Analysts remain bullish over industrial metals in 2021

Analysts expect industrial metals prices to continue to rise in 2021 as global manufacturing recovers. However, metals prices may start to ease back if China withdraws its economic stimulus.

London-based Capital Economics said in a Jan. 13 note that the prices of industrial metals may encounter headwinds if the Chinese economy slows and demand growth for consumer goods "comes off the boil," but the rally in metals prices is still expected to continue on the back of China's outperforming economic growth and growing risk appetite.

"While prices may rise further in the near term, we think that they will start to ease back in the second half of 2021 as China withdraws its economic stimulus and supply picks up," the analysts said.

The price of copper, which is currently trading near an eight-year high of $8,000 per tonne, may fall to $7,000/t by end-2021 due to less stimulus from China and a recovery in mined and refined supply as coronavirus-related restrictions ease, according to Capital Economics.

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Tin prices hit a seven-year high Jan. 21 as consumers continue to boost global demand for electronics, SP Angel said in a same-day market overview.

However, analysts at Capital Economics warned tin consumption may slow amid weaker global electronics demand as economies reopen and spending in advanced economies steers away from consumer goods. "This will lead to markedly slower growth in tin consumption, in particular, but will be a factor weighing on overall demand for most other base metals too," the analysts wrote.

StoneX, formerly known as INTL FCStone, is bullish on industrial metals on global manufacturing recovery supported by stimulus from central banks and governments. According to a Jan. 8 note, the "unprecedented" shift toward green policy, driven by government stimulus packages across the world as well as electrification and light-weighting of vehicles, will dramatically increase the demand for copper, aluminum and battery metals, including cobalt, lithium and nickel.

"We forecast a bullish outlook for the metals this year as demand outside China recovers on global immunization prospects, while China enacts its 14th Five-Year Plan and a global shift to green policy supports investment into 'green' metals," Natalie Scott-Gray, a senior metals analyst at StoneX, said in the note.

In a monthly report published Jan. 19, S&P Global Market Intelligence's Metals and Mining Research team forecast zinc price to rise to $2,500/t in 2021, with a surplus of 12,000 tonnes.

"Market sentiment was broadly positive during December 2020 and early January as coronavirus vaccination programs began, although the bullish sentiment has been tempered of late by fresh virus outbreaks in China and a strengthening U.S. dollar," Market Intelligence analysts said.

Global mined zinc output is expected to reach 13.72 million tonnes in 2021, up 3.8% from 2020, according to Market Intelligence analysts, who noted the resumption of operations at Vedanta Ltd.'s Gamsberg zinc mine in South Africa. Annual global refined zinc consumption is forecast to climb 4.7% to 14.07 million tonnes in 2021 as vaccine rollouts are expected to boost global economic recovery.