Doha, September 21 (QNA) - QNB said that it expects Copper prices to rise in the coming years, supported by relatively low starting price, bullish imbalance of supply and demand as well as a widely-expected adjustment in the US Dollar.

The bank said that commodities are one of the pillars of the global economy, vital for real world, tangible, physical activities, such as transportation and the production of manufactured goods. Copper, in particular, as the most widely traded base metal, has a prominent role within the commodity complex. It noted that copper is critical for a broad range of industries, including construction, real estate, infrastructure, automotive, and white goods. It also noted that Copper prices are often foretell the direction of the business cycle, prompting investors and analysts to refer to the commodity as "Dr. Copper," as if it had a PhD in economics.

The note tackled whether the fact that Copper prices are hovering near all-time highs means a correction is due. It concluded that such an outcome is unlikely and that Copper prices could rise in coming years, boosted by three tailwinds.

The first is that several measures of relative prices suggest that there is significant room for higher copper prices in the future, given the commodity's prices were down 23% in real terms (discounted by US CPI inflation) since the Global Financial Crisis in 2008, versus real gains for other metals, such as gold, palladium and silver.

The second is that basic fundamentals suggest extended periods of copper shortage over the medium- and long-term, which should propel prices. On the demand side. The bank noted that physical needs for copper are set to more than double from current levels to more than 50 million metric tons over the next decade. QNB added that the increase in the supply of electric vehicles, the build-up of new power infrastructure, and renewable energy projects as part of a shift towards green energy require intensive in copper consumption.

"As a metal with unique properties for electrical conductivity, copper will play a critical part in clean energy build out. In contrast, supply growth is expected to be severely limited in the coming years. Inventories were drawn down to historically low levels and capital spending in the mining industry continues to go down vis-a-vis total copper sales or asset depreciation," the bank said.

It noted that major copper miners have been reluctant to increase CAPEX on new exploration projects, due to lengthy licensing and regulatory burdens, resource nationalism in production countries, and shareholder demands for more capital discipline.

The third reason is that foreign exchange (FX) movements are also likely to play their part in supporting copper prices. The bank said that an assessment of the USD suggests that the currency is overvalued by around 9%, requiring a significant adjustment.

"A cheaper USD increases the purchasing power of the rest of the world for USD-priced commodities, such as copper, boosting overall demand and supporting prices," the note said.

QNB said that all those factors combined leads them to believe copper prices are likely to move higher over the coming years. (QNA)