Aluminium: Technical rebound
Aluminium prices are rising as expected but this is merely a technical correction for now, one that is driven by short-covering. Huge oversupply of aluminium this year and next, growing geopolitical tensions and the uncertain macro-economic outlook do not give us confidence that a price rally is sustainable yet.
Copper: Our base case assumes further price upside in near term
Copper prices continue to recover broadly in line with our expectations and we believe that they will move higher still in the coming weeks, essentially driven by healthy refined copper demand growth in China. The sustainability of the copper price rebound will be dependent on the shape of recovery in demand in the rest of the world in the second half of this year. While we think that demand conditions should improve notably in the second half, we also acknowledge that US-China relations are a wildcard for the price outlook for copper and all the base metals.
Lead: Consolidating and building a base
Lead has not proven itself to be one of the metals eager to recover but at least it looks like consolidation has set it. Prices continue to bounce along the bottom with support evident in the region of $1,590 per tonne while resistance is above $1,700 per tonne.
Nickel: 74,000-tonne surplus in 2020 heavily skewed to H1
Nickel prices are consolidating after another step higher in a promising uptrend off the March low. We believe that the trend can continue given that the market has passed the worst of the Covid-19 demand destruction and a recovery lies ahead. We analyse the latest supply and demand data in this week’s report.
Tin: Expect a rebound in consumption
Tin continues its rebound alongside the other base metals. While positive risk-on sentiment, driven by easier financial conditions, is pushing the complex higher, tin has also been supported by fresh supply disruptions despite weaker demand conditions. We expect a little more price upside for tin in near term, reflecting a possible rebound in consumption as economies re-open for business.
Zinc: Quantifying supply disruption rates
We estimate that supply disruptions directly related to Covid-19 amount to 742,000 tonnes of lost mine production but only about 140,000 tonnes of lost refined production. Although the sharp fall in TCs is understandable, but the 154,000-tonne global zinc concentrate market deficit we calculate to have re-emerged in the first quarter of 2020 will probably disappear again in the second half.
