Base metals prices have benefitted from good economic performance in critical markets, most importantly China. The LMEX index has gained nearly 18% thanks to strong gains in all metals aside from tin.
Aluminium
- Aluminium prices coming off recent highs as market grapples with the impact of China’s production cuts
- Transparent inventories have been relatively stable since Q2 2017 while share of cancelled warrants has shrunk—a worrying sign for demand
- Forward curve has remained in contango despite draw in inventories. Elevated pricing is creating possibility of non-China suppliers restarting smelters and re-entering market
- China’s clampdown on industrial metal production is having an impact on aluminium output, albeit slowing it from an extremely elevated pace
- Exports have stabilized but still remain at risk of trade policy disruption from Trump administration
- Meanwhile domestic demand indicators not pointing to particularly robust conditions; SHFE inventories hitting new record levels
Copper
- Copper oscillating on China import data but has set on a downward trend from hitting more than USD 7,000/tonne
- Potential for slower growth in China next year—combined with mine restarts—point to a lower copper price in 2018 from current levels
- Labour disruption remains a near-term risk in major producers in South America while political uncertainty around the Grasberg mine in Indonesia also adds short-term upside risks
Click here to download full chartpack
Edward Bell
Facebook
Twitter
Linkedin
Email
