Renewed demand from major buyers to fuel consumption of metals such as copper, aluminium, lead and steel.
Industrial commodities may rise in 2010 on renewed demand from major consuming nations, as the resurgence in economic activity is likely to fuel all-round consumption.
Since G20 members in their recent meeting agreed to continue with policies to create a supportive environment for fast economic recovery, this may boost sentiment in industrial commodities. Therefore, infrastructure projects deferred due to the economic downturn in September 2008 may get fresh investment, especially in developing countries like China and India, which would be the next growth driver.
There has been mixed reaction for metals in the past year. Prices of steel and leading base metals, including aluminium, copper and tin, fell up to 25 per cent. While zinc, lead and nickel gained up to 16 per cent.
A Religare Commodities report said after a decent upside march in the previous month, steel prices remained subdued through last month. The movement will see the price move sharply up, despite integrated producers’ plan to double capacity to 124 million tonnes (MT) by 2011-12 from 65 MT now. Demand side concerns remained positive for India, as GDP growth remained positive. According to Union steel secretary, PR Rastogi, the country’s steel consumption is estimated to grow at 10 per cent, as the worst of economic slowdown is getting over.
After an elongated stagnant period, steel prices climbed up last month to some extent, but the pace has been slow. Prices have managed to nudge past its 50th and 200th week average, which indicates the overall trend has turned bullish, but at present the metal is unable to cross the hurdle of Rs 24,000 a tonne. But the lower level is expected to entice buyers in steel, as the long-term scenario looks bright for the counter. Hot-rolled coil prices in China, the world’s largest producer and consumer, slipped 23 per cent to Yuan 3,555 a tonne by the end of September, as compared to Yuan 4,625 a tonne a year ago.
Copper fell 7.55 per cent in the last one year, but recovered sharply from the December low of $2,812 a tonne to trade at $6,490.5 a tonne on September 28. Analysts believe the red metal demand will improve next year on the back of an expected pick-up in the world economy, but would not reach the levels seen in 2007 and 2008. Japan’s KME Group, one of the world’s leading makers of copper and copper alloy products, expects global copper demand to improve in 2010.
India’s aluminium demand growth is expected to accelerate to 4-5 per cent this year from 3 per cent last year, helped by the power, auto and construction sectors. The country produced 1.35 MT in 2008-09, a small share of global production of 40.16 MT. The auto sector can be favourable for prices of the metal in the coming months, as we can see much demand for it. The price of aluminium sharply fell to $1,782.5 a tonne in the last week of September from $2,395 a tonne a year ago. Total global production in August stood at 1.954 MT compared to 1.948 MT in July and 2.175 MT in August 2008.
An estimated rise in steel demand may boost consumption of zinc, being a major ingredient for galvanised steel, which is abundantly used in construction. There are expectations that zinc demand may increase in the coming months, which can take prices to further highs. However, most of the market surplus has been generated in China. Around three-quarters of a million tonnes of inventories were being held in China, some 400,000-500,000 tonnes above normal levels. The global zinc market was in surplus by 273,000 tonnes in the first half of 2009, latest figures show global refined zinc use was 5.079 MT, down from 5.737 MT a year earlier. Zinc rose on the LME to $1,866.5 a tonne in the last week of September, from $1,650 a tonne around the same time last year.
Lead moved in tandem with zinc and surged to $2,184 a tonne from $1,801 a tonne on renewed demand from manufacturers of batteries used in automotive and household sectors. The metal is expected to follow zinc in future as well.
On rising demand from stainless steel makers, who used over 67 per cent of global output, nickel prices drifted higher to $16,895 a tonne from $15,755 a tonne. Industrial demand is estimated to continue to bolster nickel in future as well. China’s real consumption of nickel is expected to rise 25 per cent on the year, to 404,000 tonnes.
