Aluminium: Weak prices, weak fundamentals
London Metal Exchange aluminium prices continue to underperform. We attribute this mainly to the relative lack of a Covid-19 supply response by aluminium smelters. In the other better-performing base metals, major supply reductions have been an important feature, lifting sentiment, compensating for demand losses and keeping the fundamentals relatively closer to balanced. The 4 million-tonne surplus we forecast for aluminium this year represents 6.6% of world consumption, compared to about 3% of consumption for the other metals.

Copper: More price upside in near term
Copper has rebounded well over the past week, reinforcing our conviction that the recovery in prices will continue into the end of the quarter. This is because refined copper demand and speculative sentiment will benefit from countries re-opening their economies, while supply remains tight and disrupted. That said, we have lowered slightly our second-quarter price forecast this week, considering that the rebound to date has been more restrained than previously expected. The seasonality turns friendly in June after being neutral over March-May.

Lead: A base is in place
Lead put in a stronger performance last week and that continued into the start of this week, with prices getting as high as $1,672 per tonne, up from their March low of $1,570 per tonne. As such, it does look as though a base is in place. An imminent pullback in stocks, as suggested by the rise in LME canceled warrants, also looks supportive for short-term sentiment and price direction, and may well signal some restocking by industry as economies reopen.

Nickel: Right to be cautiously bullish
Nickel’s price recovery off its March lows remains robust but, as our technical analysis highlights, in order to extend further, prices must now overcome important nearby resistance. We maintain our cautiously bullish view on nickel prices for the remainder of this quarter – a stance that has served us well recently. We have been in the top five most accurate nickel price forecasters in three of the past four quarters, according to Fastmarkets’ Apex surveys, including in the first quarter of 2020, and we were the top nickel forecaster in 2019.

Tin: Weak price rebound despite stock outflows
Tin prices have experienced only a weak recovery since the start of the second quarter, despite sustained outflows from both LME and SHFE warehouses. We have revised lower our second-quarter price forecast, taking into account the demand weakness in the world ex-China. That said, we continue to see some upside in the near term.

Zinc: Slower demand recovery seen in H2
Zinc was the top performer on the LME last week, playing catch-up. This has helped to lift the quarter-to-date average more in line with our base-case forecast for the second quarter, which remains unchanged. Above $2,000 per tonne, prices have encountered technical resistance and news of mine restarts in Peru and Bolivia this month may also be capping price sentiment. Separately, we think we had not been cautious enough with our demand forecasts for the second to fourth quarters of this year. We have nudged these lower this week.

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