Volatility will be the theme for copper this year, according to Barclays analyst Dane Davis, who calculated some 7.2 million tonnes of supply was at risk of disruption, which would lead to short-lived rallies in price.
These rallies, he said, would likely punctuate a year-long trend of increasing concentrate production and therefore lower overall prices than current levels, though ahead of the bank's previous forecasts.
Copper was trading at around US$7,050 per tonne late this week, after running up to more than $7,200/t just before New Year from $6,530/t early in December - an increase of around 10% in three weeks.
"We raise our 2018 forecast for the LME average cash price of copper to $6,619/t, noting that we expect this to incorporate a high degree of volatility," Davis said in the note this week. "Indeed, our quarterly price forecasts reveal only part of the story.
"While we see prices easing from spot levels of [around] $7,000/t to $6,400/t by year end, we think it both possible and likely that within the quarterly averages spot prices may rally to as a high as $7,700/t if certain conditions are met."
Davis attributed the recent price run to "tightness in key markets" brought on the "distribution of global [copper] inventories", rather than the result of poor liquidity as it had appeared to many. This had contributed to the improved internal forecast at Barclays for 2018.
However, he said the broader theme for the year was likely to be heavily influenced by falling copper consumption out of China.
"The most recent round of Chinese macroeconomic data, released January 18, showed an economy growing at a robust pace and beating expectations of a slowdown," Davis said.
"However, we continue to believe that the market is ignoring weakness in one critical sector of Chinese copper consumption: real estate. The rebound in the Chinese property market brought about by a credit expansion in 2016 is showing signs of fading."
Meanwhile, the state copper commission in Chile this week raised its 2018 price forecast to $6,747/t from a previous estimate of $6,505/t on the back of an expectation for disrupted supply.
The commission forecast a global copper supply deficit of 175,000t for 2018 compared to 67,000t last year. Chile was expected to respond with an increase in production of 4.9% to 5.74Mt, principally from normalised output from the world's largest copper mine, Escondida.