Industrial metals rebound on bullish long-term demand
04:59, 16 December 2021
Most base metals prices rebounded on Thursday in Asia trading supported by optimism over long-term demand despite China’s subdued economic data and the Federal Reserve’s hawkish monetary policy.
Copper on the London Metal Exchange advanced 1.98% to $9,381.50 per tonne, while US copper futures rose by 1.23% to $4.23 per pound. Aluminium advanced 1.24% to $2,631.25/tonne; tin rose 0.92% to $38,502.5/tonne; and zinc gained 0.97% to $3,316.25/tonne. Nickel rose 1.52% to $19,380/tonne.
Prices of most industrial metals dropped on Wednesday after a slew of China’s data signalling slowing economic growth, clouding demand for the metals. China’s retail sales, an indicator of consumer spending in the world’s most populous country, grew by 3.9% in November, slowing from an increase of 4.9% in October, the National Bureau of Statistics announced on Wednesday.
Long-term demand
Ahmad Zuhdi, analyst at the Office of Chief Economist at Jakarta-based Bank Mandiri, told Capital.com that since most economies in metal-consuming countries are still recovering, any negative sentiment could knock metals prices.
“However, prices will tend to rebound because overall (metals) demand is still high. Market still optimistic for long-term that metals will be the core of renewable energy development. Therefore, demand for nickel, copper, aluminium and other will still increase,” Ahmad added.
According to a study commissioned by the International Copper Association (ICA), increases in solar and wind energy will raise copper demand by 813,000 tonnes annually by 2027, a 56% increase on 2018 levels. The International Nickel Study Group (INSG) in October forecast global primary nickel usage will increase to 3.04 million tonnes in 2022, from estimated 2.77 million tonnes in 2021.
INSG expects the electrification of vehicles will continue to have a positive impact on nickel usage through the use of nickel sulphate in batteries.
Copper disruption
Copper was also supported by the announcement from copper miner MMG on Thursday that it will shut production at its Las Bambas mine in Peru, the world’s second copper miner, from 18 December, which may squeeze supply in market.
The decision came after the wholly owned subsidiary of Guoxin International Investment could not reach an agreement with local Peruvian who had blocked the mine’s transport road.
MMG estimated that until 18 December, production is estimated at 290,000 tonnes of copper concentrate. Stockpiles on site are now approximately 60,770 tonnes of copper in concentrate, it added
Prices can go up further
Also on Wednesday, the US Federal Reserve (Fed) announced plans to double the pace of its bond purchase programme or tapering, putting it on a path to zero out new purchases by March 2022, from an initial plan in June. But Fed chair Jerome Powell said the US central bank would not raise rates until the taper process concludes. It means rate hike decision may come as early as March next year or in May.
Ahmad said from the tapering process to the actual rate hike, metal prices can still go upward but in slower pace.
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