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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

  • Base metals pushed back by strong dollar headwinds

    22 February 2017

    Sentiment remains largely bullish, but consolidation seems the order of the day for the base metals as the higher price levels attract profit-taking and forward selling. The firmer dollar is also probably acting as a stronger headwind now that it looks like it may start to trend higher again.

  • Metals rebound after Thursday's sell-off

    24 February 2017

    A wave of weakness flushed through the base metals on Thursday, which has put all prices on more of a back footing. But there have been rebounds this morning, helped by bargain hunting and a weaker dollar.

  • Metal prices consolidate after Friday's rebound

    27 February 2017

    The base metals have shown some hesitation in their ability to extend gains in recent weeks. But as was seen at the end of last week, dips did attract buying so the key will now be whether there is follow-through buying.

  • Market Summary: Supply-demand balances extended to 2019

    21 February 2017

    Over the last few weeks we have completed the process of rolling our supply-demand balances forward to 2019. Generally, we are modelling tight markets and higher prices that year.

  • Aluminium: Price outlook raised

    21 February 2017

    We have upgraded our price forecasts this week to reflect the resilience of the recent speculative rally and the fact that the market has become, and is likely to remain, sensitive to continuing efforts to control air pollution in China. Cost inflation from raw materials has also become a factor. But on the key issue of the Chinese supply cuts, we remain non-believers. The government’s proposal needs to be re-worked, in our opinion. If, as we suspect, authorities ultimately soften their stance and/or down-size the capacity cutback target then prices will clearly be vulnerable to a sell-off.

  • Technical analysis: Bullish outlook still intact although likely to remain volatile

    21 February 2017

    Upward trends remain the dominant theme on the base metal charts, though in many cases the latest phase of correction and consolidation is still to run its course before the uptrends resume.

  • Copper: All going according to plan

    21 February 2017

    Our base-case forecast for Q1 remains $5,910/tonne and is well-placed relative to the quarter-to-date average of $5,802/tonne. We had factored in supply disruptions inflating prices for a while this quarter. But as the days tick by and production losses mount in Chile and Indonesia, the resulting bullish sentiment is starting to move prices towards our high-case outlook, which is $6,100/tonne for Q1 and $6,400/tonne for Q2.

  • Lead: No fundamental case for fresh rally yet

    21 February 2017

    Lead’s upside break stalled and prices have returned to the $2,200-2,400/tonne trading range. Our view remains that until there is more evidence of tighter fundamentals, such as a consistent drawdown in exchange stocks, the lead price will struggle to push higher. Unfortunately for lead bulls, LME stocks are flat and SHFE stocks have been rising.

  • Nickel: Giving us the run-around

    21 February 2017

    Nickel prices have clearly become rather volatile as the Indonesian and the Philippine situations are still evolving and the market is still trying to make sense of it all. A degree of bullishness is re-emerging. So as we find ourselves reviewing our price forecasts again in light of the latest swing in sentiment, our instinct is to maintain a cautious stance. This has been a constant in our thinking for some time, and it must remain so given the quite bearish structural themes that have not gone away (surging investment in Indonesian ferro-nickel/NPI capacity, resilient Chinese NPI supply, the overhang of stocks).

  • Tin: Fight back continues

    21 February 2017

    Tin has been struggling to re-establish itself back above $20,000/tonne. Poor sentiment is still holding it back. But the technical chart is starting to look more constructive, exchange stocks are no longer rising and we are forecasting a balanced global market during Q1 2017 ahead of a return to a significant deficit in Q2. On these grounds, we believe that higher prices can be justified, so we maintain the view that a break of $20,000/tonne is imminent, which will put tin back in line with our Q1 base case price forecast.

  • Zinc: Still bullish, but less of a one-way bet

    21 February 2017

    The latest ILZSG data last week gave us the chance to re-evaluate the fundamental picture with fresh numbers. Generally, we were underwhelmed. The refined market was effectively balanced in December, the 2016 annual deficit was more modest than previously expected and hidden stocks are still buffering the market. And, although we don’t believe it, ILZSG data at least suggests Chinese mine output is surging. We can’t help but feel that last year’s big rally priced in a more bullish backdrop than this. So we are not surprised that zinc is struggling to push on to new highs this year. More evidence of tightening supply is probably needed to support the zinc bull market’s efforts to move to the next level.

  • Base metals investment analysis: Short-selling gathering pace in Comex copper

    21 February 2017

    We wondered last week whether the run-up in prices back above $6,000 per tonne would spark short-covering but the opposite happened – shorts increased their exposure

  • Demand Indicators February 21 2017

    21 February 2017

    Demand indicators for the base metals market

  • Downloadable Base Metals Weekly Data February 21 2017

    21 February 2017

    Downloadable data for week February 21 2017

  • Keeping a positive bias towards zinc

    24 February 2017

    Zinc is likely to remain well supported given its bullish technical and fundamental backdrop. In the medium-to-long term, we still like zinc; barring any risk-off events or announcements of major capacity restarts, our bias will remain positive.

  • Still hard to make a fundamental bull case for aluminium

    27 February 2017

    Aluminium prices may remain well supported in the short term given the view that the global reflationary environment should prevail and induce investors to stay overweight base metals. Over the long term, however, aluminium's fundamental rebalancing process may not survive the substantial Chinese supply response that is already in progress in an already-oversupplied market.

Breaking Views

  • Still hard to make a fundamental bull case for aluminium

    27 February 2017

    Aluminium prices may remain well supported in the short term given the view that the global reflationary environment should prevail and induce investors to stay overweight base metals. Over the long term, however, aluminium's fundamental rebalancing process may not survive the substantial Chinese supply response that is already in progress in an already-oversupplied market.

  • Metal prices consolidate after Friday's rebound

    27 February 2017

    The base metals have shown some hesitation in their ability to extend gains in recent weeks. But as was seen at the end of last week, dips did attract buying so the key will now be whether there is follow-through buying.

  • Metals rebound after Thursday's sell-off

    24 February 2017

    A wave of weakness flushed through the base metals on Thursday, which has put all prices on more of a back footing. But there have been rebounds this morning, helped by bargain hunting and a weaker dollar.

  • Keeping a positive bias towards zinc

    24 February 2017

    Zinc is likely to remain well supported given its bullish technical and fundamental backdrop. In the medium-to-long term, we still like zinc; barring any risk-off events or announcements of major capacity restarts, our bias will remain positive.

  • Base metals pushed back by strong dollar headwinds

    22 February 2017

    Sentiment remains largely bullish, but consolidation seems the order of the day for the base metals as the higher price levels attract profit-taking and forward selling. The firmer dollar is also probably acting as a stronger headwind now that it looks like it may start to trend higher again.

  • 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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