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Base Metals Forecaster

MBR’s Base Metals Forecaster provides independent forecasting and coverage of all the key parameters affecting market movements for copper, aluminium, nickel, tin, lead and zinc. The report brings you accurate and reliable pricing information for all the key physical and financial transactions taking place within the base metals arena.

Latest Issue

  • Metal prices remain upbeat, upward momentum gathers pace

    11 January 2017

    Base metal prices are looking stronger as their new year rallies extend on the back of better economic data. For now we would run with the upward momentum, but be ready for some turbulence. We may get a hint at what is to come this afternoon when US president-elect Donald Trump holds a press conference.

  • Base metals pass baton to precious amid geopolitical uncertainties

    12 January 2017

    The base metals had a mixed day yesterday, finishing weaker and starting lower today. Precious metals prices are stronger this morning with spot gold prices recapturing the $1,200 per oz level, driven by fresh safe-haven buying ahead of the geopolitical uncertainty that the change-over of US Presidents brings.

  • Metal prices consolidate after strong gains and ahead of uncertainty

    13 January 2017

    Base metal prices on the LME are consolidating at lower numbers this morning, January 13. We see this as being driven by profit-taking ahead of the weekend and ahead of what may well be a choppy market next week in the run up to the US presidential inauguration.

  • Markets vulnerable to Trump inauguration jitters this week

    16 January 2017

    There are plenty of economic events and data scheduled for this week that could move financial markets. Friday will be a key day, with important Chinese data releases and Donald Trump's inauguration as US president.

  • Market Summary: Still bullish, but far from a one-way bet

    10 January 2017

    Underlying sentiment in the base metals still seems bullish. But there are concerns that a lot of the bullishness thus far has been fund-orientated and that the physical markets are not showing strength or tightness. That raises questions as to whether the rallies will resume and, if they do, how sustainable they can be.

  • Aluminium: Return to surplus this year

    10 January 2017

    After a deficit year in 2016, which helped to drive the strongest performance in aluminium prices for six years, 2017 should see a return to oversupply. That is turn should weigh on prices, especially given the scale of off-market stocks. But cost inflation and heightened investor interest in commodities more generally, should prevent a significant price decline.

  • Technical analysis: Short-term mixed, long-term bullish

    10 January 2017

    While longer-term bullish technical trends are undisturbed on the base metal charts, shorter-term trends are down to sideways. Serious corrective action is currently being experienced in some markets, including lead, while others, such as copper and zinc, appear more ready to resume uptrends.

  • Copper: Calm before the storm

    10 January 2017

    Copper may have entered 2017 in a very narrow trading range, but we continue to forecast a tight market over the 2017-2018 period, with a deficit of 77,000 tonnes expected this year. While we expect another rally towards $6,000/tonne in the near term, we still believe that it will not be until late Q2 or early Q3 that we see a sustainable move over this key resistance level.

  • Lead: Three main headwinds

    10 January 2017

    Exchange stocks are not falling, ILZSG data continues to show a market in surplus and the physical market is amply supplied with a glut of Iranian secondary lead. Against this backdrop, we doubt whether prices can recapture the high ground above $2,400/tonne. Instead we would look for them to get back into the $2,100-2,300/tonne trading band, and then make more progress on the upside once more signs of a supply deficit appear.

  • Nickel: Banner year for stainless

    10 January 2017

    Nickel prices suffered a fairly severe correction into the end of 2016, but solid support was found and the rebound in recent sessions has been strong. The overall uptrend remains intact and should continue this year. As ever, ore supply and the Chinese-Indonesian NPI sectors are in the headlines. On this front there are some important known unknowns hanging over the outlook for the year. But rather than speculate on the potential severity of the Philippine mining crackdown or potential revisions to Indonesia’s ore export policy, the one thing we can be certain of is that NPI production will surprise most observers by its resilience again. The bullish caveat to that is that stainless steel production is likely to surprise on the upside too after a banner year in 2016, and the net affect will be another deficit year in the nickel market.

