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Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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Base Metals Market Tracker

Base Metals Market Tracker provides independent forecasting and coverage of all the key parameters affecting market movements for copper, aluminium, nickel, tin, lead and zinc. The service 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: Still stuck in limbo, but don’t switch off

    13 November 2018

    Despite the ongoing price drift, the underlying theme in the base metals is that the fundamentals are generally tightening, so if there is any progress on the trade disputes then those metals with the strongest fundamentals could rebound strongly. Waiting for new trade agreements has dragged on. But, do not switch off. When the news flow becomes more positive, we think the price reaction will be swift.

  • Aluminium: Low case scenario

    13 November 2018

    Aluminium prices continue to consolidate after finding good support around $1,950 per tonne. Still-declining availability reflects fundamental tightness. Despite this, attempts to rally are still struggling against selling emanating from dollar strength and wider risk-off sentiment. Failure to turn more positive in the short term and shake off the current downside pressure will increase the likelihood of support being eroded and puts the focus increasingly on our low-case scenario for Q4.

  • Technical analysis: Tin, zinc, copper most constructive

    13 November 2018

    Technically, tin is looking the most bullish base metal at the moment, with zinc then copper trying to follow suit. The other metals are still struggling and may not have seen their 2018 lows yet.

  • Copper: Unsustainable price weakness

    13 November 2018

    We maintain that weak copper prices disregard this market’s tightening fundamentals and prematurely discounts a slowdown in China’s economy and copper demand. Speculative positioning is underweight relative to the bullish supply/demand imbalance we model for 2018 and 2019, and concerns about China are overblown. This leaves room for positioning to ‘normalize’ and prices to rebound accordingly at some point. That could happen before the year-end on more robust Chinese economic data releases, or if sentiment at Asia Copper Week is sufficiently upbeat to provide a bullish wake-up call to complacent bears, or if the US and Chinese presidents make progress towards a trade deal when they meet later this month.

  • Lead: Waiting game continues

    13 November 2018

    Lead has managed to hold above $1,900 per tonne and, having found support last week, there was another sharp short-covering rally to the $2,000 per tonne area, this time on news that Port Pirie will close for a month in December on environmental grounds. Once again though, lead has since pulled back. The pick-up in volatility lately could represent the market hammering out a base, which could be the precursor to a more sustained price recovery. Supply disruption news will help.

  • Nickel: Price forecasts lowered

    13 November 2018

    In our nickel analysis two weeks ago we acknowledged that prices were starting to lose touch with our base case price forecast for Q4 and were instead moving into line with our low case scenario for the quarter ($12,000 per tonne). With prices continuing to fall, $12,000 per tonne now becomes our base case and we have revised down our quarterly averages for 2019 too since the market will be starting next year from a lower base.

  • Tin: Expect steeper price upside

    13 November 2018

    Last week, tin continued to withstand the broad-based wave of selling pressure across the base metals caused by an unfriendly macro backdrop. This was mainly driven by renewed supply concerns from China as the world’s largest tin smelter announced temporary closure for maintenance. While we maintain our constructive view on tin prices for Q4, we have revised upwardly our forecasts for next year, expecting a steeper path higher for tin prices.

  • Zinc: Staying modestly bullish in the short term

    13 November 2018

    The Q4 average so far is $2,618 per tonne, which is slightly below our base case forecast of $2,690 per tonne. We are comfortable staying slightly bullish for the remainder of the year because prices may well feel some upside pull amid supportive signs in the physical market (falling stocks, tighter spreads and a fresh uptick in premiums).

  • Base metals investment analysis: Improvement in spec length, lead the anomaly

    13 November 2018

    The latest COT reports from the CFTC and LME both show a pick in speculative long positions in early November. Lead is an anomaly in that it is the only metal in which funds remain net short.

  • Demand Indicators: November 13 2018

    13 November 2018

    Demand indicators for the base metals market

  • Downloadable Base Metals Weekly Data November 13 2018

    13 November 2018

    Downloadable data for week November 13 2018

Breaking Views

  • Metals firmer on higher hopes for trade deals

    Free

    13 November 2018

    The metals are in limbo as they wait for trade developments, but the fact they are getting some lift this morning despite the stronger dollar and equity weakness is noteworthy and suggests some independent strength.

  • Still under pressure amid dollar strength and weakness in broader markets

    Free

    26 October 2018

    Base metals are weaker again this morning, with nickel leading the way. The weakness warns that bases have not yet been secured and that there may be more room on the downside for the complex, especially with the dollar challenging resistance and concerns in broader markets continuing.

  • Metals give back recent price gains while weakness in equities weighs on sentiment

    Free

    25 October 2018

    Base metals are mostly down this morning, with aluminium and nickel the weakest. Poor US new home sales data on Wednesday and fragile equity markets are weighing on sentiment. But these stresses may make policymakers more dovish on trade tariffs and sanctions – any such development could give the metals a long overdue boost.

  • Soft start to LME Week

    Free

    08 October 2018

    Base metals this morning are either under pressure or consolidating, because the recent stronger phase failed to attract follow-through buying. For now the risk-off sentiment in Asia and in emerging currencies, combined with continuing uncertainty over US trade, are smothering any bullishness. We wait to see if sentiment changes as LME Week gets under way. .

  • Metals prices tread water while higher US yields trouble wider markets

    Free

    04 October 2018

    The base metals are slightly weaker this morning. This follows another day of strength on Wednesday when the complex closed up by an average of 1.8%, led by a 6.4% rise in aluminium prices – the latter up in news of a full closure of Norsk Hydro’s alumina operations in Brazil.

  • 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.