Copper deficit likely, says Goldman, but Antofagasta overvalued

Copper prices are likely to remain strong in coming years, Goldman Sachs said on Friday, but analysts downgraded Antofagasta for several reasons.

BHP Billiton this week predicted a bright future for the orange metal, with China's 'Belt and Road' plan driving a surge in demand of around 7% of annual demand over the next five years.

Barring a macro event such as that of 2007-08, Goldman were confident that demand is "likely to continue to grow in the next few years”.

Furthermore, analysts added that supply was an equally important part of the equation: “We believe the market continues to underestimate the lack of supply growth in copper, and therefore remain positive on the copper price.”

As such, the lack of investment in developing new supply "will see a deficit eventually forming in early 2020s".

Antofagasta, however was downgraded to 'sell' from 'neutral' over what is seen as a stretched valuation, relatively poor free cash-flow generation compared to its peers, and “uncompelling” growth options.

Goldman reiterated 'buy' recommendations on BHP and Anglo American.