RESEARCH: Key takeaways from the latest Base Metals Market Tracker

Aluminium: Capped by oversupply
A lack of a meaningful supply adjustment to the Covid-19 demand hit is keeping the aluminium physical market oversupplied and weighing on prices, limiting the success of more buoyant macro and technical forces on prices. Our premium forecasts are under review in light of threats from the United States to re-implement a 10% tariff on imports from Canada.

Copper: Too soon to fight the uptrend
Copper was the best-performing base metal in June, rising by roughly 10% on the month. This marks its strongest performance since November 2016. In addition to the risk-on environment, we think that tighter refined market conditions in China have been a key driver of the copper price rally. Although there are clouds on the horizon, we think that the advance in copper prices will extend in the second half of the year.

Lead: Disruptions, stock falls could boost prices
Trevali’s announcement it had halted operations at its Santander mine in Peru after workers tested positive for the virus is a warning that supply remains particularly vulnerable, since in general it is mostly producer countries now where infections are spreading fastest. With lead supply under pressure and exchange stocks falling again, prices may be poised to rally further.

Nickel: Bull themes trump bear themes, for now
A potentially bullish technical chart set-up and risk-on macro sentiment seem to be outweighing the potential negatives for nickel prices at the moment. These include trade tensions, the frailty of economic recoveries so far, overbought equity markets and nickel pig iron overcapacity in Indonesia. Our base case is for prices to continue working upward in the third quarter, but volatility is likely to remain high.

Tin: Upward price pressure set to continue for longer
Tin has rebounded for a second consecutive month in June, up roughly 8%. In addition to the risk-on environment that is pushing all base metals higher, tin has been supported by falling exchange inventories, tighter supply from Indonesia and noticeable production disruptions in Latin America. Even though physical demand conditions continue to weaken, we expect tin prices to continue their advance due to the very easy financial conditions, a bullish technical configuration and a degree of catch-up still to play out after its marked underperformance in 2019.

Zinc: Spot TCs have bottomed
Spot zinc treatment charges (TCs) appear to have reached a base around $150 per tonne, which is above our forecast of closer to around $100 per tonne. Providing availability improves in line with seasonal patterns, we now see spot TCs averaging around $180 per tonne in the second half of 2020, compared with around $140 per tonne forecast previously. Our latest tally of unplanned production losses this year amounts to 744,000 tonnes, or 5.8% of global production. 

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