BNP Paribas Favors Lead, Tin, Zinc Over Copper

BNP Paribas is reiterating its position favoring lead, tin and zinc over copper in the base-metals complex. The bank points out copper fell to its forecast of $6,500 as metric ton even sooner than it expected. BNP Paribas says it still looks for the copper market to move into a “material but far from catastrophic” supply surplus in 2014-15. The bank says it still has a positive view on demand, looking for growth of more than 10% over the next two years. However, the bank also looks for world mine production to rise by about 10% over 2014-15, with refined production outpacing mine output. 

The bank says a copper rally above $7,000 likely would present a selling opportunity. “But we do not believe the fundamentals warrant a decline below $6,000/t, either in the short term or in 2015, when the market will begin to look to the increasingly positive medium-term story,” says metals strategist Stephen Briggs. 

“Our preferred trading recommendation remains: short copper versus long a basket of lead, tin and zinc. The price ratios have already come a long way, but we expect copper/zinc and copper/lead both to eventually reach 2.5:1, with tin/copper at 4:1.”