• While overcapacity pressures prices in the steel industry and the iron ore market…
• … base metal prices are expected to run higher next year on the macro-outlook
• Chinese import demand growth rate for industrial materials will soften, but the level will remain high
Price trend for base metals is still up
The macro-economic baseline is still good. Economic conditions and the prospects for major metal consuming countries should provide price strength for cyclical industrial metals. For aluminium we expect prices to strengthen further, although the pace of increase will remain slow. Current stocks in weeks of consumption is still high in historic perspective and this prevents prices from increasing significantly on the short term. For copper we also expect stronger prices going forward, but the gains will be relatively low. Price is mostly dictated by macro-economics in this stage. In nickel, short term prices should drift between a small bandwidth, while long term prospects look more favourable. Long term prospects for zinc are also buoyant, which is more due to supply side problems (limited availablilty) rather than demand side issues. Prices in the steel sector are expected to stay soft, as long as overcapacity lingers on (China, Europe) and Chinese (power and export) subsidies remain in place. There are rumours that the Chinese export rebates will be cut, but this has not been officially announced yet. Prices for iron ore are also expect to stay soft, but an end year rally on increased demand could lift prices somewhat. Coking coal prices, however, should strengthen again on tighter fundamentals going forward.
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