Investing.com - Industrial metal prices have seen lackluster trading for much of the year, but UBS sees potential upside going forward, with copper the shining light.

Industrial metal prices, reflected by sector indexes, have recovered more than half from the late March to early April sell-off. While that brings industrial metals into positive territory for the year, adjusted by U.S. dollar weakness, prices are still mostly down, said analysts at UBS, in a note dated June 18.

Moreover, the performance at an individual metal level has diverged, with copper standing out and lead, aluminum, and nickel prices treading water, while zinc prices slipped firmly this year.

Mounting macroeconomic concerns in the third quarter should keep industrial metal prices largely anchored. But U.S. tariffs are not just negative for the sector. The latest U.S. decision to raise tariffs on steel and aluminum to 50% from 25% and the renewed focus on the US Section 232 investigation into potential new copper import duties continues to add another layer of price complexity, the Swiss bank added.

Once the tariff fog clears, global rates have moved lower, the U.S. dollar continues to decline, and growth outside the U.S. picks up, metal-specific supply challenges are likely to come to the fore.

“This makes industrial metal prices a buy on a dip or worth selling the price downside risks in select metals,” UBS added.

“Copper remains our metal of choice. Aluminum and zinc prices should move higher too, but this view comes with lower conviction. Nickel and lead prices require numerous changes to commodity-specific factors to justify a sustained price rally.”