Aluminium: Short-term upside targets achieved
LME aluminium’s price recovery to $1,600 per tonne has been driven by macro forces acting on all metals, and amplified for aluminium by technical factors after prices became so oversold at the double-bottom lows in April and May. With a 4-million-tonne supply surplus this year, aluminium’s fundamentals are doing little to assist the rebound. It is now encountering strong resistance and is achieving our short-term targets. We expect consolidation back down towards the April highs next.

Copper: Hefty price gains as expected
Copper enjoyed its largest weekly gain since September 2018 in the week to June 5, and the momentum has run into this week too. It reflects an increased conviction among market participants that the Covid-19 deflationary shock was temporary and that authorities have acted sufficiently swiftly to support a solid economic recovery in the months ahead. We expect copper prices to continue to rise on positive momentum, risk-sentiment, and tighter fundamental indicators. Prices remain on track to align with our Q2 base case forecast of $5,380 per tonne. Also in our analysis this week, we discuss a modelling approach to TC forecasting.

Lead: Auto market revival to favour EVs
After revising our price forecasts last week, lead put in a robust performance as US jobs data surprised on the upside and provided hope for the economic recovery. But auto sales data around the world still makes for depressing reading. Government incentive schemes aimed at reviving the auto market after the 2008/09 financial crisis targeted the industry in general, but this time round early indications suggest incentives will be aimed mostly at EVs, which will not be such a positive for the lead-acid battery market.

Nickel: Revising our NPI outlook
We have conducted a thorough review of our Chinese and Indonesian NPI database, assumptions and forecasts. We have lowered our forecast from Chinese production, but raised our Indonesian forecast substantially. The net effect on our supply-demand balance has been to increase our global 2020 surplus from 74,000 tonnes to 111,000 tonnes. But with prices driven more by macro sentiment, our price forecasts are unchanged.

Tin:Smaller surplus in 2020, larger deficit in 2021
Tin has enjoyed a sharp price rebound since the start of the month, outperforming the other base metals, and putting it on course for our second-quarter base case average forecast of $15,500 per tonne. That said, revisions to our fundamental assumptions this week have reduced the 2020 annual surplus from 10,000 tonnes to 6,000 tonnes. Our 2021 deficit forecast has risen to 12,000 tonnes.

Zinc: Needs to overcome technical resistance
Amid the rise in broad risk sentiment, zinc needs to break above overhanging technical resistance to avoid attracting follow-through selling from bearish traders and investors that could turn prices lower again. This is particularly important now that mine production in Latin America is beginning to recover. The significant supply disruptions this market has seen – amounting to nearly 6% of global zinc mine supply – had helped put a fundamental floor under zinc prices in March and drive the recovery since then.

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