 "Most industrial metals likely to move up next year")
Copper is likely to trade lower on concerns of weak Chinese demand, along with trimming of its global economic growth forecast by the International Monetary Fund (IMF). Other industrial metals, however, are expected to buck the broad trend and strengthen in 2015.
Led by nickel, base metals’ price declined in September. On the benchmark London Metal Exchange, nickel fell by steep 13.5 per cent, followed by 7.1 per cent in lead, 6.8 per cent in aluminium, 4.4 per cent in copper and 3.6 per cent in zinc.
Of late, however, base metals have recovered, albeit temporarily, on brisk buying by Chinese traders. With this, copper settled on October 14 at $6,780.5, aluminium at $1,909, lead $2,053.5, nickel $16,180 and zinc at $2,323.5 a tonne.
The fundamentals remain weak for base metals, though. Mario Draghi, the European Central Bank president, said there are signs that the region’s recovery is losing momentum, while US Federal Reserve meeting minutes fuel concern that the US economy might be at risk from a global slowdown. Also, the IMF has cut its outlook for global expansion.
Commodity prices have come down and not only due to economic weakness in Europe, China and the US. A rapid increase in supply of several also compelled the market to go down. The IMF in October revised its global economic growth forecast downwards to 3.4 per cent for 2014 from its earlier assumption at 3.7 per cent. A weaker global economy will lower expenditure on infrastructure, resulting in lower demand and, thereby, prices for base metals.
London–based leading global base metals consultancy Natixis Commodity forecasts a copper surplus to be visible soon, with rising mine output and elevated treatment and refining charges. “We are, therefore, projecting a decline in copper prices to somewhere around $6,335 a tonne in 2015 from $6,860 a tonne in 2014 and $7,322 a tonne in 2013,” said Nic Brown, head of commodities research, Natixis.
The International Copper Study Group estimates copper mine and refined production to rise 2.6 per cent and 5.1 per cent this year to 18.63 million tonnes and 22.15 mt, respectively.
“A supply glut is likely to keep base metals’ prices lower. Increasing copper supply from Indonesia on opening of Newmont Mining Corp, coupled with rising output in Japan, is expected to worsen the red metal's supply. China’s weak aluminium demand will push its prices into negative territory. Increasing supply of other base metals, amid poor demand, will keep their prices under check,” said Naveen Mathur, associate director, Angel Broking.
Apart from weak housing data from the US, China’s factory output in August reported the weakest growth in six years. In addition, the dollar jumped to a four-year high after the Federal Reserve raised interest rate estimates to 1.375 per cent, compared with 1.125 per cent in June for end-2015 in its September meeting, adding to the downside.
Vikas Khemani of Edelweiss Securities believes global aluminium demand will grow seven per cent to 52.8 mt for the current calendar year. The market deficit was estimated at around 0.7 mt, owing to capacity cuts in many large producing countries.
The lead market is expected to remain in broad balance, helping to keep prices within this tight range. Despite forecasts for modest demand growth over the coming two years, the global zinc market is expected to tighten further as supply becomes increasingly constrained, and new mines are not expected to arrive until existing inventories are close to depletion.
Led by nickel, base metals’ price declined in September. On the benchmark London Metal Exchange, nickel fell by steep 13.5 per cent, followed by 7.1 per cent in lead, 6.8 per cent in aluminium, 4.4 per cent in copper and 3.6 per cent in zinc.
Of late, however, base metals have recovered, albeit temporarily, on brisk buying by Chinese traders. With this, copper settled on October 14 at $6,780.5, aluminium at $1,909, lead $2,053.5, nickel $16,180 and zinc at $2,323.5 a tonne.
The fundamentals remain weak for base metals, though. Mario Draghi, the European Central Bank president, said there are signs that the region’s recovery is losing momentum, while US Federal Reserve meeting minutes fuel concern that the US economy might be at risk from a global slowdown. Also, the IMF has cut its outlook for global expansion.
Commodity prices have come down and not only due to economic weakness in Europe, China and the US. A rapid increase in supply of several also compelled the market to go down. The IMF in October revised its global economic growth forecast downwards to 3.4 per cent for 2014 from its earlier assumption at 3.7 per cent. A weaker global economy will lower expenditure on infrastructure, resulting in lower demand and, thereby, prices for base metals.
London–based leading global base metals consultancy Natixis Commodity forecasts a copper surplus to be visible soon, with rising mine output and elevated treatment and refining charges. “We are, therefore, projecting a decline in copper prices to somewhere around $6,335 a tonne in 2015 from $6,860 a tonne in 2014 and $7,322 a tonne in 2013,” said Nic Brown, head of commodities research, Natixis.
The International Copper Study Group estimates copper mine and refined production to rise 2.6 per cent and 5.1 per cent this year to 18.63 million tonnes and 22.15 mt, respectively.
“A supply glut is likely to keep base metals’ prices lower. Increasing copper supply from Indonesia on opening of Newmont Mining Corp, coupled with rising output in Japan, is expected to worsen the red metal's supply. China’s weak aluminium demand will push its prices into negative territory. Increasing supply of other base metals, amid poor demand, will keep their prices under check,” said Naveen Mathur, associate director, Angel Broking.
Apart from weak housing data from the US, China’s factory output in August reported the weakest growth in six years. In addition, the dollar jumped to a four-year high after the Federal Reserve raised interest rate estimates to 1.375 per cent, compared with 1.125 per cent in June for end-2015 in its September meeting, adding to the downside.
Vikas Khemani of Edelweiss Securities believes global aluminium demand will grow seven per cent to 52.8 mt for the current calendar year. The market deficit was estimated at around 0.7 mt, owing to capacity cuts in many large producing countries.
The lead market is expected to remain in broad balance, helping to keep prices within this tight range. Despite forecasts for modest demand growth over the coming two years, the global zinc market is expected to tighten further as supply becomes increasingly constrained, and new mines are not expected to arrive until existing inventories are close to depletion.