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Investing.com -- Bernstein analysts provided insights into the commodities market, highlighting copper's potential price movements. They indicated that while copper currently faces the greatest downside risk of more than 20%, the probability of it reaching the 90th percentile cost is considered very unlikely, except in the event of the most severe recessions.
The analysts pointed out that other commodities such as nickel, aluminum, and metallurgical coal are already close to their 90th percentile costs. In contrast, copper's downside seems to be cushioned by several factors that could provide strong support levels for its price.
According to Bernstein, copper prices should find robust support around $7,500 per ton. This support level is underpinned by two primary factors: the capital expenditure intensity of brownfield mining projects and the 90th percentile of copper's C1 cash cost plus sustaining capital expenditures.
The firm notes that the capital expenditure intensity for expanding existing copper mines has risen above $25,000 per ton. For instance, Freeport's Bagdad mine expansion has an estimated intensity of around $35,000 per ton, with an incentive price between $3.50 and $4 per pound of copper.
Furthermore, the 90th percentile of copper's C1 cash cost, which includes sustaining capital expenditures, is approximately $6,700 per ton. This cost structure suggests that even if copper prices were to decline, they would likely remain above this threshold, providing a floor for the market.
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