Citi mentioned in a report that as the conflict with Iran intensifies, there is a short-term risk of copper prices dropping below $12,000 per ton. The report notes that the current market pressure mainly stems from geopolitical uncertainty. Nonetheless, Citi expects the situation to ease in a few weeks, with copper prices rebounding to the range of $13,500 to $14,000 per ton within three months.
According to data from the London Metal Exchange (LME), copper futures prices hit $12,722 per ton on Tuesday, marking the lowest level since February 19. Citi analysts stated that while the situation with Iran may impact copper supply, if the conflict continues to escalate, the market could experience large-scale sell-offs driven by concerns over growth prospects. This has led to increased net short positions in the copper market.
In addition to copper, Citi also noted that metals such as tin, nickel, and lead are affected by similar risks and maintain net short positions. Meanwhile, the price risk for aluminum and zinc leans bullish, primarily because the production of these metals is susceptible to disruptions in transportation in the Gulf region, and rising energy costs may further drive up smelting costs.
Due to the instability in Iran, Norsk Hydro's joint venture in Qatar has suspended aluminum production, which has also pushed aluminum prices higher. The Middle East accounts for 8% of global aluminum capacity, with aluminum products exported through the Strait of Hormuz. A senior official of Iran's Revolutionary Guard had stated that Iran would fire on any ship attempting to pass through the Strait of Hormuz.
