Cautious tone in metals markets persists

by: Casper Burgering

Industrial Metals Monitor-Nov. 2015.pdf (479 KB)

Well-supplied ferrous metals and aluminium markets are keeping prices low

Metals demand from construction, automotive and manufacturing sectors still moderate

China demand worries, overcapacity, US dollar and Fed rate hike will determine price direction

Ferrous related metal prices strongly down

All prices for industrial metals have taken a beating since the start of 2015. But conditions in the ferrous markets are most challenging. Global steel, iron ore and coking coal have fallen strongly. The nickel price also saw a major drop. Nickel is mostly used in the stainless steel sector, were demand have also been rather weak year-to-date. The distress in industrial metal prices can be traced back to five key issues in 2015: 1) overcapacity (ferrous markets, aluminium), 2) China growth and demand worries, 3) the strong US dollar, 4) weak end user demand, and 5) the Fed rate hike. China, which is a heavy industrial metals user, is the main cause of industrial metals prices distress this year. Since the start of Q4 2015, the price of ferrous metals managed to decrease further and prices for base metals have stayed weak also. Well-supplied ferrous metal and aluminium markets are keeping prices low. These markets are in need of significant production cutbacks, which should bring back more market balance and lift prices. But for now, all eyes are on macro-economics.

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