Investing.com– Copper prices are set for more upside after rallying to 11-month highs, Citi analysts wrote in a note on Thursday, adding that they were overweight on the red metal as its supply outlook turned tighter.

The red metal rose sharply this week after reports said that China’s biggest copper smelters were considering output cuts, potentially creating a supply deficit for refined copper. The move also came amid persistent mining disruptions in Chile and Peru, the world’s largest copper ore producers.

Three-month on the London Metal Exchange surged as high as $8,977.0 a metric ton on Thursday- their highest level since April 2023, while one-month U.S. hit a near one-year peak of $4.0810 a pound. 

Citi bullish on copper supply tightening, also sees demand improvement 

Citi analysts said copper’s break above $8,600 a tonne was a key move for the red metal, and presented more upside.

They said they were overweight on the red metal, and said they were long on a June 2024 $9000/$9500 call spread. 

Citi analysts said they also expected an improvement in copper demand, with the global manufacturing cycle showing signs of bottoming out. They also expected a “building equity bubble” to factor into increased consumption, in turn helping copper demand. 

China is also no longer a negative signal for copper markets any more, with Citi analysts stating that China appeared keen to support some industries tied to metal demand, particularly automobiles.