  • Tin: Price risks to the upside in 2017

    10 January 2017

    Our base case outlook for tin prices in 2017 is $21,638/tonne, and while this is only slightly above current trading levels, it represents a very respectable 20% improvement year-on-year. However, the balance of risks remains on the upside. Disruptions to Chinese supply if environmental controls intensify or if ore supply from Myanmar wane, could quickly shift the market back into a deeper deficit, and with it pave the way for our high case price forecast of $23,000/tonne to become a reality.

  • Zinc: Strong start but still overbought?

    10 January 2017

    Weaker prices recently represent a healthy correction and bullish momentum appears to be carrying over into early 2017 (at the moment at least). Our previous high-case price forecast for Q1 has been promoted to our base case, but at $2,450/tonne it still feels on the low side given the current trading range. We are wary of the stronger tone continuing given the risk of restart news, producer and investor selling, the lack of tightness in the physical market and geopolitical threats to broader risk appetite.

  • Base metals investment analysis: Economics versus politics

    10 January 2017

    As investors look ahead to 2017, they are likely to be emboldened by macro indicators that are setting a positive tone for the economic outlook this year, but political risks are likely to be a source of concern.

  • Demand Indicators January 10 2017

    10 January 2017

    Demand indicators for the base metals market

  • Downloadable Base Metals Weekly Data January 10 2017

    10 January 2017

    Downloadable data for week January 10 2017

Breaking Views

  • Markets vulnerable to Trump inauguration jitters this week

    16 January 2017

    There are plenty of economic events and data scheduled for this week that could move financial markets. Friday will be a key day, with important Chinese data releases and Donald Trump's inauguration as US president.

  • Metal prices consolidate after strong gains and ahead of uncertainty

    13 January 2017

    Base metal prices on the LME are consolidating at lower numbers this morning, January 13. We see this as being driven by profit-taking ahead of the weekend and ahead of what may well be a choppy market next week in the run up to the US presidential inauguration.

  • Base metals pass baton to precious amid geopolitical uncertainties

    12 January 2017

    The base metals had a mixed day yesterday, finishing weaker and starting lower today. Precious metals prices are stronger this morning with spot gold prices recapturing the $1,200 per oz level, driven by fresh safe-haven buying ahead of the geopolitical uncertainty that the change-over of US Presidents brings.

  • Metal prices remain upbeat, upward momentum gathers pace

    11 January 2017

    Base metal prices are looking stronger as their new year rallies extend on the back of better economic data. For now we would run with the upward momentum, but be ready for some turbulence. We may get a hint at what is to come this afternoon when US president-elect Donald Trump holds a press conference.

  • Strong Chinese PPI data boosts metal prices

    10 January 2017

    The base metals are looking more bullish this morning and the strong PPI data in China is no doubt driving that. The metals look well placed to extend higher, but political developments could scupper that, at least for a while.

  • More breaking views...


More analysis...

A weekly 24-page report:

  • Technical analysis and short-term trading strategies
  • Fundamental analysis and medium term forecasts on production, stocks, trade and consumption of the LME metals
  • Price-modelling and forecasting utilising high-low case scenario planning, quarterly with three year outlook
  • Analysis of speculative money flows and fund activity in the base metal commodities
  • Consensus price forecasts, quarterly to the end of 2017
  • Premiums forecasts, quarterly, forward one year, including European, US and Asian spot benchmarks for all six metals
  • Raw material price forecasts, forward one year, including alumina, copper TC/RCs and zinc TCs
  • Insights into leading industry companies
  • Independent analysis and forecasts covering all six base metals in one report

Additional data, downloadable into Excel:

  • Global supply-demand balances for all LME metals, with ten year history and two year forecast. Regional data breakdown - China, North America, Europe and ROW
  • Daily spot and forward LME prices, stocks, spreads, LME open interest and cancelled warrants by metal
  • Reported stocks by metal on a quarterly basis and demand indicators
  • Raw material prices data
  • Premiums data


All subscribers are eligible for regular individual consultations with the editor of the report.
 

