Bullish for base in 2018

Although base metals are under pressure in the short term, we have a bullish bias to our 2018 price forecasts given the supportive background of solid global economic growth and the fact that all six base metal markets look set to be in fundamental deficit this year. But each has a slightly different supply-side story and this aspect should be the main differentiator.

For example, zinc’s narrative has changed and is no longer about supply getting tighter and tighter. We will now see supply recovering steadily, assuming the new and restarted mine capacity coming on line does so without any undue delays or disruptions. That trend suggests that zinc’s bull market is nearing its peak, and picking a top is a key consideration in our forecasts here. 

Primary lead supply should also benefit from the same theme as zinc, but to a lesser extent.

Copper’s fundamentals are going the other way – the market is only going to get tighter over the medium to long term as underinvestment in the next generation of mines should increasingly be felt, compounded by this industry’s propensity for unplanned disruptions. That lays the foundation for a long-term uptrend in prices, but how fast? And how much of this developing bull story is already discounted?

And in aluminium, the market probably still has some adjusting to do having got overly optimistic about the effectiveness of Chinese reforms and cutbacks, but authorities haven’t given up and there is room for aluminium bulls to get excited again. 

Aside from the major supply side themes shaping the base metal outlooks, there is also the keen interest in the electric vehicle (EV) revolution to factor into price forecasts. But, again, the impact is different for each metal, with nickel set to be one of the biggest winners, albeit over the long term. Key to a successful forecast here will be judging how aggressively the market prices in this story.

Directional forecasts for March 2018
Short term pressure expected to push prices down in March, but overall 2018 is forecast to see price gains

Base MEtals Directional Price Forecasts

Reviewing 2017 price forecasts
Metal Bulletin’s Apex survey, which ranks the quarterly forecasting accuracy of the around 20 commodity banks and trading desks, regularly placed Metal Bulletin Research in the top-five leader boards throughout 2017.

For the latest complete quarter, Q4 2017, our forecasts for the period, which were submitted in early October, achieved over 98% accuracy in aluminium, copper, lead and tin.

Top forecaster in Q4
Averaged across all the base metals, Metal Bulletin Research’s overall accuracy rating in Q4 2017 was 99.4%, which placed it top of the Apex Base Metals Leaderboard for that quarter.

In the overall leaderboard for 2017, which averages the forecast accuracy for all six base metals over all four quarters of the year, we were ranked fourth most accurate, with an accuracy 95.6%. The top forecaster’s accuracy was just 0.8% higher.

In 2016, we ranked second with an average accuracy of 96.8%.

We also made it into overall annual leaderboard in the previous two years, ranking fifth in 2015 with an average accuracy of 91.9%, and fourth in 2014 with an average accuracy of 95.9%.

Metal Bulletin Research is the only forecaster to consistently appear in the Apex top five in each of the last four years.

Andrew Cole

Published

Andrew Cole

February 28, 2018

00:00 GMT