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Aluminium: Demand outlook revised We are not surprised to see aluminium prices retreat from last week’s high after flagging up in recent reports that they had become overbought. ‘Sell-the-rally’ traders will be targeting the April high now, down at $1,534 per tonne.
This week we have reviewed our aluminium demand forecasts for 2020. We have raised our forecast for China, though growth is still negative. And we have revised lower our forecast growth rates for the rest of the world. However the net effect of these revisions at the global level is minimal and the global surplus is not materially increased, so our price outlook remains unchanged.
Copper: Choppy price uptrend to continue The magnitude of the copper price rebound since late March has come broadly in line with our expectations. While we attribute the price strength to positive macro factors, most notably a strong increase in global risk-taking appetite on easier financial conditions, we expect demand conditions in the world ex-China to improve in the months ahead. This should further underpin the uptrend in copper prices in the months ahead, especially if Covid-19 continues to disrupt supply.
Lead: Resilience makes $1,800 per tonne a short-term target Lead prices consolidated last week, riding out fairly well the downside correction most of the other metals and equity markets experienced. This suggests that lead dip buyers had taken advantage of the price weakness. The resilience allows technical traders to target $1,800 per tonne in the short term.
Nickel: Healthy consolidation Nickel’s break above $13,000 per tonne last week left the technical picture looking short-term bearish. But there is room for consolidation to extend down to around $12,400 per tonne before there is any potential technical damage on the charts. If support continues to hold out, which is our base case view, then the three-month-old uptrend will remain intact and should be able to extend further.
Supporting prices is the scale of unplanned supply disruptions, mostly due to Covid-19. Nickel losses this year amount to no less than 7.3% of world production or equivalent to Vale’s entire annual output.
Tin: Rally mode Tin is the most resilient LME base metal so far this year, which comes in sharp contrast to last year when it performed the worst. While tin is currently playing some catch-up with its peers, we acknowledge that tighter refined output trends, resulting in lower visible inventories, have helped tin prices push higher since the start of Q2. We expect more upside in the near term. Our fundamental analysis suggests that global refined tin demand should rebound sequentially from next month, which could add more fuel to the tin price rally.
Zinc: Demand forecast downgraded slightly Zinc prices are trading firmly in line with our Q2 forecasts, but we think that the demand recovery is falling slightly behind our expectations. We have revised down our forecasts this week and now see global growth declining by 4.1% this year instead of our previous forecast for a 3.9% contraction. Our H2 price forecasts remain unchanged.
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