The past two years have seen a sustained rise in metals prices. On average, the London Metal Exchange basket rose from the start of 2016 to the end of that year by 23% and in 2017 the rise has been around 20%.
The average rise over the past two years in all the base metals, except zinc, has been clustered around 35-45%. For zinc, the rise over the past two years has more than doubled.
In assessing the common factors driving prices higher, there are essentially four.
First, Chinese demand growth, especially in housing and infrastructure, exceeded expectations in both years as Chinese policy makers returned to “old economy” drivers.
Secondly, Chinese supply-side reforms and environmental clampdowns have restricted supply-side growth in China in energy (coal and coke), raw materials (especially iron ore, zinc and bauxite/alumina) and finished products (steel and aluminium).
Thirdly, low prices in the 2012-15 period seriously hit new project development...