Outlook for base metals remains strong, analysts say

Copper cathode production at Florence Copper’s test facility, July 2020. Credit: Taseko Mines.

Haywood Securities is raising its price forecasts for copper this year from US$3.00 per lb. to US$3.50 per lb.; for zinc from US$1.10 per lb. to US$1.25 per lb.; and for nickel to US$8.00 per lb. from US$6.75 per pound.

Looking beyond 2021, Haywood’s forecast for 2022 is US$3.50 per lb. copper; US$1.20 per lb. zinc; and US$8.50 per lb. nickel.

“The economic recovery is building, demand for metals is increasing, and sentiment about base metals is positive,” Haywood’s Pierre Vaillancourt said in a new research report today. “China ended 2020 in remarkably good shape, and remains poised to expand further this year, as the economy grew 6.5% in Q420, faster than the 6.1% consensus forecast, and industrial production rose by 7.3% in December 2020, the highest since March 2019.”

The analyst added that as vaccinations against Covid-19 continue along with economic stimulus measures, they see a broad-based economic recovery, “with the pace of expansion picking up 2H21” and “increasing global industrial production” supporting metal prices.

The report also noted that rising demand for electric vehicles and battery technology will support metal prices. “With China’s commitment to carbon neutrality by 2060, President Joe Biden’s infrastructure spending plan, and a pledge to return the United States to the Paris Agreement on climate change, the move to de-carbonization is intensifying,” Vaillancourt wrote. “Fiscal stimulus programs to recover from Covid will also help to support spending on green initiatives. This trend will impact demand for base metals, and could also have a multiplier effect on industrial production and commodity-producing countries.”

Bank of America Securities is also bullish copper. In a recent research note, U.K.-based analyst Michael Widmer forecast an average copper price of US$4.31 per lb. (US$9,500 per tonne) in the fourth quarter of 2021, “with the market likely flipping into a deficit, as inventories are low.”

“Digging a bit deeper, the rebound in demand and hence prices was led by China in 2020,” Widmer wrote. “As consumption from the Asian country has slowed in recent months, the recovery has broadened, with every sector now making a positive contribution to offtake. While the growth in copper purchases may slow further from the peak levels of +20% year-on-year in summer, this suggests continued support to fundamentals.”

“At the same time,” he continued, “activity in the U.S. and Europe should strengthen, heavily influenced by fiscal stimulus and an opening up of economies. Given the increased focus on tackling climate change, the focus of government spending will be worth following as de-carbonisation is bullish metals.”


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