 

Andrew Cole

Andrew Cole joined the Metal Bulletin group in 2000, initially as an associate editor with Industrial Minerals. He moved to Metal Bulletin Research in 2001 and has been analysing the base metals markets for the past 12 years. He is responsible for the Base Metals Weekly Market Tracker, and all aspects of MBR’s research and forecasting on the base metal markets. His price forecasts frequently rank in the leader boards of MB’s Apex analyst forecast surveys.

Andrew has also been project leader on a wide range of upstream and downstream consultancy assignments covering all the base metals and has managed the publication of a number of MBR’s non-ferrous book reports.

Andrew is an exploration geologist by training, with a PhD and practical experience in Central Asia and Africa, including the Zambian Copperbelt.                                                                                                          


Market Brief


Base metals are the major industrial non-ferrous metals other than precious metals and minor. Specifically, they are aluminium, copper, lead, nickel, tin and zinc. All six are traded on the London Metal Exchange (LME), which is the principal global marketplace for base metals accounting for abot 80% of global trade. The main exchange in China is the Shanghai Futures Exchange (SHFE), where aluminium, copper, lead and zinc are traded, while copper is also traded on the New York Commodity Exchange (Comex).

Prices are governed by the interaction between supply and demand fundamentals and the flow of investment and speculative capital into and out of the market.

The base metals’ major applications are found in industries such as automotive and transport, building and construction, intrastructure, electrical and electronics, packaging, consumer goods and batteries.

Traditional markets in Europe, the USA and Japan are still important, but have been overtaken by China during the last 10 years, which now accounts for around 40% of global production and consumption of each base metal.

Types of Base Metal

1. Aluminium

A light and durable metal that is easily rolled, extruded and recycled, aluminium is produced from bauxite via an intermediate product, alumina. Four tonnes of bauxite yields approximately two tonnes of alumina, which in turn results in about one tonne of primary aluminium out of the smelter gate. Several other ingredients are needed, but energy is the main input and most of this is consumed as electricity at the smelting stage to convert alumina to metal. It is because of the significant energy needs that primary aluminium production has increasingly gravitated towards regions of low energy cost rather than to where the metal is most needed – for example Japan, a major aluminium consumer, today has negligible smelting capacity, whereas the Middle East has established itself as a major primary aluminium production centre over the past decade. With aluminium prices tending to trade around the marginal cost of production in recent years, higher cost smelters remain under pressure.

The global aluminium market has been in a supply surplus since 2007, but excess material has been stored in financing and rent deals in warehouses, effectively keeping availability tight and elevating premiums to record high levels. However, increased regulatory scrutiny of the warehouse industry in 2013 has put premiums on a downward trajectory 

2. Copper

The most conductive – both electrically and thermally – of all the commonly available metals, copper is produced from sulphide or oxide ores typically from large open cast mines. Sulphide ores are concentrated, smelted and refined into cathode, while oxide ores can be heap-leached to produce cathode via the solvent-extraction, electowinning (SX-EW) process.

Major copper mining regions are found in the south western USA and Latin America, where Chile alone accounts for about one third of global output. The largest copper mining company in the world is Chilean state-owned producer Codelco, while the largest mine in the world is Escondida, also in Chile, but operated by global resources giant BHP Billiton. In contrast to the main centre of global copper mine production, the key region for refined copper production is Asia, led by China. The region is a major importer of concentrate and scrap.

The copper market has faced a decade of structural supply shortages created by a combination of underinvestment in new mines and a propensity for unplanned disruptions, which coincided with China’s demand boom. This underpinned high prices and a wave on fresh investments in new and expanded mining capacity. However, 2012 marked a transition to what should a new era of relatively ample supply as new projects come on line at the same time as economic growth in China and the developing world stabilises.  

