(Bloomberg) — The price of copper, a barometer for the global economy, could jump in 2020 with capital spending for new production down and stockpiles tapped out at a time when U.S.-China trade tensions are easing.

The threat of a long trade war limited mining activity and kept manufacturers from adding to their stocks. The result: Inventories at warehouses tracked by the three international exchanges, a last resort for supply, have shrunk by about 37% since July to just shy of 300,000 tons, equivalent to just 1.2% of global consumption. Meanwhile, mine production fell 0.4% last year from 2018.

That has large international banks largely bullish on the metal. Citigroup Inc. sees demand in China, the top consumer, jumping 2.6% after barely rising in 2019, powered by power grid and automaker investments. Goldman Sachs Group Inc. analysts see prices at $7,000 a metric ton in 2020, according to a December report. That follows a 3.5% gain to $6,174 in 2019.

“Europe and developed Asia have been destocking pretty aggressively over the past six months or so,” said Colin Hamilton, an analyst at BMO Capital Markets, by phone. “You can’t do that forever.”

Copper, a malleable conductor of both heat and electricity, serves as a barometer of global economies because of its broad use in wiring and motors, construction materials, electronics, and in vehicles for everything from radiators and connectors to brakes and bearings.

Copper’s tight supply situation was masked by the trade tensions, according to Darwei Kung, head of commodities at DWS Investment Management Americas Inc., who is bullish on the metal. Now with a preliminary truce between the countries, copper is looking “positive” this year, he said.

But it’s no slam dunk. Traders and analysts surveyed by Bloomberg last week remained neutral on copper, awaiting the signing of the so-called phase-one trade deal between the U.S. and China, as well as further clarity in the U.S.-Iran standoff as Chinese fuel supplies could be substantially impacted.

“Copper seems to have found a good short-term base above $6,000 but a further rally may have to wait” until after the preliminary trade truce is signed, said Tai Wong, the head of metals derivatives trading at BMO Capital Markets.

Some analysts expect the downward trend in China’s gross domestic product growth to continue slowing, despite the recent breakthrough with the U.S. on a first-step trade agreement, limiting copper’s upside.

“You can’t be greedy in this kind of environment,” BMO’s Hamilton said. Any further escalation of geopolitical tension has the potential to dampen economic activity and weaken demand for base metals, Goldman Sachs analysts said after the Iranian crisis.

While recent manufacturing data in key copper-consuming markets -– China, Germany and the U.S. — have been uneven, the fact that they are “not getting worse is actually positive,” said DWS’s Kung.

German manufacturing remains burdened by issues ranging from the U.S.-China trade conflict and Brexit uncertainty to its own struggles to manage the auto sector’s shift to electric vehicles. But its latest industrial output data offered a cautious sign that Europe’s economy may be near the bottom of its manufacturing slump.

In Asia, which accounts for more than 60% of copper demand, manufacturing finished 2019 with a modestly brighter outlook, with fewer economies signaling contraction at factories.

Seiichi Murayama, the head of JX Nippon Mining & Metals Corp., the owner of Japan’s largest copper smelter, last week called copper a “growth metal” driven by the need for infrastructure in emerging Asian countries. But he warned that continued progress is needed between the U.S. and China for the market to continue growing.

In China, the manufacturing sector continued to expand in December, adding to evidence that the world’s second-largest economy is stabilizing.

The manufacturing purchasing managers’ index remained at 50.2, and the outlook for export-oriented firms brightened, with a sub-index of new orders for export rising above the 50 mark for the first time since May 2018. Production recovered for a second month and output prices narrowed their decline.

China’s central bank’s willingness to provide liquidity, reflected by its move earlier this month to trim the amount of cash that lenders must hold in reserve, will also be “helpful for demand and pricing,” said BMO’s Hamilton.

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These historical resource estimate models are based upon historical resource estimates prepared by John Thornton in 2011. While, in the opinion of Dane A. Bridge, author of the revised NI 43-101 standard technical report, Geology, Mineralization and Exploration of the Santo Tomas Cu-(Mo-Au-Ag) Porphyry Deposit, Sinaloa, Mexico dated April 21, 2020 (the “Report”), reliable estimation practices were used, in order to upgrade or verify the historical estimations, resampling and assay of historical drill samples, twinning of historical drill holes, and a new program of regularly spaced drilling is required. No qualified person has undertaken sufficient work to classify the current mineral resources or mineral reserves upon which these models are based and the Company is not treating the estimates as current estimates of the mineral resources. The Company gives no assurance that either these models or the historical resource estimates upon which they are based are accurate, and does not undertake any obligation to update the models or to release publicly any update or revisions of the resource estimates except as required by applicable securities law. The reader is cautioned not to rely upon these models or the historical resource estimates upon which they are based.

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