Engineering & Mining Journal

AUG 2018

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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104 E&MJ • AUGUST 2018 www.e-mj.com MARKETS Morgan Stanley Research (MSR) sees global expansion continuing through 2019, but risks from trade barriers and China policy tightening are build- ing. The research group has turned more constructive on met coal, copper and iron ore. They believe supply disruptions underpin the outlook for incrementally stronger prices. The MSR metals team raised its 2018, 2019 and 2020 copper price fore- casts by 1% to $3.11/lb, 5% to $3.14/ lb, and 1% to $3.01/lb, respectively. The team expects the market to remain bal- anced through the rest of 2018, but po- tential strike action presents upside risk. They are expecting a supply-driven defi cit to emerge in 2019 as Grasberg enters a "transition year," but brownfi eld projects and a number of greenfi eld mines will re- balance the market into 2020 by adding 1.4 million metric tons (mt) of supply by 2022. The MSR team's long-term nom- inal price is $3.11/lb, unchanged from the last update. The MSR team also now sees alu- minum prices increasing to $1.01/lb in 2018, 5% higher than previously forecast. Prices should remain volatile through the second-half of 2018, refl ect- ing the market's waxing and waning fears around trade sanctions and tariffs. The 2019 and 2020 forecasts are unchanged at $0.98/lb. The long-term nominal price estimate of $1.05/lb remains unchanged. MSR revised alumina price forecasts higher for 2018, as supply remains constrained. The alumina price forecast was raised in 2018 by 18%, and its 2019 forecast by 2%, expecting prices to aver- age $442/mt this year and $354/mt in 2019. The increase to the 2018 forecasts is driven by MSR's belief that Alunorte will not restart until the fi rst quarter of 2019, keeping prices well-supported through the rest of the year. The team's long-term nominal price remains $370/ mt, unchanged from its last update. The fi rm now sees met coal prices in- creasing by 29% for 2019 and 9% for 2020 compared to the previous fore- cast. The team now expects $163/mt for hard coking coal in 2019 and $130/ mt in 2020. These revisions are driven by higher input costs due to a higher oil price outlook and stronger-than-expected demand for high-quality seaborne coal, primarily from Chinese steel mills due to environmental pressures, which should keep prices above cost-support levels. The long-term nominal price forecast re- mains unchanged at $143/mt. The MSR iron-ore price forecast re- mained largely unchanged, while price forecasts for 2019 and 2020 increased by 5% and 12%, respectively. The up- ward revisions are primarily driven by a better outlook for Chinese steel. Its new 2018, 2019, and 2020 price forecasts are $66/mt, $61/mt and $60/mt, re- spectively. While the team expects 2019 prices to average $61/mt, it expects slowing demand and ramping seaborne supply to push prices below $60/mt by the end of 2019. The long-term nomi- nal price forecast is unchanged from last quarter, at $57/mt. The group lowered its zinc price fore- casts by 1% in 2018. Pricing is expect- ed to remain strong this year at $1.46/ lb. MSR left its long-term nominal price unchanged at $1.19/lb. For a full report, visit www.morgan- stanley.com/what-we-do/research. Supply Disruptions Underpin the Outlook for Stronger Prices Gold and silver prices provided by KITCO Bullion dealers (www.kitco.com). Platinum group metals prices provided by Johnson Matthey (www.platinum.matthey.com). Non-ferrous base and minor metal prices provided by London Metal Exchange (www.lme.co.uk). Iron ore prices provided by Platts Iron Ore Index. Currency exchange rates were provided by www.xe.com. (August 1, 2018) Precious Metals ($/oz) Base Metals ($/mt) Minor Metals ($/mt) Exchange Rates (U.S.$ Equivalent) Gold $1,215.50 Aluminum $2,036.00 Molybdenum $26,000 Euro (€) 1.160 Silver $15.35 Copper $6,137.00 Cobalt $67,250 U.K. (£) 1.303 Platinum $823.00 Lead $2,115.50 Canada ($) 0.768 Palladium $925.00 Nickel $13,780.00 Iron Ore ($/dmt) Australia ($) 0.737 Rhodium $2,325.00 Tin $19,975.00 Fe CFR China $66.55 South Africa (Rand) 0.075 Ruthenium $250.00 Zinc $2,628.00 China (¥) 0.146

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