Industrial commodity prices to continue upward trajectory in 2014

In 2013, prices for most base metals – aluminium, copper, nickel and zinc – came down from where they had started the year, but 2014 should see them move back up again. Current PMI readings for the manufacturing industry in China, the eurozone and the United States suggest higher production growth in the months ahead. PMIs in key metal-consuming regions have been comfortably above 50 for quite some time now, showing that industrial activity – in China, the eurozone, and the US – is picking up further. Current macroeconomic trends in the biggest metal-consuming countries and figures released by the sectors that use high volumes of metals both hold out encouraging short-term prospects for growth in the cyclical metals markets. That said, ABN AMRO does predict oversupply for all base metals in 2014, but with the global economy on course for increased growth, demand for metals should keep pace and cyclical metals markets benefit accordingly.

Chinese demand for industrial metals should stay relatively highFor 2014, ABN AMRO is projecting economic growth at 8 per cent for China, the world’s biggest industrial metals user, with increased export growth and domestic consumption expected to be the key drivers. As infrastructure investment growth gradually slows to a rather lower pace, the demand for industrial metals might not grow as fast as it has done in the past, but will still be relatively high.

Base metals prices on the up, steel prices coming downFundamentals in the steel industry are getting better, as most regions’ PMIs for manufacturing would seem to suggest. However, we do not expect to see any significant long-term improvement just yet, as Europe and China in particular are still grappling with overcapacity and demand remains relatively weak. The aluminium industry is facing similar overcapacity and high inventories, but demand for this metal should remain robust this year and prices might edge up. Supply and demand balances look relatively more encouraging for the other base metals markets ¬– copper, nickel and zinc. Historic price trends suggest that industrial metals prices typically stage some sort of rally in the first four months of the year, but the prices of the various industrial metals are subject to a wide range of economic and non-economic fundamentals, and it is these that will ultimately decide the direction in which the markets move. Based on historical price trends coupled with strong regional manufacturing PMIs, we would expect to see an improvement in industrial metals prices in the short term. 

Documents

• Industrial Metals Monitor January 2014​ (PDF 781 KB)