Aluminium: Early signs of post-lockdown demand recovery
With major economies outside China reopening after the easing of their Covid-19-related restrictions on movement and industrial activity, last week’s jump in the number of cancelled aluminium warrants on the London Metal Exchange may be an early sign that the post-lockdown recovery in demand that has already begun to gather pace in China will be repeated in the rest of the world.
The arbitrage import window was likely to remain open for the Chinese aluminium market at least throughout May. And, beyond a likely technical rebound in the immediate term, we think that any longer-term recovery in LME prices over the remainder of the year will be restrained, given the cumulative global surplus of 7 million tonnes that we continue to forecast for 2020 and 2021.
Copper: Global demand set to contract by nearly 4% in 2020
Copper came under pressure in the week ended May 15 due to risk aversion caused by rising tensions between the United States and China over Covid-19. This was despite signs of economic recovery in China in the second quarter, and the easing of lockdown measures elsewhere.
Fundamentally, we think that the worst of the contraction in global refined copper consumption is behind us. We expect a recovery in the quarter ahead, initially still led by China and subsequently by the rest of the world.
That said, the global refined copper market was expected to show a substantial surplus this year after a 4% contraction in demand, thereby capping the copper price upside.
Lead: Choppy sideways trading expected to continue
Given that demand for lead is tied so much into the automotive market, and that spending on large-ticket items such as vehicles is likely to recover only slowly, the outlook for lead demand is not great in the near term.
This sentiment was reflected in lead prices, which remained under pressure and were still trying to build a base. Lead was also the only base metal for which speculative short positioning was still growing.
Nickel: Buoyant price consolidation in line with expectations
Our short-term view on nickel prices has not changed in the past week, because the market has generally consolidated sideways. This ensured that the quarter-to-date LME average continued to edge higher toward our base-case forecast for the period of $12,100 per tonne.
That in turn kept us on track to extend our strong forecasting performance in this market, which, according to Fastmarkets’ Apex consensus surveys, ranked us as the most accurate nickel price forecaster in 2019.
Tin: A little bit more upside
Tin has rebounded the most since the base metals complex hit the recent low on March 19. While the rebound in tin prices has been supported by marked exchange inventory outflows, it has been capped by the soft conditions in the physical market.
We see a little more price upside into the quarter-end, driven by a likely improvement in demand conditions in Europe and the US on the easing of lockdown measures.
Zinc: Looking to China for an infrastructure boost
After revisions last week, our supply-demand balance and price outlooks remain unchanged this week, while we continue to monitor the pace of recovery in both supply and demand now that more and more lockdown restrictions are being eased around the world.
China’s delayed National People’s Congress will get under way in Beijing later this week and may bring with it some commitments to increase zinc-friendly infrastructure investment.
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