LONDON The prospect of a
housing recovery in the United States and an encouraging
outlook in China will bolster metals demand in 2013, according
to Goldman Sachs analysts.
"While the U.S. debt ceiling
issues have the potential to create some demand uncertainty
over the next couple of months, the outlook for China has
improved over the past month," they said in a note Monday. "We
continue to believe that during the second half of this year an
improving U.S. outlook against an improved emerging market
outlook will further boost near-term prices."
However, as metal markets are
weaker and only copper is expected to move into backwardation
this year, the analysts overall commodity outlook remains
somewhat more downbeat.
In the longer term, some
stability is expected to enter the market, they said. "Driving
our expectations for more stable long-term prices has been the
improved outlook for long-term energy and metals supply at
current price levelsU.S. shale for energy and Chinese
productive capacity for metals."
The aluminum market will see its
seventh consecutive annual surplus this year, the Goldman Sachs
analysts predicted, and relatively low-cost Chinese and Middle
East capacity growth is expected to offset any price-related
production closures at current prices. The production growth
also is expected to outpace marked rises in global aluminum
demand, they added.
On the other hand, current
aluminum prices and physical premiums are not likely to lead to
capacity closures, curtailments or delays that would balance
the market over the next six months to a year. "As such, we
recommend selling near-dated aluminum at prices above $2,100
per tonne and rolling the position to earn an anticipated
sustained contango, as well as any potential price downside,"
the analysts said.
London Metal Exchange copper was
resilient in 2012, largely because of strong growth in
late-cycle Chinese construction, they said. "We expect this
resilience to continue throughout 2013, with continued strength
in Chinese construction completions being complemented by a
pick-up in Chinese consumer appliance-related copper
They also are predicting a
slight rebound in non-Chinese activity, and that the
improvement in global copper demand growth will offset a
forecast acceleration in mine supply growth. This will lead to
a broadly balanced market or possibly a small deficit by the
middle of 2013, according to the Goldman Sachs analysts, who
set their six-month price target at $9,000 per tonne ($4.08 per
Meanwhile, a recent nickel rally
to levels above Goldman Sachs price targets has led to
increasing caution on the price outlook. "At current prices, we
foresee ample nickel pig iron supply growth, as well as an
overhang of inventory, particularly in China," the analysts
said. "Outside of a potential short-term period of stainless
steel restocking in Europe and/or the U.S. in (the first
quarter) or unanticipated supply disruptions, there appear to
be few nickel-specific catalysts for upside from current
Zinc, like aluminum and nickel,
has been hurt by large inventories and the possibility of a
further small-to-moderate surplus, according to Goldman
Chinese supply growth is
expected to be enough to counteract a recovery in global zinc
demand over the next six months to a year, the analysts said.
"Having said this, a major mine is expected to be depleted by
March 2013, which could support sentiment towards zinc in the
short term and thus we would be wary of being short zinc over
A version of this article was first published by AMM sister
publication Metal Bulletin.