Aluminium: Underperformance creates rebound risks
LME aluminium finished April down 2% on the month – one of the weakest base metals. But SHFE aluminium gained 12.7%. The underperformance of the LME aluminium price versus the SHFE and the other LME metals raises the possibility of a technical correction in May. But the "sell the rally" mentality has become ingrained and with rising LME stocks, weak demand, a lack of production restraint, and huge annual surpluses looming, we think any short-term upside for LME prices will be limited.

Copper: Prices up, TC/RCs down in the rest of Q2
The LME copper price has rebounded by roughly 20% since its March 19 low of $4,371 per tonne. It is consolidating above $5,000 per tonne. We believe the rebound will continue in the course of the second quarter while fundamental tightness in China’s refined copper market spreads to the rest of the world and thus supports global copper prices. That said, we expect the recovery to be bumpy in the current challenging macro environment. Treatment and refining charges (TC/RCs) have not yet bottomed given almost 1.5 million tonnes of unplanned mine disruptions, 883,000 tonnes of which are attributed to Covid-19.

Lead: Resilient price in Q2, rebounds in Q3 and Q4
Lead prices remain depressed – this was the worst-performing LME metal in April – and given auto sales numbers this is hardly surprising. But, perhaps the market is too focused on the big picture and not on the peculiarities of the lead market: 1.) lower new auto sales mean higher replacement battery demand, especially since idle batteries during lockdowns mean higher failure rates; 2.) low stocks in China while the economy recovers threatens a supply squeeze; and 3.) Chinese strategic stockpiling could prove supportive. We are still looking for price resilience in the second quarter and rebounds in the third and fourth.

Nickel: Bulls versus bears
In this week’s analysis we highlight the bullish and bearish themes shaping the outlook for nickel this year. On balance, strengthening economic activity in China, the gradual easing of lockdown restrictions elsewhere, supply disruptions and nickel’s positive seasonality underpin our forecast for further price recovery in nickel in the coming weeks and months. But prices will remain susceptible to sharp pullbacks along the way.

Tin: More to come from macro-driven price rebound
Tin enjoyed a decent rebound of 5% in April alongside most of the rest of its complex, which is consistent with our view that the chief driver of tin prices is the macro, judging by the high cross-correlation of tin and its complex. Given the epic monetary and fiscal policy easing across the globe, we think that macro sentiment could remain positive in the near term, resulting in further price strength for tin. The resilience of tin’s fundamental indicators reinforces our friendly near-term view.

Zinc: TCs under pressure
We have trimmed our outlook for zinc metal production in 2020 and 2021 this week after revising higher our expectations for this year’s mine disruptions to around the 500,000-tonne mark. While refined market surpluses have narrowed as a result, the projected level of oversupply will still be an obstacle to price sentiment. TCs meanwhile have not seen their bottom yet in 2020, and will be pressured lower into mid-year.

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