Michael Widmer

May 6, 2021

The world risks “running out of copper” amid widening supply and demand deficits, according to Bank of America, and prices could hit $20,000 per metric ton by 2025. In a note Tuesday, Bank of America commodity strategist Michael Widmer highlighted inventories measured in tons are now at levels seen 15 years ago, implying that stocks currently cover just over three weeks of demand. This comes as the global economy is beginning to open up and reflate. “Linked to that, we forecast copper market deficits, and further inventory declines, this year and next,” Widmer said. “With (London Metal Exchange) inventories close to the pinch-point at which time spreads can move violently, there is a risk backwardation, driven by a rally in nearby prices, may increase.” Backwardation is when an underlying asset is trading at a higher price than the futures market for that asset. Widmer also highlighted that a rise in volatility resulting from falling inventories was not without precedent, since nickel shortages in LME warehouses in 2006/7 drove nickel prices more than 300% higher.