BASE METALS | Demand Worries
BASE METALS PRICE MOVEMENT Prices in $/ tonne
10,317 5,216 1,516 1,724 4,800 1,468
October November 2015
2015 Copper
help smelters. While this may correct the supply demand imbalance one needs to keep in mind that this quantity will just change hands and is not actually consumed. Overall supply remains in excess and intentions to reduce excess capacity have not translated into action. The increase in price was driven by a weaker dollar, a factor that also helped other metals. Nickel price is hovering close to
12-year lows and the weak dollar could not provide support in December.
Nickel price is hovering close to 12-year lows and the weak dollar could not provide support in December
The primary focus of producers seems to be on reducing production cost. Madagascar’s Ambatovy nickel mine, jointly owned by Canadian company
February 2016 |
www.wealth-monitor.com Aluminium Nickel
Sherritt International Corp and Japan’s Sumitomo Corporation has indicated it will incur a loss of about $1.7 billion from operations. The main hit on nickel demand has come from a slump in stainless steel consumption, the primary consumer of the metal. The fall in nickel is indeed steeper compared to other base metals. Companies have no option but keep on producing at same levels or even higher in order to ensure cash flows that can take care of bank loans and related incidentals. The International Nickel Study Group
estimates that the global surplus in nickel was close to 52,000 tonnes in the January-October period of 2015. Producers of metals such as nickel have some respite from the recent continued fall in crude oil price but major challenge remains in the form of the skewed demand-supply imbalance. Analysts are cutting down the earlier forecast for nickel, indicating price could test a low of $8,000 a tonne, down approximately 20% from January levels.
Zinc is facing an identical fate to nickel.
Price of the metal fell by 20% in 2015. The price fall in the metal has defied a positive impact arising out of production cuts, including Chinese smelters and the closure of Queensland’s Century mine. Leading Indian zinc producer Hindustan
1,583 9,244 4,639 1,497
December 2015
Zinc
Zinc’s revenue from the metal declined 17% in the October-December quarter of 2015. “We are carrying out a review of our
high cost operations to ensure all of our operations are sustainable in the present weak zinc market,” Agnivesh Agarwal, chairman of the company said on January 21. The average zinc price for 2016 has been forecast at about $1,500 a tonne. The International Lead and Zinc Study Group estimated a surplus of 213,000 tonnes in the zinc market for the first ten months of 2015 and predicts a deficit in 2016. A revival, however, appears sketchy. Metals continue to be under pressure as manufacturing activity conditions worsened in China as shown by the readings of the manufacturing Purchasers Managers Index (PMI) at 48.2 for the month of December versus 48.6 the previous month, while in the US, the Institute of Supply Management manufacturing PMI at 48.2 versus 48.6 also signalled a contraction in activity. Another factor contributing to the weakness in metals was the depreciation of the Chinese yuan which increases the competitiveness of local metal producers, OPEC said in its January oil market report.
1,528 8,708
27
Sources: IMF, OPEC, Hindustan Zinc
Source: World Bank Commodities Price Data
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