TELF AG Insights: Base Metals Face Challenges Amid Economic Conditions May 15, 2023
Declining prices
The base metals market has experienced a decline in prices in recent months, with copper being particularly affected. Currently priced at $8,500 per metric ton, copper has significantly decreased to around $1,000 per ton from its mid-January highs. Several factors have contributed to this downward trend, creating a challenging environment for base metals.
One key factor impacting copper prices is the state of the Chinese economy. While the recovery has been steady, it has not been as robust as anticipated. As a result, copper semi-fabricator utilization rates have reached a plateau, affecting the overall demand for the metal. Additionally, concerns about the European and US economies experiencing a slowdown and ongoing recession fears have further dampened market sentiment.
The complexity of central bank interest rate policies is also contributing to the challenges faced by base metals. In addition, banking failures and the need to address core inflation have made it difficult for central banks to implement effective strategies. The combination of these factors has created uncertainty and volatility in the market, impacting the pricing dynamics of base metals.
CITI Research recently released its updated forecast for base metals in 2023, reflecting the evolving market conditions. As a result, the forecast includes adjustments to the price predictions for various metals. For example, the zinc price forecast has been revised downward to $2,882 per metric ton, reflecting a decrease from the previous estimate of $2,958. Similarly, the aluminum price forecast for 2023 has been lowered from $2,561 per metric ton to $2,475. CITI Research has also adjusted its aluminum price forecasts for 2024 and 2025, with estimates now at $2,800 per metric ton and $2,900 per ton, respectively.
Regarding nickel, the bank revised its 2023 price forecast to $23,258 per metric ton, down from the previous estimate of $23,443. Looking ahead to 2024, CITI Research reduced its nickel price forecast to $20,000 per metric ton, down from $22,000 per ton. However, despite the challenges faced by the base metals market, CITI Research raised its copper price forecast 2023. The new estimate is $8,733 per metric ton, up from the previous forecast of $8,607 per ton. Furthermore, the bank increased its copper price forecasts for 2024 and 2025 to $10,000 per metric ton.
The adjustments made by CITI Research reflect the changing dynamics and expectations in the base metals market. While certain metals face downward pressure due to prevailing economic conditions, copper stands out as a metal with the potential for resilience and growth in the coming years. As a result, the revised forecasts indicate that copper may overcome the challenges and continue its upward trajectory.
Investors and industry stakeholders should closely monitor the base metals market, considering the evolving economic landscape and the potential impact of various factors on prices. For example, the Chinese economic recovery, European and US economic conditions, central bank policies, and inflation levels will all significantly shape the future of base metals. In such a complex environment, staying informed and adapting to market dynamics will be crucial for making informed decisions.
