Base Metals With Least Exposure To Chinese Supplies To Do Best In 2015; Aluminum Top Pick – Standard Chartered
By Kitco News
Wednesday November 19, 2014 9:41 AM
(Kitco News) - Aluminum is Standard Chartered’s top pick for a base metal market in 2015, as it has the least exposure to China’s destocking cycle, the bank said in a research report from late Tuesday.
The Asian nation continues to be hobbled by the constrained credit environment, which is the force behind China’s supply-chain destocking cycle, Standard Chartered said. Eventually some restocking will be expected, but China’s metals sectors needs to become more efficient, so the bank said it expects any supply buildup to be more muted than previously seen.
“In this respect, we continue to expect base metals with least exposure to this dynamic on an LME basis to outperform, which places aluminum as the top pick,” they said.
Based on London Metal Exchange values, their average 2015 price forecast for aluminum is $2,170 a metric ton, versus 2014’s forecast of $1,910. Their 2016 forecast is $2,400. For copper, their average 2015 price forecast is $6,950 a metric ton, versus 2014’s forecast of $7,010. Their 2016 forecast is $7,250.
Their 2015 lead price forecast is $2,300 a metric ton, versus 2014’s forecast of $2,150. Their 2016 forecast is $2,450. The 2015 nickel price forecast is $20,500 a metric ton, versus 2014’s forecast of $17,100. Their 2016 forecast is $25,000.
The 2015 tin price forecast is $22,500 a metric ton, versus 2014’s forecast of $22,000. Their 2016 forecast is $24,500. For zinc, the 2015 price forecast is $2,430 a metric ton, versus 2014’s forecast of $2,170. Their 2016 forecast is $2,600.
Standard Chartered said based on purchasing manager index data, they expect China’s destocking cycle will deepen for the rest of 2014, and the 2015 restocking cycle will be shallow and short-lived.
The bank said it “most comfortable” with its bullish outlook for aluminum, despite China’s stock cycle.
“A key reason for this bullish view is the notion that the significant ex-China primary market deficit that has developed since 2013 is effectively insulated from dynamics in China’s primary market,” they said.
They also don’t see China becoming a major primary net exporter, as they have a limited inventory of primary supply. Any exports are likely to head to Japan because of its proximity and freight costs versus other markets.
“It is highly unlikely any of these exports will be delivered onto the LME; hence we are skeptical about an LME stock rise,” they said.
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