Industrial Metals Chartpack
Edward Bell - Senior Director, Market Economics
Published Date: 21 August 2017
Industrial metals highlights
- Aluminium prices have surged on capacity closures that have been announced in China and are now being enforced to a sharped degree than market had expected.
- Decline in LME stockpiles is mirrored by a major rise in SHFE stocks which have hit their highest level since 2010.
- Demand conditions appear good but not strong enough to support the current level of prices for a sustained period.
- Copper has broken out of its 2017 lethargy and surged to levels well above USD 6,000/tonne.
- Spark for recent rally has been plans in China to limit imports of scrap metal from 2018. Actual volumes are likely to be limited but will nevertheless contribute to a tighter market if enforced.
- Labour and mine disputes continue to affect major producers. Strike action may persist going forward if miners demand greater participation in upside.
- Primary lead supply is tightening as concentrate availability has been affected. China has banned imports of lead concentrate from North Korea.
- Closures of zinc mines, where lead ore is often produced as a byproduct, also contributing to a tighter market.
- Forward curve, however, not giving signs of a particularly tight market.
- Nickel riding on the back of strong gains in steel prices in China as infrastructure spending ramps up demand for construction-related commodities.
- Uncertainty over supplies from the Philippines has also helped push prices higher. A new mining minister has so far kept in place restrictions on mining operations.
- Tin prices have generally been drifting in 2017 as earlier decline in inventories has largely stabilized. Low levels of cancelled warrants not sending a strong demand signal.
- Supply disruptions may be coming from China as tin smelters caught by environmental pressures to close.
- Zinc also benefitting from the ‘steel effect’, like nickel as China construction demand draws in the need for zinc to galvanize steel. Zinc will be subject to the same concerns over debt levels in China and a slowdown in spending for rest of 2017 and into next year.
- Supply closures in recent years have helped contribute to a draw down in inventories.
- Current rally may help encourage mining restarts from 2018 but market likely to remain in deficit, providing a floor for prices.
- Front of the curve showing no supply impact yet but longer term curves anticipating a tighter market.
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