BASE METALS

S&P more positive about nickel, copper

Strong demand and supply constraints have led S&P Global Ratings to upgrade its price forecasts for nickel and copper.

Staff reporter
S&P more positive about nickel, copper

Both metals have been battered in the past month as US president Donald Trump ramps up a trade war with China.

"Demand fundamentals remain favourable, but the rise of global interest rates and trade tensions between US and China may exacerbate price volatility or hurt medium-term fundamentals," S&P said.

"Still, we expect GDP growth in the US approaching 3%, in the Eurozone near 2%, 2.5% in Latin America, and 6% to 7% in China while that country adheres to stricter environmental standards.

"These GDP forecasts are beneficial for industrialised metals such as iron ore, copper, nickel, and zinc."

Forecasts for most metals remained unchanged, except for nickel and copper.

Copper had previously been expected to average US$6,400 per tonne this year, but S&P has upgraded that to $6,600/t for the remainder of the year.

The red metal has averaged $6,898.62/t so far this year and last traded at $6,382.75/t.

S&P has lifted its 2019 forecast copper price to $6,800/t from $6,600/t and its 2020 outlook to $7,000/t from $6,800/t.

"Once again, we moved up our price curve for copper, reflecting more consensus around potential deficits in 2019-2020," S&P said.

"Our expectations of global economic growth and consistently strong industrial demand from the largest economies, especially China, will likely put increasing pressure on producers that are having difficulty expanding supply at a faster pace.

"On top of that, potential disruptions from new technologies, such as electric vehicles and other power storage uses, may boost demand beyond our forecast horizon."

S&P expects mine supply to grow by 0% to 2% over the same period.

"This small increase is due to continuing trends of declining grades, environmental issues, and a relatively modest project pipeline," it said.

S&P's nickel forecast is also below the average price for 2018 so far.

It lifted its 2018 price forecast to $13,000/t from $12,000/t, which is still well below nickel's year-to-date average of $13,875.10/t.

Nickel closed at $14,118/t overnight.

Forecasts for 2019 and 2020 were also raised by $1,000/t to $13,500/t and $14,000/t, respectively.

S&P said its forecasts were increased to reflect declining production by Vale, Norilsk and Sumitomo, falling stock levels, and positive Chinese stainless steel production.

On the supply side, analysts noted that any negative action on mines in the Philippines or curtailments of Indonesian export permits could further lift prices.

S&P said the recent rise in nickel to $15,000/t was unsustainable in the next year or so.

"The relatively weak margins of stainless steel producers in China limit the companies' ability to pass on high nickel prices," it said.

"Thus, we think the current nickel price is unsustainable and could pressure steel prices in the short-term because stainless steel production still accounts for about 65% of the first use of nickel.

"We also think that the current spot prices for nickel reflect some degree of speculative bullish sentiments.

"Although the production of electric vehicle batteries have only minimally contributed to global nickel demand (less than 3%), the optimistic forecasts of auto manufacturers have added to the upward price trend."

 

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.