A glance through the latest expert views and predictions about commodities: iron ore, copper, coal, lead and nickel.
-Morningstar's preferred iron ore exposure
-The US$1tr Infrastructure Bill's effect upon copper demand
-Significant volatility for the thermal coal price
-Macquarie's bullish stance on lead
-Nickel pig iron prices soften in
Iron ore, copper and met coal
Following a significant softening in Chinese demand, Morningstar lowers 2021-24 assumptions for iron ore prices to
The iron ore impact is lessened for both
Morningstar makes a greater relative reduction to fair value for
Credit Suisse notes
In searching for a turnaround in pricing, the commodities team at Credit Suisse sees a December trough and anticipates
Infrastructure stimulus will be needed to plug the growth gap from a crumbling property sector and to achieve the targeted 5% rise in GDP in the country's five-year plan, according to the broker. It's thought money allocated to Local Government Special Bonds for 2022 will far exceed that in either 2020 or 2021, and commodity prices should leap in response.
If the reader is looking for less exposure to the fluctuating iron ore price, Morningstar likes the quality of
Returning to copper, Credit Suisse estimates the additional demand impact from the US$1tr Infrastructure Bill in the US may be 50-250ktpa, which is almost 1% of global demand at the high end. On these figures, the broker feels the looming 2023-24 supply glut may turn out a lot less than feared by some.
Thermal coal
Macquarie notes thermal coal prices have experienced significant volatility over the past month.
The spot Newcastle price jumped to
While
The Chinese government has instituted several price ceilings for thermal coal, with the aim of helping power plants reduce losses, so that they can lift power generation during the upcoming winter. Interventions aside, Macquarie estimates a fundamental shift in the domestic supply demand balance in favour of lower coal prices.
Credit Suisse finds it difficult to weigh the effect of
The broker wonders if
Macquarie expects
Lead
Macquarie has adopted a more bullish stance for lead demand over the next five years, based upon the broker's global auto forecasts.
As lead acid batteries will continue to be used for auxiliary functions in battery electric vehicles (BEVs), the broker thinks the global lead market should remain in a slight surplus, until the end of this decade.
Macquarie considers the future for lead is dependent on the overall fleet size, the speed of the transition to electric vehicles and the extent to which BEVs phase out lead batteries for auxiliary functions.
Given the relative cost and reliability of lead batteries, the broker downplays a risk that they are gradually phased out altogether.
It's thought
Lead demand is essentially battery driven, accounting for 85-90% of total demand. Autos account for around 55% of the total, of which replacement is normally around 40% and new vehicles are around 15%, points out the broker.
Nickel
After trending upwards for over a month due to robust stainless steel demand, Credit Suisse notes nickel pig iron (NPI) prices in
After pandemic disruptions, the global nickel market is expected to swing into surplus as production recovers. The Chinese research house Antiake reported recently that prices are expected to fall from this year's multi-year highs.
Production next year is expected to rise in
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