Stable Non-Ferrous Metals Price Forecast: Not Surprising

The views expressed in Andy Home’s Reuters article this week are, while interesting, hardly surprising.

Reuters took a poll of analysts views on the state of metals prices and reported on their assessments as to what the next six months holds for buyers, a story initially picked up by my colleague Taras in these digital pages. Following the last three months of declines, metal price forecasts for 2012 and 2013 have been slashed across the board since the last January poll.

This year, the metals markets have been in a largely new ball game. So even for metals like tin and copper, which are widely (if not exclusively) expected to be in supply-side deficit this year, the price is still expected to fall or remain at currently depressed levels into next year.

Perversely, the only two metals that are expected to see any price increases are lead and zinc, since both are reported this week by the World Bureau of Metal Statistics to be in substantial surplus. The median forecasts of lead at $2,041 and zinc at $1,985 are both higher than actual first-half averages, but only very marginally, by $6 and $7 per ton respectively.

Aluminum and nickel are expected to remain in surplus and the full-year average forecasts for both are below actual H1 prices, highlighting a general frustration that higher-cost production, particularly in China, is not being curtailed fast enough to prevent a significant build in market surplus, according to Home’s article.

There seems widespread acceptance of the position reported in our recent articles that China is not going to come to the rescue of metals prices this year as it did in 2009; there will be no 2009-style shock-and-awe stimulus package from Beijing.

Nevertheless, a gradual recovery in investment and construction in China next year is being factored in as part of an expectation for modestly higher prices in 2013. That and an expectation that Europe cannot be in the same dire position in 2013 as in 2012 – but then again, we said the same in 2011 and look how much worse Europe has gotten, or more to the point, how little has been done to resolve the situation.

How accurate the predictions will be remains to be seen based as they are on current economic sentiment rather than supply/demand fundamentals. With analysts having a tendency to see the future through today’s eyes (which are understandably jaundiced), their collective view is still for flat or stable pricing over the next 6-9 months — a view we cannot see any strong case for challenging.

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