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MARKETS What Lies Ahead for 2012? By Steve Fiscor, Editor-in-Chief
Last year, natural disasters had a huge impact on mine production and financial worries had a negative impact on base metal prices. Although no one knows what Mother Nature has in store for this year, the inability of policymakers to come to grips with financial matters remains center stage. Taking these issues into account Natixis recently published its .
Despite a rapid increase in demand for aluminum, a sustained increase in supply kept the market in substantial surplus in 2011. With aluminum prices depressed and costs of production rising, aluminum companies are closing higher cost facilities to bring the market back into balance. Natixis projects aluminum prices rising modestly to an average of $2,250/metric ton (mt) in 2012, but significant downside risks clearly exist.
After a period of significant destocking in 2011, Chinese apparent demand for copper is expected to increase more rapid- ly than the 6%-7% increase in end-user demand. Prices may push significantly higher in 2012 as global stockpiles drop sharply. The forecast calls for average cop- per prices of $9,250/mt in 2012, before prices stabilize just below $10,000/mt in 2013.
The lead market experienced a "dis- tinctly schizophrenic year in 2011," according to Natixis. During the first half of the year, backwardations on the LME sug-
Base Metal Price Outlook 2010 to 2013 Average cash price ($/mt)
2010 Al
Cu Pb Ni Sn Zn
02,173 07,539 02,148 21,809 20,447 02,159
2011
02,395 08,810 02,400 22,830 26,025 02,190
2012
02,250 09,250 02,375 22,000 26,500 02,225
gested a high degree of physical scarcity just as metal flooded into Asian warehous- es, but in the second half of the year lead prices fell back (with LME markets shifting to contango) just as global stockpiles began to recede. For 2012, Natixis sees the recent tightening of the market in China as being indicative of more balanced funda- mentals this year, with a reduction in the global surplus to just 34,000 mt able to support average lead prices of $2,375/mt. Like lead, the tin market can be accused of flagrantly ignoring fundamentals for much of last year. During the early part of the year, prices pushed up to all-time highs above $33,000/mt, long after Chinese demand had gone into reverse. The tin mar- ket is in danger of moving toward acute physical scarcity over the coming two years. This could propel tin prices back up toward, if not in excess, of last year's highs. The nickel market confounded almost everyone last year, with expectations for a
2013
02,420 09,800 02,600 24,000 32,000 02,400
% change
12/11 -6.1%
-5.0% -1.0% -3.6% -1.8% -1.6%
13/12 07.6%
05.9% 09.5% 09.1% 20.8% 07.9%
significant surplus being met instead by a drop in LME stockpiles of 45,000 mt. Nickel prices should be well supported between $18,000-20,000/mt, suggesting an average for the year of perhaps $22,000/mt.
The zinc market has struggled with per- sistent surpluses in recent years, as mod- est growth in demand has been swamped by an increase in supply. Much of this over- supply can be traced to a major inventory cycle in China. The market looks to be in a better fundamental position in 2012, although we may need to wait until 2013 before deficits can begin to erode the sub- stantial global stockpiles that have accu- mulated over the preceding six years. Zinc prices are expected to advance mod- estly over the coming two years, with aver- age prices of $2,225/mt in 2012 and $2,400/mt in 2013.
The full 56-page report is available from www.natixis.com.
(February 3, 2012)
Precious Metals ($/oz) Gold
Silver Base Metals ($/mt)
$1,725.90 Aluminum $2,159.00 Molybdenum $31,500 Euro (€) $33.67 Copper
Platinum $1,625.00 Lead Palladium
Rhodium $1,475.00 Tin Ruthenium $120.00 Zinc
$708.00 Nickel
$8,320.00 Cobalt $2,147.00 $20,780.00
$31,500 U.K. (£) Iron Ore ($/dmt)
$24,000.00 Fe CFR China $145.00 South Africa (Rand) $2,088.00
China (¥)
Minor Metals ($/mt) Exchange Rates (U.S.$ Equivalent) 1.3156 1.5815 1.0069 1.0771 0.1338 0.1596
Canada ($) Australia ($)
80 E&MJ; • FEBRUARY 2012
www.e-mj.com
First Quarter 2012 Metals Review
Non-ferrous base and minor metal prices provided by London Metal Exchange Gold and silver prices provided by KITCO Bullion dealers (http://www
Currency exchange rates were provided by the GoCurrency .com.
.kitco.com). Platinum group metals prices provided by Johns (http://www
.lme.co.uk). Iron ore prices provided by P n
o latts IODEX (www t
M a t t h e y ( h t p : / w
/ .platts.com). .lt
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Source: Natixis
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