Updated 2024 outlook for copper stocks following a pullback by Investing.com

Copper stocks have been under pressure in recent months, driven by a 16% drop in prices since record highs in May.

Despite this correction, RBC Capital Markets analysts believe copper could find a level close to current levels around $4.00 per pound.

Analysts point out that while global economic concerns, particularly in China, have weighed on prices, supply constraints remain tight. Any improvement in demand, especially from China, could push prices up again.

The copper market recorded mixed signals, notes RBC.

On the one hand, positive indicators include China’s import premium rising to $60 a tonne from a negative $14 in mid-June and a 15% drop in Shanghai copper stocks over the past month.

On the other hand, stocks on the London Metal Exchange (LME) rose 40% over the same period, reflecting continued economic uncertainty.

“A broader global slowdown remains a downside risk which historically would suggest copper falls to marginal cost ($2.75-$3.00/lb); however, if indeed we have a softer landing and rate cuts provide support, we could be close to a low at around $4.00/lb,” analysts said.

For copper stocks, the outlook remains cautiously bullish. Copper stocks have outperformed the metal itself, with shares up 22% year-to-date, compared to copper’s 5% gain. Despite recent operational performance setbacks, the stock is trading at “reasonable” valuations.

RBC analysts point out that the second half of 2024 is expected to be crucial for copper producers, with many companies relying on stronger operational performance to meet annual guidance.

According to the latest industry update, around 45% of the annual production target has been achieved so far, with significant growth expected in the coming months. However, costs are still about 4% above the guidance midpoint.

“Q2 results were helped by stronger metal prices, with copper up 15% and gold up 13% over Q1, which offset weaker operations, resulting in ~67% of copper producers covered by exceeding EBITDA estimates,” the analysts pointed out.

Several copper producers faced challenges during the quarter, but remain optimistic about a stronger performance in the second half of 2024.

Producers such as Capstone, Teck (TECK), Ivanhoe, Hudbay (HBM) and Lundin are focusing on stepping up key projects and improving operations, RBC says.

Costs generally remained under control in the first half of the year, with further improvements expected at Teck due to higher QB2 volumes and at Capstone with the successful ramp-up of its Mantoverde development project.

Freeport ( FCX ) and First Quantum are also well positioned to meet their full-year guidance if operations remain flat in the coming months, according to RBC.