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In This List

Sector Review: Metal Price Assumptions: Aluminum Lowered For 2020-2021; Copper Raised For 2022


Quote Book: Gleaning Sector Trends From Rating Actions For BSL CLO Market Participants (As Of Oct. 29, 2020)


Five Dangers For Credit Markets Awash With Liquidity

Cracking & Fracking: A Review Of The Each Presidential Candidate’s Energy Platform And What It Means For Credit Quality


COVID-19 Impact: Key Takeaways From Our Articles

Sector Review: Metal Price Assumptions: Aluminum Lowered For 2020-2021; Copper Raised For 2022

Table 1

Revised Metal Price Assumptions Versus Previous Assumptions*
Revised assumptions (as of Dec. 23, 2019) Previous deck (Oct. 9, 2019)
($/ton) 2020 2021 Afterwards Rest of 2019 2020 2021 Afterwards
Aluminum 1,900 2,000 2,100 1,800 2,000 2,100 2,100
Copper 6,000 6,100 6,200 5,900 6,000 6,100 6,100
Nickel 15,000 15,500 16,000 17,000 15,000 15,500 16,000
Zinc 2,300 2,300 2,300 2,400 2,300 2,300 2,300
Gold ($/oz) 1,400 1,400 1,300 1,450 1,400 1,400 1,300
Iron ore ($/dmt) 80 70 65 90 80 70 65
*Ton--metric ton (1 metric ton = 2,205 pounds). Oz--ounce. Dmt--Dry metric ton.

S&P Global Ratings maintains most of its price assumptions for its rated metals portfolio for 2020, 2021 and 2022. We made minor revisions to our price assumptions for aluminum and copper to more closely reflect our view of prevailing market dynamics and supply-demand fundamentals. Our assumptions for gold, iron ore, nickel, and zinc remain unchanged.

Demand fundamentals for industrial metals continue to be weighed down by slowing economic growth in the U.S., China, and EU. We believe the prospect of a global recession has reduced for the next 12 months, with a 25%-30% probability of one occurring. In our view, this lowers the downside risk to the demand for global commodities.

Supply growth for most metals, excluding the normalization of iron ore, is likely to remain relatively constrained over the next couple of years, which in our view should provide fundamental price support for most of these commodities.

We believe geopolitical risks and trade tensions will continue to undermine growth prospects, shifting market sentiment and adding volatility to commodity prices. As a result, we would expect to adjust our price assumptions in accordance with changing market dynamics.

For additional insights into our views on global growth and credit conditions, please read "Global Credit Conditions: A Precarious Balance," Dec. 4, 2019. For more details on our methodology to determine price assumptions, please see "FAQ: How S&P Global Ratings Formulates, Uses, And Reviews Commodity Price Assumptions," published Sept. 28, 2018.


We have lowered our aluminum assumption by $100/ton to $1,900/ton to reflect the forward curve and our expectation that growth in demand for the metal will slow down, primarily led by softness in the global automotive industry. Prices have held between $1,700/ton and $1,800/ton over recent months despite expectations of the market being in a deficit of 1.0 million tons in 2019 and global inventory levels reaching lows not seen since 2007.

Our long-term price assumptions reflect our view that prices will be supported by slower growth in smelting capacity in China, low inventory levels, and long-term demand growth trends, such as lighter-weight vehicles and increasing aluminum applications in the aerospace sector. However, global trade tensions and potential risks to global growth may continue to weigh on aluminum prices over the next 12 months.

At current prices of around $1,750/ton, a significant amount of capacity is being produced at a cash loss. This deficit may lead to additional capacity curtailments, further supporting a price recovery. In our view, our longer-term price assumption of about $2,100/ton would correspond to a healthier margin level for producers.


We maintain our copper price assumptions at around $6,000 per ton in 2020 and $6,100 in 2021, with a slight increase to $6,200 in 2022. In our view, supply expansion in the next few years are likely to be modestly below 2%, but the pace of demand growth will probably stay low as well. Chinese imports of refined copper are likely to grow modestly on the back of protracted trade flows and slower domestic consumption (as seen in recent trends of electricity and automobile production).

