Goldman Sachs' commodities team has said copper, having already passed the $7,000 a tonne mark to a three-year high, could move as high as $8,000 a tonne by 2022.
Questioning whether the current rally was down to market fundamentals or merely speculatively-driven, Goldman Sachs said it believed it was the former.
Current prices for the industrial metal reflect three market fundamentals, the broker said:
- Strong and synchronous global growth
- US dollar depreciation
- Repeated disappointments in copper mine supply
Goldman analysts said they expected global copper demand to rise 2.5% in 2017 and 1.8% year-on-year on average to 2022 - forecasts it had raised.
"In essence, we now think that global growth has more room to run and copper will benefit from the synchronised pick-up in world economic activity," said analyst Hui Shan.
The broker also said fears were easing about slowing growth in China - the biggest global consumer of copper.
Since the beginning of the year the dollar has fallen 7.7% on a trade weighted basis and many forecast it to move lower still with the European Central Bank and the Bank of England both moving to a tightening bias.
The dollar is an important factor in commodity prices, as most are denominated in the US currency. If the dollar moves lower, it make the metal cheaper to buy in rival currencies.
The Goldman Sachs analysts continued: "Back in early 2016, we were expecting a large wave of mine supply coming online, which did not materialise."
"Although we still expect robust mine production growth in 2018 and 2019, we think that the risk for supply is tilted to the downside.
"Historical data suggest that disruptions tend to rise when copper prices are higher, as higher commodity prices give workers and governments more bargaining power and disputes are more likely to emerge."
Concluding, the analysts said: "Combining our supply and demand balance forecast with our forward views on growth and currencies, we believe the 2011-2016 surplus market is over and copper is poised to go higher, with the potential to surpass $8,000 a tonne by 2022."
By early afternoon in London, three-month copper on the London Metal Exchange was 1.2% to $7,094 a tonne, while on Comex, the New York commodity exchange, copper rose 1.1% to $3.223 a pound.
Several other industrial metals were boosted by Goldman's comments. Nickel rose 1.1% to $12,032 a tonne, while zinc added 1.4% to $3,181 a tonne.