Pictured above, from left: Liu Yang of the LME, Simon Collins of Trade Cloud Services, Robert Hawkes of Goldman Sachs International, Guy Wolf of Marex Spectron and Zhu Yi of Bloomberg Intelligence.
A panel of metals analysts and traders gathered for the LME (London Metal Exchange) Asia Week 2018 Seminar, which took place in Hong Kong in May, largely agreed that events in the first five months in 2018 had done little to squelch the world’s growing demand for base metals, likely meaning prices will be stable to rising the rest of 2018.
Regarding copper, Simon Collins of Singapore-based Trade Cloud Services Pte. Ltd. commented, “A lot of new production has been absorbed by the market [and] pricing has stayed strong. Overall, the picture looks relatively bullish.”
On the supply side, panelist Robert Hawkes of Goldman Sachs International said it is unclear how many or where copper mine labor-management disagreements will play a role in 2018, but, “Either way, we’ll see supply disruptions,” and, as a result, “Prices will rise pretty quickly and sharply on the back of that.”
Zhu Yi of Bloomberg Intelligence remarked that while restrictions had meant Chinese manufacturers were importing less copper scrap in 2018, they quickly produced or brought in more concentrates and blister. “We do see more copper scrap going to Southeast Asia,” she added. “Going forward, that will be a trend.”
Guy Wolf of London-based commodity brokerage Marex Spectron said the speculative investment community “does not do particularly well with copper,” but the red metal may still draw attention from such investors if they wish to put money into commodities. “Metal has different characteristics than other commodities; it’s easy to store,” he remarked. “You cannot [easily] store billions of dollars in crude oil, but you can store a lot of copper.”
Supply factors may also support aluminum pricing in 2018, according to Zhu. She said China’s National Development and Reform Commission (NRDC) may cut not only aluminum production for clean air reasons in late 2018, but also is scrutinizing “captive power plants” at facilities such as smelters.
She added, “We see less than expected [aluminum] capacity cuts, but very slow approval on new capacity. Going forward, the output growth [in China] is slowing down, supporting prices.”
Wolf pointed to nickel as a metal whose pricing “still has residual strength in our estimate.” He said the use of the metal in electric vehicles (EVs) may be “a little bit of a red herring [but is] positive for psychology” within the nickel market.
Hawkes stated, “I don’t think the EV story is a red herring. If you’re in that business, you need to lock in prices now. You don’t know where [metals] prices will be in five years.”
Although Wolf may have disagreed somewhat about the role of EVs in the market, he nonetheless made the case for metals price bullishness by stating a downturn in high-tech, real estate or overall stock market investing could bring “a flood of money into assets that had been forgotten about, and that includes metals. I think metals prices will go materially higher—higher than anyone imagines right now.”
The LME Asia Week 2018 Seminar was Thursday, May 17, at the Hong Kong Convention and Exhibition Centre.