Goldman Sachs is pretty bullish about copper prices. Here's why

A rally in copper prices is expected to pick up pace as higher demand from China exacerbates supply shortages sparked by outages at large mines, Goldman Sachs said.
Copper, which is used as a proxy to gauge China's economic health, has had a torrid time in the past few years. China's economic wobbles led to a reassessment of demand and fueled a broad-based slump in commodities, prompting companies to slash investments.
Many investors unable to sell Chinese assets due to the country's capital controls instead dumped copper to express their unease.
But there have been signs of recovery recently.
The copper market is gripped by fears of a supply squeeze as potential outages threatens a market which has slashed capital expenditure in the last few years since a sustained broad-based commodities slump since the summer of 2014.
Benchmark three-month copper on the London Metal Exchange was trading about 0.4 percent higher at $5,888 a metric ton on Wednesday morning at 12.25pm HK/SIN time, after gaining 1.7 percent in the previous session to $5,925, near a two-month peak of $6,007.
On Wednesday, BHP Billiton said it has begun halting operations at its Escondida copper mine in northern Chile, the world's largest, ahead of a planned strike on Thursday, a union leader told Reuters. Chile and Peru are top copper producers by volume.
"The timing of these disruptions (at the Escondida and Grasberg mines) is important since, should they materialize over the next three months, they would be occurring over the same period as we expect to see a strong seasonal and cyclical uptick in Chinese demand post Chinese New Year and into the second quarter of 2017. This could contribute to a tighter second quarter, which is normally a period of seasonal deficit (in a balanced market)," wrote Goldman Sachs analysts in the report.
"With exchange copper stocks already very low, these strikes could add to anticipated physical (and spread) tightness during the second quarter," they added. The two mines is expected to produce about 9 percent of world mine supply this year, Goldman estimates.
If workers are Escondida go on strike for 20 days (the midpoint of the lengths of the prior two industrial disputes related to contract negotiations at Escondida during 2006 and 2011) alongside a one-month shipping delay from Grasberg, there will be a combined production loss of almost 100,000 tons, or 1.8 percent of quarterly world mine supply, they said.

Read more:

• Oil fundamental and inertia can push prices to new highs
• Goldman Sachs: “Gold is a better hedge than oil in current market conditions”
• Golden years for Gold
• The end-of-year gold rally continues at full speed
• Gold goes over $ 1,500, big players with estimates for the next year