Those of you who know MetalMiner, know that we’ve always had our eyes on what’s behind a metal price’s movement – and share the most important, timely and even sometimes-misunderstood ones with our readers.
Below is an excerpt from our recently released report, “2015 Metal Buying Outlook: What Can We Expect for Base Metal and Steel Prices Over the Next 12 Months?”
Peak of Spring
When we study metals individually, we see that all of them have behaved similarly since 2008. Prices of steel and the 6 base metals in this report peaked in the spring of 2011. This is not a coincidence, as two main drivers pushed commodities – and therefore, the metals complex – down.
#1: The US Dollar
Base metals as commodities move in opposite directions to the dollar. Over the past several years, every important turn in the US dollar was either followed by, or coincided with, a turn in the price of commodities. Therefore, both markets remain closely linked to each other. Buying organizations would make a mistake by not taking into account the dollar’s movements.
We pointed out in our 2014 outlook report that the direction the US dollar takes through 2014 would give important clues for future trends of metal prices. Indeed, the dollar skyrocketed during the second half of 2014 (rising over 10%) putting pressure on industrial metals. We’ll have to wait and see whether this is just the beginning of a bigger move or if the dollar will hit a ceiling as it approaches the record levels of 2009.
China is the world’s largest importer of commodities, which makes the country the biggest driver of global demand for commodities – including metals, of course. The resulting slowdown China’s economic growth has impacted investors’ view of commodities demand, and as a result, brought down demand for metals, creating price weakness.
During 2014 we have seen increased investor enthusiasm for China’s economy. This might be one of the reasons why industrial metals outperformed the rest of commodities in 2014. Further improvements coming from China would certainly help push metal prices up going forward, but we believe that it is still too early to call.
We believe that the two drivers above will determine future trends of industrial metals.
For detailed analysis of 7 metal categories, download the full, free report by filling out the form below: