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S&P Global Ratings raises metals price outlook again on anticipated demand

S&P Global Ratings again raised its price assumptions for copper, nickel, zinc and iron ore, anticipating stronger demand coupled with supply constraints in the next two to three years. The previous revision was completed in December 2017.

The rating agency said March 9 that it expects prices of US$6,400/tonne of copper, US$12,000/t of nickel, US$3,200/t of zinc and US$65/t of iron ore for the remainder of 2018.

According to S&P Global Ratings, Chinese demand and production capacity remain the biggest influences over metal prices, despite the U.S. government's move to impose tariffs of 25% on global steel imports and 10% on aluminum imports.

The report outlines copper prices increasing in the medium term to US$6,600/t in 2019 and US$6,800/t in 2020 compared to previous estimates of US$6,170/t for each of 2018, 2019 and 2020, as strong global demand is expected to outpace supply, leading to "very tight" market conditions toward the end of the decade.

While the surprising demand for steel in 2017 is not expected to be replicated in 2018, S&P Global Ratings anticipates steel demand remaining positive this year, which will continue to support iron ore prices.

The higher 2018 price forecast for iron ore, up from US$55/t previously, is backed by expectations that steel margins will remain healthy through 2018 amid reduced Chinese steel capacity and stable demand from China's downstream sector, though prices are seen dropping beyond 2018 to US$60/t in 2019 and US$55/t in 2020.

Improved market fundamentals, particularly production cuts by global majors such as Vale SA and Sumitomo Corp. and increased demand from Chinese stainless steel producers, led to the upward revision of nickel prices.

Higher zinc price assumptions were driven by expectations that current improvements in steel production and healthy steel prices will lead to demand continuing to surpass supply, as large capacity shutdowns in 2015 and 2016 are unlikely to be replaced in the short term.

S&P Global Ratings' 2018 price forecasts for gold and aluminum remain at US$1,250/oz and US$2,100/t, respectively.

This S&P Global Market Intelligence news article contains information issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings document referred to in this news brief can be found here.