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Today's Market View - The US and China continue to lead synchronised global growth in commodity consumption

Today's Market View - The US and China continue to lead synchronised global growth in commodity consumption

Key Themes

  • The US and China continue to lead synchronised global growth in commodity consumption
  • The EU is also reinvesting in manufacturing growth as it targets recovery
  • China’s anti-pollution drive has forced the closure of many polluting plants with particular impact on industrial commodities
  • The US dollar fell last year against many currencies helping metals prices higher in the short term despite rising Fed interest rates.
  • Going forward ongoing capacity closures in China should continue to raise commodity prices as anti-pollution enforcement distorts markets
  • Prices should continue to rise as Supply constraints act against Demand growth as ongoing low interest rates and rising inflation promote coordinated global GDP growth

Battery Metals

  • Lithium: Rapid adoption of lithium-ion battery technology across vast end-use markets is driving expansive growth in raw compound consumption by battery manufacturers. Significant market undersupply created surging battery-purity prices, which are forecast to contract following the resolution between Chile’s Corfo and major SQM to drive output to equivalent 78% global production 2017 (216,000 tpa).
  • Cobalt: LME probe into ethical, inelastic supply from the DRC combined with updated and unattractive mining legislation is expected to increase the strain on transparent, responsible mining operations and boost investment and development of Australian and Canadian projects. Rapidly rising high-purity premium prices are increasing substitution risk as battery manufacturers look to phase out cobalt in next generation Nickel-Manganese-Cobalt (NMC) chemistries.

Reference SP Angel – Battery Raw Material Review 2017 for further battery analysis.

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Base Metals

  • Copper: Strengthening manufacturing sentiment, demand for electric vehicles, renewables, and infrastructure are expected to boost consumption of copper. Concerns surrounding wage negotiation and supply disruptions, focussed in South America forecast to support copper prices in 2018.
  • Nickel: Rapid advancement of nickel-heavy battery technology is expected to boost consumption requirements, combined with a growing shortfall of high-grade sulphide deposits should see nickel prices rise into 2019. 
  • Zinc: A supply led shortage, based on 20 years of under exploration resulting in few new zinc orebodies in accessible locations. The market is now dependent on smaller mines and some lower grade orebodies to remain fully supplied. Demand follows general economic activity and steel production with galvanising representing the bulk of demand.

Precious Metals

  • Gold: Safe-haven investors favour gold during growing concerns surrounding economic policy uncertainty, mounting possibility of financial market disruption, global debt level swelling above $230 trillion and global geopolitical tension. Meanwhile softer physical demand, surging equities and disruptive cryptocurrency investments are applying short-term downward pressure.
  • Palladium: Demand expected to remain high as global emission standards tighten and consumption for auto-catalysts advances in place of diesel.
  • Platinum: Growing substitution of palladium in catalytic converters is expected to drive demand for Platinum into 2019. With production in South Africa threatened by the strength of the rand-dollar exchange and global stockpiles falling to lowest levels since 2016, supply may tighten to drive Platinum Group Metals higher through 2018.

Energy

  • Oil: Sustained cooperation by OPEC and non-OPEC member producers is expected to maintain effective supply cuts beyond 2018 as major Saudi Arabia publicaly agrees to curbing output. Meanwhile global stocks are edging nearer to the five-year average target. Downside threat expected from rapid increase in US shale production capitalising on current elevated crude prices.
  • Uranium: Combination of sustained depressed prices, high-profile supply cuts, notably major producer Cameco and Kazatomprom, and budding global nuclear demand are expected to boost uranium prices. Utilities will be entering a major contracting cycle as 30-35% requirements in 2020 are not under contract. 

Bulk Commodities

  • Steel & Iron Ore: Global manufacturing and construction output is forecast to remain high, boosting demand for steel production and associated raw materials. Low interest rates are expected to fuel infrastructure spending and private investment, advancing manufacture supply. Tightening environmental legislation is expected to create a price disparity and boost premiums as a focus on higher-quality will extend throughout the supply chain.
  • Coal: While short-term electricity demand across emerging nations is expected to sustain current output, trends favouring cleaner supply, including the ‘Powering Past Coal Alliance Initiative’, would drag down future consumption. Growing environmental and ethical concerns are removing significant portions of investment from the sector, including Norway’s sovereign wealth fund.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc

Overall SP Angel ranked:

  • 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

We are immensely proud of our team’s price forecasting performance against the world’s major investment banks and broking institutions

 

See the MB APEX report link for further details

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