The downside risk for copper prices is likely to be low, assuming no drastic changes to the global trade flows. We expect a mild deficit for concentrate copper in 2020, with a chance that this will become more pronounced towards 2021 as supply constraints occur more frequently. Prospects for large greenfield projects, such as Quellaveco and Tia Maria in Peru, are getting gloomier, due to the social and political opposition to these projects. Such opposition is a recurrent issue in some parts of Peru--a country that supplies nearly 10% of the world's copper supply.

Table 2

Global Copper Supply-Demand Balance
(kt) 2018 2019 2020 2021
Production 23,679 24,130 24,679 25,354
Year-on-year change (%) 3.20 1.90 2.30 2.70
Consumption 23,723 24,011 24,686 25,427
Year-on-year change (%) 3.20 1.20 2.80 3.00
Balance (44) 119 (7) (73)
Stocks (no. of weeks' consumption)
Total stocks 12.4 12.5 12.2 11.7
Year-on-year change (%) (3.70) 0.90 (2.80) (4.10)
Note: Data as of Dec. 6, 2019. Historical figures draw in part on the work of International Copper Study Group and World Bureau of Metal Statistics. kt-Kilo ton. Sources: S&P Global Market Intelligence; COMEX; London Metal Exchange; Shanghai Futures Exchange; Thomson Reuters.


We have not changed our gold price assumptions, which include US$1,400 per ounce (oz) in 2020-2021, and US$1,300/oz thereafter. In our view, market fundamentals for gold remain largely the same. Prices have also trended roughly in line with our previously revised assumptions over this period, staying just above US$1,450/oz.

We expect short-term periods of sentiment-driven volatility to persist over the next 12 months, but the factors supporting our price assumptions should remain mostly intact. In our view, slowing global economic growth and relatively low interest rates should limit material downside to prices. Specifically, we assume the historical inverse relationship between interest rates (i.e. 10-year Treasury yields) and gold prices will persist. Moreover, uncertainty remains around progress in the U.S.-China trade dispute and prospects for tariffs around the world, and this is likely to limit sustained downside pricing pressure.

However, we do not envision a material increase in gold prices from current levels. The yield curve in the U.S. is no longer inverted, and this follows three interest rate cuts by the U.S. Federal Reserve this year. S&P Global Ratings economists also now expect U.S. GDP growth in 2020 of 1.9%, and place the risk of recession in the next 12 months at the upper end of the 25%-30% range. Both these measures represent a slight improvement since our previous review. Nominal interest rates (10-yield Treasuries) are also likely to slowly increase beyond this year, with no further cuts in 2019. In our view, these factors notably temper upside to our assumptions, which are slightly below previous prices.

Iron Ore

Our price assumptions for iron ore remain unchanged, and include average prices of $80/dry metric ton (dmt) in 2020, $70/dmt in 2021, and $65/dmt thereafter. This reflects our view of market fundamentals for iron ore over the next two to three years, and our expectation of a gradual normalization of market supply.

Going into 2020, prices are likely to remain elevated and are well supported, stemming from the supply-side disruption caused by a dam disaster for Brazil-based Vale S.A. in early 2019. We maintain our view that supply will return to the market over the next two to three years, and that any increase in supply would be gradual.

We expect spot prices to wane during 2020 on the back of improved production from each of the majors, including Vale. Operations have since resumed at Vale's Brucutu mine; however, output will temporarily reduce to about 40% of normal capacity as the company evaluates the stability of the nearby Laranjeiras dam. About half of the 93 million tons per annum (mtpa) of iron ore supply has been brought back online since Vale's disaster, with the remaining 40 mpta targeted to return over the next two years.

Our assumptions also incorporate our expectations for slowing economic growth in China and incremental supply returning to the seaborne market. Apart from the incremental production from Vale, we don't expect any meaningful incremental volumes from the global iron ore majors in the coming 12 months due to capacity constraints. Over the long term, we anticipate a continued shift to electric arc furnaces in China, given that scrap availability will rise over coming years, and that could dampen the long-term demand prospects for iron ore.

