In this list
Electric Power | Metals

Headwinds to hit consumer demand for metals: Sucden

Commodities | Electric Power | Electricity | Energy | Coal | Energy Transition | Emissions | LNG | Natural Gas | Natural Gas (European) | Oil | Crude Oil | Metals | Steel | Steel Raw Materials | Shipping | Tankers

Market Movers Europe, Oct 25-29: Mixed signals for oil prices, energy majors release Q3 results

Energy | Electric Power

Platts Forward Curves – Gas and Power

Metals | Coronavirus | Steel

16th Steel Markets Asia Conference

Agriculture | Energy | Energy Transition | Coal | Natural Gas | Electric Power | Biofuels | Renewables | Emissions | Electricity

FEATURE: Biomethane GOs cross-border trading needs a harmonized EU registry system

Metals | Non-Ferrous | Steel | Steel Raw Materials

Around the tracks: Vehicle makers lower annual forecasts amid parts shortage

Headwinds to hit consumer demand for metals: Sucden

Highlights

Headwinds include China power outages, construction curtailment

Softer economic environment not conducive to copper upside

Aluminum, nickel markets more bullish

Consumer demand for various metals such as copper, aluminum, nickel and PGMs faces headwinds over the fourth quarter, notably from the impact of power outages, construction curtailments, decarbonization efforts and monetary tightening in China, Sucden Financial's head of research Geordie Wilkes said during an Oct. 6 metals market webinar.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

However, he added that the impact on prices is likely to be delayed due to backlogs of orders in some commodities, which are making demand appear to be stronger than it actually is.

Wilkes said that new orders from China, as well as the Purchasing Managers' Index, had been contractionary for a few months, which Sucden views as a clear dynamic causing metals, particularly copper, to suffer.

Sucden is not all that bullish on copper -- which reached record highs of over $10,000/mt earlier in 2021 but has dropped back to around $9,000/mt -- forecasting a trading range of $8,500-$9,500/mt in the fourth quarter.

"You're starting to see that softer economic environment and that's not going to be too conducive to the upside for copper. When we look at global macro-economy, obviously 'Doctor Copper' has been given that name for a reason. The evidence is really starting to mount up and I do think you can see prices dip down towards $8,500/mt," Wilkes said.

He said that mine supply was climbing from South America, especially Peru, although production in Chile had been impacted by strikes and water restrictions at BHP's Cerro Colorado copper mine.

"Global mine supply in the first half of the year was up around 4.9% year on year. Another interesting dynamic is the power side and... China's carbon-neutral plans, which are impacting a lot of metals on the production side," Wilkes said.

Sucden commodity broker Robert Montefusco said that, while copper stocks were relatively tight and the market was steady, it was "definitely going to react to what we are seeing in global activity, particularly looking at energy prices and monetary tightening."

Power outages impact aluminum supply

Meanwhile, Sucden remains largely bullish on aluminum prices due to China's problems with power outages. The LME aluminum cash price hit an intra-year high of $2,949.50/mt in mid-August and remains strong, edging slightly lower to $2,879.50/mt on Oct. 6.

Sucden expects a $2,800-$3,000/mt range for prices in Q4, with Wilkes saying that he expected quite a lot of new smelter production that was meant to come online this year would be halted.

"We don't know how the market is going to react to this, but the increase in costs from the supply side are going to increase the cost curve," Wilkes said.

He said, as of August, there was probably 2 million mt/year of Chinese aluminum capacity taken out of the market and this was expected to push towards 3 million mt/year by the end of the year, if not already.

"The market is quite nervous around $3,000/mt... the demand side in China continues to soften, while manufacturing in the US and Europe is still very strong. Lead times of products are very high and we do expect that to continue in the near-term, but as backlog orders are filled, the real underlying consumer demand is going to start to filter in and could cause quite a bit of a shock on that side of the market," Wilkes said.

Low nickel stocks

Nickel prices were also being hit by China's power outages, although a key supporting factor was low inventories of nickel, Wilkes told the webinar.

Sucden expects nickel prices to trade in the $17,000-$19,300/mt range in Q4, with Wilkes saying they had a "pretty strong support level."

LME nickel cash prices are currently at $17,800/mt, down from $20,372/mt reached in early September.

"Inventories are probably going to fall further -- they've fallen a lot already and you are really getting to the material that is of lower quality and lower purity, so that is another impact on the market in that it's going to need more processing and the power outage and electricity shortage are also impacting production," Wilkes added.

Montefusco said that, while nickel prices were expected to move higher in the longer term due to falling stocks, in the short term he expected them to go along with other metals hit by the curtailments in the Chinese construction market.

He added that plummeting car sales due to the shortage of semiconductor chips was also an issue.

Wilkes agreed that although overall auto demand was still weak, more electric vehicles were being made, which was resulting in "an interesting dynamic."

"We are seeing more batteries and more EVs across the globe produced... seeing all the different gigafactories that are looking to be built in Europe. You'll probably see a considerable amount of consumption coming from Europe in the coming years and now with Biden as US president, more investment is going into that sector in the US," Wilkes said.

The ongoing semiconductor shortage is also expected to continue impacting platinum group metals, although Wilkes said that hopefully some backlogs would be filled in 2022.

"Palladium is expected to remain in deficit... but platinum supply is looking to return to pre-pandemic levels so with that weak demand outlook and strong supply side, you do expect platinum will continue to suffer," Wilkes said.

Sucden forecast the Q4 trading ranges for palladium and platinum at $1,760-$2,130/oz and $840-$1,030/oz, respectively.