Bullish for base in 2018

Although base metals are under pressure in the short term, we have a bullish bias to our 2018 price forecasts given the supportive background of solid global economic growth and the fact that all six base metal markets look set to be in fundamental deficit this year. But each has a slightly different supply-side story and this aspect should be the main differentiator.

For example, zinc’s narrative has changed and is no longer about supply getting tighter and tighter. We will now see supply recovering steadily, assuming the new and restarted mine capacity coming on line does so without any undue delays or disruptions. That trend suggests that zinc’s bull market is nearing its peak, and picking a top is a key consideration in our forecasts here. 

Primary lead supply should also benefit from the same theme as zinc, but to a lesser extent.

Copper’s fundamentals are going the other way – the market is only going to get tighter over the medium to long term as underinvestment in the next generation of mines should increasingly be felt, compounded by this industry’s propensity for unplanned disruptions. That lays the foundation for a long-term uptrend in prices, but how fast? And how much of this developing bull story is already discounted?

And in aluminium, the market probably still has some adjusting to do having got overly optimistic about the effectiveness of Chinese reforms and cutbacks, but authorities haven’t given up and there is room for aluminium bulls to get excited again. 

Aside from the major supply side themes shaping the base metal outlooks, there is also the keen interest in the electric vehicle (EV) revolution to factor into price forecasts. But, again, the impact is different for each metal, with nickel set to be one of the biggest winners, albeit over the long term. Key to a successful forecast here will be judging how aggressively the market prices in this story.

Directional forecasts for March 2018
Short term pressure expected to push prices down in March, but overall 2018 is forecast to see price gains

Reviewing 2017 price forecasts
Metal Bulletin’s Apex survey, which ranks the quarterly forecasting accuracy of the around 20 commodity banks and trading desks, regularly placed Metal Bulletin Research in the top-five leader boards throughout 2017.

For the latest complete quarter, Q4 2017, our forecasts for the period, which were submitted in early October, achieved over 98% accuracy in aluminium, copper, lead and tin.

Top forecaster in Q4
Averaged across all the base metals, Metal Bulletin Research’s overall accuracy rating in Q4 2017 was 99.4%, which placed it top of the Apex Base Metals Leaderboard for that quarter.

In the overall leaderboard for 2017, which averages the forecast accuracy for all six base metals over all four quarters of the year, we were ranked fourth most accurate, with an accuracy 95.6%. The top forecaster’s accuracy was just 0.8% higher.

In 2016, we ranked second with an average accuracy of 96.8%.

We also made it into overall annual leaderboard in the previous two years, ranking fifth in 2015 with an average accuracy of 91.9%, and fourth in 2014 with an average accuracy of 95.9%.

Metal Bulletin Research is the only forecaster to consistently appear in the Apex top five in each of the last four years.

What to read next
US export controls on recycled copper would have unintended consequences that could weaken the country’s domestic recycling and manufacturing ecosystems, the president of the Recycled Materials Association (ReMA) said.
The publication of Fastmarkets’ assessments for nickel 4x4 cathode, nickel briquette and nickel uncut cathode premiums in-whs Rotterdam was delayed on Tuesday July 16 because of a reporter error.
Fastmarkets has corrected its alumina index inferred prices, which were published incorrectly on Tuesday July 15.
The United States' copper recycling industry is ramping up pressure on policymakers to impose some form of export controls on high-purity copper scrap, arguing that current trade dynamics – particularly with China – are distorting prices, weakening domestic capacity and undermining national security goals.
Fastmarkets launched two new price assessments for Indonesia’s domestic trade in nickel ore on Tuesday July 15. The two price assessments are for domestic trades of Indonesian laterite ores with 1.6% and 1.2% nickel content. Indonesia now accounts for 60% of the global nickel supplies and while there is an official government reference price, known […]
US copper scrap market participants are shifting from COMEX to LME pricing in response to extreme price volatility and a new 50% copper import tariff. The change is influencing discount formulas, export strategies and long-term trading dynamics across the sector.