Price Forecast 2018
- Metals prices have risen in five of the past six quarters, and prices for the first
nine months of the year averaged 26 percent higher than the corresponding
period of 2016. All metals prices increased in the third quarter, led by zinc and
nickel, which jumped 14 percent on robust demand and reduced mine
production (zinc) and solid stainless-steel demand (nickel). Iron ore and
copper also surged, rising 13 and 12 percent, respectively, in part due to
- China has been a major driver of tighter metals supply. In part, this is due to
government efforts to reduce surplus capacity by targeting old, inefficient, and
illegal production. It is also strengthening environmental and safety
inspections, and has directed polluting industries in 28 northern cities to
reduce production during the winter, particularly aluminium and steel (fed by
iron ore) plants. These directives may also affect metal demand as cities
curtail construction to fight pollution. Globally, capital expenditures by mining
companies are rising after five years of decline linked to falling prices.
- On the demand side, strong global economic growth and stimulus measures
in China helped move some markets into deficit, notably zinc. China has
accounted for the bulk of global growth in metals consumption over the past
15 years. China has consumed more metal in last year due to its focus on
infrastructure and development.
- Base metal prices have been on the uptrend in comparison to prices of metals
in 2016. Some metals like Zinc have increased in price substantially due to
supply cuts from big producers, like Glencore and closure of Australian mine
and Century mine.
- Oil Prices have recovered from last years low of USD 30 to USD 60.
- Recent large mine closures due to exhaustion—the latest
happened in Australia and Ireland in early 2016—and price-induced “shut-ins”
in Australia and the United States have tightened the zinc concentrate market.
China, which produces nearly half of the world’s refined zinc, has seen its
output constrained by environmental inspections, closures of illegal mines,
and the delayed start-up of new capacity. This has accelerated China’s zinc
imports. Meanwhile, demand to galvanize steel in China has been strong,
underpinned by steel usage in the construction, infrastructure, automotive,
and “white goods” (heavy consumer durables) sectors. The zinc market is
expected to remain in deficit in 2018- 19 until new capacity comes online.
- Metals prices are projected to ease slightly in 2018 due to profit booking in
2017 year end. Lot of hedge funds infuse fresh capital in the market so the
beginning will start slowly.
- Upside risks to the price forecast include more robust global demand and
production shortages. Supply could be curtailed by slower ramp-up of new
capacity, tighter environmental constraints, and policy action that limits output
and exports, notably in China. Downside risks include slower demand from
China, risks of substitution with other materials, and higher than-expected
production—including the restart of idled capacity and easing policy action in