Jefferies has increased its price projections for key base metals, saying the market appears to be moving from being controlled by supply issues to being driven more by demand. The investment bank raised its peak outlook for London Metal Exchange copper, lifting its prior estimate to $8.00 per pound in 2030-31 from an earlier $6.00 per pound forecast.
The firm also updated its aluminum forecasts upward, putting both its copper and aluminum outlooks above current market consensus. Copper is trading at $6.14 per pound at present, and Jefferies expects it to reach $6.50 per pound by 2027 before advancing to $8.00 per pound - an equivalent of $17,600 per tonne - by 2031-32.
Jefferies points to specific demand drivers behind the revisions. The bank highlighted growth in data center construction and investments in power infrastructure in the United States as central to the stronger demand picture. It also noted that the US ISM index has stayed above the 50 threshold for five consecutive months after having been weak for three years, a statistic the firm uses to support its view of improving activity.
On the supply side, Jefferies said constraints remain material. The firm cited the war in Iran as a factor that has exacerbated certain supply issues, adding to the market tension that underpins its updated pricing path.
The bank emphasized that base metals typically display low price elasticity of demand. It quantified the effect of metal price changes for several end uses: metals account for roughly 25% of manufacturing costs in products such as white goods and electric vehicles, meaning a 25% rise in metal prices would increase total manufacturing costs for these products by about 5-6%.
For data centers, Jefferies estimated that a 25% increase in metals prices would raise construction costs by roughly 2-3%, underscoring that while metal costs matter, their impact on total build costs for data centers is relatively smaller than in manufactured consumer goods.
The firm also spelled out risks to its outlook. Geopolitical developments or inflationary pressures that weaken the broader economy could undermine demand. In particular, Jefferies warned that a recession prompted by an oil price shock or further Federal Reserve rate hikes would be negative for the sector.
As part of its recommendations, Jefferies listed Freeport, Glencore, Anglo, Teck, and Alcoa among its top mining picks.
Overall, Jefferies' revised forecasts reflect a view that stronger demand from specific infrastructure and technology-related segments, combined with ongoing supply limitations, supports higher long-term metal prices, even as the firm remains mindful of economic and geopolitical risks that could alter the outlook.