Copper is headed for a seven-year-long bear market cycle, Goldman Sachs said in a report Wednesday, slashing its medium to long-term targets.
"It is, in our view, highly likely that the four-year trend decline in copper prices is set to continue through at least 2018," it said.
Goldman cut its three-, six- and 12-month copper price forecasts to $5,200, $4,800 and $4,800 per ton respectively, from $5,500, $5,550 and $5,200. On a longer term basis, it cut its 2017 and 2018 forecasts to $4,500 a ton from $7,000 and $8,000 respectively. It doesn't expect the copper price to rise above the metal's marginal cost until 2020.
That's quite a drop from the red metal's rally in 2011 to a record high of over $10,000 a metric ton amid a surge in demand from China's housing boom.
Prices of copper – the industrial metal used to make everything from cars to houses – have long been seen as a temperature gauge for the global economy.
Copper is the commodity most exposed to macroeconomic headwinds such as divergence of monetary policy, deflation -- which leads to lower costs of producing copper -- and deleveraging in China, which reduces demand, Goldman said. The industrial metal is currently trading at its lowest since the 2009 Global Financial Crisis levels.
China is copper's largest consumer, but as the country realigns its economy and transitions from government spending and investment-fueled growth to private-sector consumption, demand has inevitably fallen, said Goldman.
Goldman isn't alone in its dreary outlook for copper.
Deutsche Bank, in a July commodities report, has also cut its copper forecasts due to sluggish Chinese demand.
"The anti-corruption checks that the government implemented for large projects has delayed orders for cable from state-owned power firms," said Grant Sporre, head of metals research at Deutsche Bank, in the report.
Copper has also taken a hit from a drop-off in loan-related demand, as previously the metal was used as collateral for financing loans in China. Last year, authorities found that the same physical metal has been used to back up multiple loans.
Deutsche Bank also anticipates a copper supply hump in 2016 due to several new mine commissions, and that copper will "remain vulnerable to periodic bouts of 'shorting'."
For copper producers, Goldman's recommendation is to "increase the hedging of their copper exposure, and investors either reduce long exposure or outright short position in copper."
--Leslie Shaffer contributed to this article.