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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

  • Metals start European trading indecisively after a stronger Asian session

    22 June 2017

    On Wednesday morning it looked like the firmer tone had run its course, but most of the metals shook off early weakness, especially lead and zinc. This morning, prices started firmer across the board but still seem to be waiting for more directional news flow. .

  • Market Summary: That’s better

    20 June 2017

    The base metals have started to look firmer over the past week, edging higher to establish, or extend, nascent uptrends. This has made the technical picture look more constructive, but there has been little real improvement in the fundamentals. That said, our view had been that recent price weakness has been overdone, so perhaps the rebounds reflect price and fundamentals re-equilibrating.

  • Aluminium: Sideways to lower

    20 June 2017

    Aluminium prices continue to test lower and are generally lingering around in low ground and therefore remain vulnerable to further weakness. Bouts of buying have tended not to attract much follow-through lately. So until the news flow brightens up, this sideways to lower direction in aluminium prices may continue.

  • Technical analysis: Fund buying picks up in copper

    20 June 2017

    We have said before that since copper’s medium-to-longer term fundamentals suggest supply shortages, we expect funds would want to build length when they can. This seems to be happening. Further buying interest may prompt short-covering.

  • Copper: More bullish on supply than demand

    20 June 2017

    We maintain our mildly bullish stance on copper, and we continue to believe that the shortfall in concentrate production in H1, combined with other disruptions expected in Q3, will lead to tighter availability of refined metal in H2. However, we are feeling a little more concerned on the demand front and, as such, we are becoming less convinced that our base case target of $6,000/tonne by Q4 2017 is achievable. We maintain our current H2 price outlook unchanged for now, but under review.

  • Lead: The tide is turning

    20 June 2017

    The tide in lead prices may be turning – prices have broken out of a base and are back above the down trend line that has dominated since late-March. LME stocks continue to edge lower and SHFE stocks have been falling in recent weeks too. And ILZSG data points to a supply deficit. So finally it may be that the fundamentals are turning bullish, in which case prices may be able to sustain this rebound.

  • Nickel: Back on cutbacks watch

    20 June 2017

    Nickel is trying to get back above $9,000/tonne this week, more on the back of gains being seen across the whole base metals complex than due to any improvement in the nickel market itself. However, beneath the surface, we do hear that Indonesian NPI producers have cut back output at these low price levels. This follows the cuts by their Chinese peers that we discussed in last week’s analysis. But with the refined nickel market is so well supplied, we fear it will take many more (and more permanent) capacity closures to generate a sustainable price recovery. Without these, it is hard to expect anything more from nickel prices than choppy sideways trading in H2.

  • Tin: 2017 price forecast revised lower

    20 June 2017

    There are still huge uncertainties as to the way in which Chinese tin supply will develop in the future, given Yunnan Tin’s tolling permit and the threat of declining ore supply from Myanmar. However, we now feel that there is an increased likelihood that more refined tin will flow out of China in H2. As such, we feel it is necessary to reduce our price outlook for the period. Our forecasts further out remain unchanged.

  • Zinc: ILZSG data generates some lift in prices

    20 June 2017

    Outside China, global demand remains upbeat for the moment, rising by 7.6% year-on-year in January-April, including 3.6% in Asia (ex. China), 57.1% in South Africa 18.2% in Brazil (+18.2%).

  • Base metals investment analysis: Fund buying picks up in copper

    20 June 2017

    We have said before that since copper’s medium-to-longer term fundamentals suggest supply shortages, we expect funds would want to build length when they can. This seems to be happening. Further buying interest may prompt short-covering.

  • Demand Indicators June 20 2017

    20 June 2017

    Demand indicators for the base metals market

  • Downloadable Base Metals Weekly Data June 20 2017

    20 June 2017

    Downloadable data for week June 20 2017

Breaking Views

  • Metals start European trading indecisively after a stronger Asian session

    22 June 2017

    On Wednesday morning it looked like the firmer tone had run its course, but most of the metals shook off early weakness, especially lead and zinc. This morning, prices started firmer across the board but still seem to be waiting for more directional news flow. .

  • Prices pick up a tailwind

    20 June 2017

    Base metals prices appear to be heading higher across the board. Key now will be whether follow-through buying gathers momentum, or whether the rebounds start to stall – but that may be a question for later in the week. For now they generally look well placed to push on and the strong gains on the SHFE this morning bode well.

  • Base metals start the week on a firmer footing

    19 June 2017

    The base metals are up across the board this morning. We wait to see how much follow-through buying interest there is.

  • Flash PMIs and US housing data on this week's economic agenda

    19 June 2017

    After last week's volatility, markets are likely to welcome a relatively light agenda for economic data this week.

  • Metals prices edge higher but lack energy

    16 June 2017

    Within quiet trading conditions, base metals prices are for the most part edging higher. The exceptions are aluminium that is lingering around recent lows and copper that is struggling to get any follow through buying after Thursday’s attempted rebound.

  • 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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