3. Lead

Mined principally from ores often associated with zinc and silver, lead is a dense, ductile, low strength metal that has seen its range of industrial applications decline in recent decades in the face of environmental and health concerns, and this will continue. Currently, as much as 80% of lead produced in the world finds its way into the lead-acid storage battery market, the majority of which are used in the vehicles, but also in emergency back-up power systems and other industrial applications such as remote access power systems.

The growth of China’s automotive market over the past decade into the largest in the world has been a major driver of lead demand growth, and the explosion in popularity of electric bicycles (e-bikes) has boosted usage rates further. Lead is also still used to a small degree in the glass and plastics industries, for radiation shielding and cable sheathing.

Lead has the highest recycling rate of all the base metals, with more than 60% of production in the Western World coming from recycling, primarily of spent lead-acid batteries. The ratio is closer to 40% in China, which suggests that there is great potential for growth in secondary production in this country as environmental and recycling standards catch up to those of the West.

4. Nickel

Rarely visible in its pure form in modern life, nickel’s principal applications are through its performance as a nickel-rich alloy or through the properties it bestows on other metals as an alloying addition. Nickel-bearing alloys, with their high temperature performance, are crucial to the design of modern aircraft engines and the metal is also vitally important in stainless steel production – a sector that accounts for about two-thirds of all nickel usage.

Nickel ores fall into three types: nickel-copper sulphides, laterites and silicates, with processing methods different for each type. The sulphide ores, of which Canadian, Russian and Australian deposits are best known, are concentrates and refined into high-purity metal, usually producing copper and platinum group metals en-route. Other ores, largely mined in Indonesia, New Caledonia, the Philippines, Cuba, Brazil and Colombia, have a high iron content and are a natural feed for producing ferro-nickel or nickel pig iron (NPI) for the steel industry.

New sulphide deposits are far and far between, leaving the future of the nickel industry increasingly dependent upon laterites. In recent years, the new generation of nickel laterite-based mega projects – employing pressure acid leaching or ferro-nickel smelting – have proved to be capital intensive and technologically challenging, leading to lengthy commissioning and ramp-up delays and even project suspensions. The void has been filled by a boom in NPI production in China, but the nickel market is now characterised by major oversupply. 

5. Tin

The only tin ore with economic value is cassiterite. It is found in hard-rock deposits in quartz veins or in the eroded remnants of these orebodies that have been re-concentrated in alluvial or eluvial deposits in riverbeds or offshore. Hardrock mining has gradually lost ground to more cost-effective gravel pumps and dredging operations, with Indonesia and China the main centres of modern ore production.

The tin market is arguably the fundamentally tightest of all the base metals, and this is mainly a function of the supply side, due to a lack of investment in exploration and project development in recent decades, tightening environmental regulations in China and Indonesia, unrest in the DRC and declining ore grades in Peru. Tin prices will need to remain high in order to incentivise new investments in the coming years.

On the demand side, about half of all tin produced goes into the manufacture of solder for the electronics industry. Tinplate and plastics are the next most important sectors for tin usages, but the metal also finds applications in glassmaking and fire retardants.

6. Zinc

Zinc’s greatest property lies in acting as a protector for other substrates, especially steel. Zinc-coated steels – using mainly the continuous hot-dip galvanising method on sheet or wire – now absorb just over half of all zinc produced. When alloyed with copper, a series of brasses provides for the second-largest offtake of zinc, and this has overtaken the diecast sector in volume terms.

Geologically, zinc ore mainly takes the form of sphalerite and commonly occurs with lead, silver and copper ores in polymetallic deposits. Ore is concentrated and refined and China has grown to be the largest producer in the world of mined and refined zinc. It is also the largest consumer.

The zinc market has been in structural oversupply since 2007, but the closure of a number of major mines due to reserve exhaustion during the 2012-2016 period (such as Brunswick and Perseverance in Canada, Lisheen in Ireland and Century in Australia) should see supply tighten up, though not to the extent that supply deficits become commonplace. Therefore, zinc is expected to remain lower priced than its sister metal lead, which is a fundamentally tighter market.



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