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Goldman Sachs slashes 2019 metals outlook on 'decelerated' Chinese economy

Goldman Sachs slashed its metals forecast for the first half as China's economy "decelerated notably," while the outlook remains positive for the second half, Bloomberg News reported Jan. 6, citing a Jan. 4 note.

The team of analysts now see copper at US$6,100/t in three months and at US$6,400/t in six months, decreasing from earlier predictions of US$6,500/t and US$7,000/t, respectively.

For aluminum, Goldman Sachs lowered its price forecast to US$1,900/t from US$2,100/t over three months and to US$1,950/t from US$2,000/t over six months.

The team lowered the three-month outlook for zinc to US$2,500/t from US$3,300/t, the six-month target price to US$2,400/t from US$3,000/t, and the 12-month outlook to US$2,200/t from US$2,800/t.

Goldman Sachs also slashed its nickel outlook on expectations of low-cost Indonesian supply. The bank lowered its three-month and six-month nickel prices to US$11,000/t and US$11,500/t, respectively, from US$15,000/t and US$16,000/t.

The team lowered the 12-month nickel price to US$12,500/t from US$18,000/t.

"Policy will need to ease in order to offset the weakness in many parts of the economy," the analysts said, citing the political importance of the Chinese growth target.

Metals remained under pressure in 2018 due to global trade tensions and a rising U.S. dollar, while China's domestic slowdown was also a leading factor in prompting bearishness.

"The experience of the 2015-2016 downturn also implies that, in uncertain times, investors may want to see concrete signs of demand strengthening before taking long positions," the analysts said.

The outlook for the second half remains positive on the back of certain metals, including copper, being oversold and on supportive microdevelopments in China.

Infrastructure investment growth is expected to accelerate to 10% in 2019 from 4% in 2018. Annualized quarterly GDP growth is also expected to increase.