Macquarie raises copper price forecasts, boosts target prices for miners

Analysts at Macquarie hiked their target prices for a raft of miners due to the "acute" sensitivity of the pure copper plays and the majors to the price of that metal.

In a previous note, published on 11 November, the Australian broker had upped its 2017 to 2020 price forecasts for the key industrial metal materially higher.

Macquarie boosted its projections for the price of copper by 17% to $2.43 a pound, 16% to $2.31, 12% to $2.35 and 11% to $2.60, respectively, pointing to lower supply projections and a possible boost from a still to be approved fiscal stimulus package in the States.

Anglo American was the exception, with the broker sticking to its target price of 1175p, while that on BHP Billiton was lifted from 1470p to 1530p, that on Glencore from 250p to 290p and that for Rio Tinto from 3500p to 3700p.

Macquarie also marked up its target for Antofagasta from 500p to 635p, on Aurubis from €51.0 to €54.0 and on Kaz Minerals from 335p to 460p.

Due to the sharp upwards revision to its target on Antofagasta, it also raised its recommendation from 'underperform' to 'neutral', but added " [...] although we maintain our cautious view given persistent operational challenges."

Its preferred play on copper in Europe continued to be KAZ Minerals, given that its revised price deck for the red metal meant the outfit's projected funding shortfall was now estimated at $400m, versus between $700 to $900m previously.

Glencore was the most leveraged to the price of copper among the majors, the broker added.

Weak third quarter production results from a host of operations over recent weeks meant 2017 consensus volume forecasts for copper were now lower, the analysts explained in their 11 November note.

Meanwhile, a Trump plan to boost infrastructure spend would likely not exert an effect on demand until 2018, given the lag between policies being approved and implementation, Macquarie said, but prices might nevertheless benefit in the meantime from a shift in asset allocation anticipating the commodity demand-pull effect which would result.