The metal of choice is copper, followed by aluminum, zinc by Investing.com

Investing.com — UBS Global Research identifies the top pick among base metals, citing favorable supply and demand dynamics and a bullish long-term price outlook.

Despite recent pressures, including rising inventories and weaker-than-expected production data, copper remains the most attractive metal due to several key factors.

Copper: Market Dynamics and Projections

Copper supply is characterized by significant constraints, particularly with production shortfalls expected from major mines such as Quebrada Blanca in Chile and Antofagasta (LON:).

These shortfalls suggest that the expected growth in mining supply may not fully materialize until 2025. UBS predicts that this tight supply environment will lead to a market shortage that is expected to persist through 2025.

“For now we maintain our estimate that global copper consumption will grow by 3% in 2024 and 3.3% in 2025, supported by significant investment in renewable energy sources,” analysts at UBS Global Research said.

While there are near-term concerns, particularly around demand from China, UBS maintains a price target of $12,000 per metric ton through the first half of 2025, strengthening their long copper recommendation.

: Balance of supply and demand

Following copper, UBS sees aluminum as a strong contender, supported by its cost structure and anticipated recovery in demand.

Aluminum production, particularly in Europe, is unlikely to see significant restarts at current price levels, according to UBS.

Additionally, Chinese production is expected to plateau, contributing to a tighter market. Global refined production growth is projected at 1.9% in 2024 and 2.6% in 2025, which should keep the market balanced.

Aluminum demand is expected to grow by 2.6% in 2024 and 2.8% in 2025, driven by sectors such as renewable energy and infrastructure in China. Production in other regions is also expected to support demand as macroeconomic conditions improve.

UBS expects aluminum prices to return to $2,700 per metric ton by the first half of 2025.

: A cautious but optimistic outlook

Zinc is ranked third by UBS, with a cautiously optimistic outlook driven by supply-side factors and a potential recovery in demand.

UBS highlights the possibility of increased zinc mine supply, particularly from new projects in Africa and South Africa. This growth could push the market into surplus by 2025.

However, UBS remains cautious about the robustness of this increase in supply, noting that it may not be as strong as expected.

With expected increases in refined production and the possibility of a supply glut, UBS anticipates that zinc prices will trend higher once macroeconomic concerns subside.

Any positive developments in Chinese property data could further support zinc prices.