Table 3

Global Iron Ore Supply-Demand Balance
(Mil. tons) 2018 2019 2020 2021
Global crude steel production 1,789 1,841 1,795 1,812
Year-on-year change (%) 5.30 2.90 (2.50) 1.00
China crude steel production 924 988 894 887
Year-on-year change (%) 9.40 6.90 (9.50) (0.70)
Global iron ore demand 2,338 2,398 2,340 2,384
Year-on-year change (%) 6.18 2.57 (2.42) 1.88
Global iron ore supply 2,350 2,375 2,392 2,478
Year-on-year change (%) 8.95 1.06 0.72 3.60
Global balance 11 (22) 52 94
Total seaborne iron ore demand 1,743 1,735 1,706 1,750
Year-on-year change (%) 6.20 (0.40) (1.70) 2.60
China iron ore import requirement 1,113 1,217 1,083 1,075
Total seaborne iron ore supply 1,717 1,652 1,646 1,706
Year-on-year change (%) 2.20 (3.80) (0.40) 3.70
Seaborne balance (26) (83) (60) (44)
Note: Data as of Nov. 29, 2019. Sources: S&P Global Market Intelligence; S&P Global Platts; China National Bureau of Statistics; CuSteel; Indian Trade Classification; World Steel Association.


Our price assumptions for nickel over 2020-2022 remain unchanged, at $15,000/metric ton (MT) in 2020, $15,500/MT in 2021, and $16,000/MT in 2022 onwards. This reflects the forward curve as well as our view of the key supportive fundamentals for nickel.

Indonesia's recent announcement that it will introduce an export ban for nickel ore from the beginning of 2020 (two years earlier than originally planned) led to a sharp spike in nickel prices, which climbed over $18,000/MT in September 2019. Later, the Indonesian government reported that nine companies would still be permitted to export ore because they demonstrated satisfying progress in constructing local smelters. So, as we had expected, the major bullish impact was relatively short-lived, and spot levels returned to more moderate level of $13,000/MT-$14,000/MT.

We will likely see this continued high volatility in prices for the next two to three years. We think the fundamentals such as declining stocks and a projected nickel deficit will support prices in 2020. However, demand stemming from the stainless steel industry is susceptible to fluctuations driven by trade tensions. Demand support has, however, been healthy recently.

Table 4

Global Nickel Supply-Demand Balance
(kt) 2018 2019 2020 2021
Primary output 2,229 2,371 2,384 2,452
Year-on-year change (%) 9.00 6.40 0.60 2.80
Primary use 2,327 2,419 2,479 2,541
Year-on-year change (%) 6.60 3.90 2.50 2.50
Balance (99) (48) (95) (89)
Total stocks 753 705 610 521
Year-on-year change (%) (12.40) (6.40) (13.40) (14.50)
Note: Data as of Dec. 10, 2019. Historical figures draw in part on the work of International Nickel Study Group and World Bureau of Metal Statistics. kt--Kilo ton. Sources: S&P Global Market Intelligence; S&P Global Market Intelligence; International Stainless Steel Forum; London Metal Exchange; Shanghai Futures Exchange; Thomson Reuters.


Zinc has been trading around our price assumption of $2,300/ton, which in October we revised down by $200/ton for 2020 and $100/ton for 2021 on a slowdown in demand due to trade concerns and a softer economic growth outlook.

We continue to expect steel production to remain stagnant for the next two to three years amid slower economic growth. After an expected decline in global auto sales in 2019, our global auto team forecasts low single-digit growth in auto sales in each of 2020 and 2021, primarily driven by growth in China after a high single-digit decline this year.

A stronger U.S. dollar will also limit the upside potential to our price assumptions.

Table 5

Global Zinc Supply-Demand Balance
(kt) 2018 2019 2020 2021
Refined output 13,623 13,889 14,084 14,285
Year-on-year change (%) 1.10 2.00 1.40 1.40
Refined use 13,676 13,764 13,988 14,169
Year-on-year change (%) (0.10) 0.60 1.60 1.30
Refined balance (53) 125 96 116
Total stocks 1,431 1,556 1,652 1,768
Year-on-year change (%) (3.57) 8.74 6.17 7.02
kt--Kilo ton.

Related Research

  • Global Credit Conditions: A Precarious Balance, Dec. 4, 2019
  • Credit Conditions Asia-Pacific: Rate Relief, Risks Remain, Dec. 3, 2019
  • Credit Conditions EMEA: Low Growth, Lower Rate, Dec. 3, 2019
  • Credit Conditions Latin America: Political Challenges Will Prevail In 2020, Dec. 3, 2019
  • Credit Conditions North America: Recession Risk Has Eased For Now, Dec. 3, 2019
  • Industry Top Trends 2020: Metals And Mining, Nov. 21, 2019

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