Sachs is projecting a surplus until 2019

The ICSG estimates are based on expected apparent demand growth of 4% year-over-year in China and 2% in the rest of the world in 2016. The expected copper market deficit could slip into a surplus if Chinese copper demand fails to live up to the expectations.

At the beginning of the year there was panic about global growth, as well as local trend in China. Currently, spot market seem as though the panic was exaggerated. Futures in general and commodity-futures in particular are leading the price formation relative to spot markets. The situation on the raw materials largely showed the result of this panic. Largely, however, areas such as US consumption look quite solid. It is obvious that growth in China will be slower and transmitted burden on service sectors will reflect with a certain lag, but also see how many commodities are undervalued.

G.Hristov / Head of Fundamental Analyzes