Spurt in economic activity will give boost to base metals market

Metals prices are projected to rise more sharply than expected in 2017 due to rapid mine closures ahead of schedule. However, a further growth slowdown in China could weigh on metals prices. Metals fell 9 percent this year but we expect them to show an upward trend in 2017. However, precious metals prices are expected to fall in 2017 as appetite for safe-haven buying ebbs with rising interest rates. Gold is expected to dip to in 2017.

Another key trend is the growth in steel demand. The global steel market is suffering from insufficient investment expenditure and continued weakness in the manufacturing sector. In 2016, while we are forecasting another year of contraction in steel demand in China, slow but steady growth in some other key regions like India, NAFTA and EU is expected. 

Growth for steel demand in all markets except China is expected in 2017. Base metals did lose their upward momentum in December but we are likely to see an upward movement as the rallies try to resume. The uncertainties surrounding the investment case for the base metals are far less grave now than they were at the end of the preceding 3-4 years. One can easily look at a bullish outlook in 2017.

The main current challenge is a sudden increase in prices of some metals which makes it difficult to adjust end product sale. But looking at a different perspective it is an opportunity as well once prices adjust as volumes would increase.

Expectation from the budget

We feel the budget would be very good for the economy and government would focus it towards infrastructure development which would result in higher consumption of all commodities. The coming budget is expected to be very positive towards the commodities sector as growth would be the focus across all sectors. 

In India, the year 2017 is very crucial for the government which has to deliver across various sectors. The boom in infrastructure would give rise to tremendous demand for base metals. As base metals are the key to the foundation of any metal, the spurt in economic activity would give a boost to the base metals market in India. For all this to happen the Indian government's support in form of liquidity and interest rate cut for the industry is required. This would also give Indian a commanding say in this global set up.
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Alireza Moghaddam is the chairman of AMIDT Group