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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

  • Market Summary: Range-trading with eyes on China

    12 December 2017

    The base metals are working lower, but are generally finding support. We do not expect the uptrends to be reignited any time soon, but we do expect range trading in high ground to continue until the fundamentals tighten up as 2018 progresses. In the meantime, the market has shown its nervousness about a potential slowdown in China, so Chinese data and policy decisions are likely to remain key.

  • Aluminium: No respite from downtrend

    12 December 2017

    Aluminium prices continue their downtrend as the immediate impact of the Chinese winter production cuts has disappointed and domestic stocks keep rising. Given this backdrop and falling alumina prices, which may shelter marginal smelters from cost-pressures to cut production, we think aluminium prices will continue trending sideways to lower in the coming few weeks.

  • Technical analysis: Sideways or lower

    12 December 2017

    Across the board, the base metals are now trading sideways at best or, at worst, lower in clear downward trends or channels.

  • Copper: Sell-off not the beginning of the end

    12 December 2017

    Prices have found support after the 4.4% drop on December 5. The market looked vulnerable, but a lack of follow-through selling and some signs of a rebound this week suggest the fall may have been profit-taking ahead of year-end and stale long liquidation following lack of upside progress, rather than reflecting weaker fundamentals. We expect prices to remain range-bound in the short term, before working higher again next year.

  • Lead: Range-bound now, higher again in 2018

    12 December 2017

    Lead prices have held up relatively well considering the weakness seen in the other base metals in recent weeks. LME data suggests a combination of forward selling and short-covering, which are likely to keep the market range-bound. We expect prices to hold in the $2,400-2,600 per tonne range in the coming weeks, but another significant global supply deficit looming in 2018 should see prices rise further next year when there are clear signs of the fundamentals tightening again.

  • Nickel: Good timing

    12 December 2017

    Vale’s production guidance downgrade has been bullish for nickel and helped prices find support, and hence some respite from the bearish head-and-shoulders formation that has been threatening a move down to $9,700/tonne. Whether this support proves temporary or more longer-lasting remains to be seen because, technically, the short-term trends are still lower.

  • Tin: Further weakness is a buying opportunity

    12 December 2017

    Tin prices have held up well despite weakness lately in most other base metals. With global tin supply deficits forecast next year, we would be reluctant to become bearish from current price levels. We would viewing any further weakness as a dip-buying opportunity. But in view of the broader tone across the base metals, further range-trading may continue in the short term before prices firm up in response to tighter fundamentals next year.

  • Zinc: Downside risks dominating now

    12 December 2017

    As was demonstrated last week, there is still support for zinc prices given the underlying structural supply deficit and falling visible stocks. But prices are capped by technical selling at the 100-day moving average, and as the market weighs up the impact of winter steel capacity closures and recent news of supply additions. Fundamentally, zinc prices probably cannot hope to try higher until Chinese steel mills start to ramp up again in late Q1 2018. Until then the technical picture suggests downside price risks dominate. Glencore has announced the restart of Lady Loretta, consistent with our expectations for a staggered restart of its idle mine capacity. We wait to see the market’s reaction.

  • Base metals investment analysis: Short selling is picking up

    12 December 2017

    Long liquidation and short selling have been responsible for prices falling in recent weeks. Short selling has been seen in copper, aluminium and nickel especially.

  • Demand Indicators December 12 2017

    12 December 2017

    Demand indicators for the base metals market

  • Downloadable Base Metals Weekly Data December 12 2017

    12 December 2017

    Downloadable data for week December 12 2017

Breaking Views

  • Quiet start to the week across the metals

    11 December 2017

    The base metals prices remain vulnerable to further falls; prices are consolidating for now, but the rebounds are not seeing much follow-through buying. So for now the path of least resistance seems to be to the downside.

  • Metals prices get some lift, strong Chinese trade data supportive

    08 December 2017

    The base metals are getting some lift this morning after consolidation yesterday and weakness earlier in the week. We have viewed the weakness of late as generally being driven by stale long liquidation and profit-taking and this seems to have been the case. With the price retreat halted for now, we should get a feel for how strong underlying buying is.

  • Metals prices remain under pressure

    07 December 2017

    Most of the base metals prices are correcting, led by aluminium and nickel, while tin and lead prices are holding up. Copper and zinc prices have broken lower, but for now are seeing some support. The market therefore remains vulnerable. We see this more as a technical/profit-taking correction rather than one that is warning of a meaningful economic slowdown.

  • Expect choppy trading ahead of option declaration

    06 December 2017

    The base metals are selling off. This suggests stale long liquidation has emerged after prices failed to extend the October rallies, and with the year-end approaching it is not surprising some profit-taking is being seen. With option declaration today, it may be that prices are choppy until option declaration is out of the way.

  • Under pressure as support starts to give way

    05 December 2017

    Base metals are for the most part weaker this morning. Concerns about slower growth in China seem to be leading to long liquidation, so prices may well pull back further. But we still expect the overall bullish medium-to-longer term fundamentals to lead to scale-down buying.

  • 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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