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Metal prices will likely rise a tad globally in 2024, says BMI

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Metal prices will likely see a marginal improvement in 2024 in the global commodities market due to weak Chinese demand and deceleration in global growth, research agency BMI, a unit of Fitch Solutions, has said.

However, the World Bank expects a further decline in metal prices from 2023 levels on slowing demand and ample supply before stabilising in 2025 as demand recovers. The Australian Office of Chief Economist has a mixed view on metal prices going forward.

BMI said on a year-on-year basis, most industrial metals and energy commodities will see gains in 2024 compared to 2023. “A weaker dollar (our Macro team expects the DXY to trade between 100-108) than the highs of 2022, continued supply constraints and positive sentiment will support commodity prices in 2024,” it said. The research agency said on the downside, weak global growth (its Country Risk team expects global growth to come in at 2.1 per cent in 2024, compared with 2.6 per cent in 2023) and a slowing Chinese economy will cap price growth.

Biggest likely gainers

“In terms of annual averages, we expect natural gas, iron ore, tin and aluminium to see the biggest gains in 2024 compared to 2023, with the sharpest declines for zinc…

“In general, prices should remain rangebound between their 2022 highs and their pre-Covid lows, with significant volatility (although less than 2022 and 2023), as investors grapple with recession risks, a fraught geopolitical environment, fluctuations in the dollar and the impacts of El Niño,” BMI said.

The World Bank said in its Commodity Outlook that base metals prices are expected to continue their steady decline into 2024 as economic activity in China and other major economies is anticipated to remain subdued and supply continues to improve. “Prices should fall by 12 per cent in 2023 compared to 2022 and by 5 per cent in 2024. Outside of China, high borrowing costs could reduce demand for metals, such as lead and tin, which are intensively used in industry and consumer durables,” it said.

Slowdown in construction

A further slowdown in new building construction in 2024, especially in Europe, stemming from high interest rates and lacklustre activity, could further dampen demand for some metals, the bank said, adding that subdued global activity and easing of supply constraints are expected to further lower prices in 2024.

BMI said the decline in the dollar’s strength in the second half of 2024 and rising demand due to the green energy transition will support copper, aluminium and tin prices. “Our Macro Team believes that the July hike was the final one by the US Fed, and continues to expect 100 basis points worth of cuts in 2024, starting in the middle of the year. Fed Chair Jerome Powell’s comments at the International Monetary Fund conference rekindled fears of another rate hike, which has the potential to pressure prices in the early months of 2024,” the research agency said. 

Upside risks

Nevertheless, the anticipated weakening of the dollar in the latter half of 2024 is set to serve as a catalyst to drive prices higher, despite possible early-year pressures, it said.

Additionally, BMI sees some upside risks in 2024 on positive investor sentiment stemming from hopes of a turnaround in the Chinese property sector, with some form of stimulus from the government. “This is expected to add support to metal prices, especially iron ore. We also forecast lead prices to average higher as demand is expected to outstrip production, while nickel and zinc prices will decrease from 2023 levels mainly due to excess market supply,” the Fitch Solutions arm said.

The Australian Office of the Chief Economist (AOCE) said aluminium prices are set to rise as energy-efficient tech supports the demand for the metal.

Copper outlook

The World Bank’s Commodity Outlook said subdued global activity and easing of supply constraints are expected to further lower aluminium prices in 2024 in addition to the anticipated 15 per cent fall in 2023.

It said copper prices are forecast to fall further in 2024 by 5 per cent, reflecting weakening global demand and strong supply growth. “Mining output is set to increase strongly in the latter part of 2023 and throughout 2024 due to start-ups and expansions in several countries, including Chile, the Democratic Republic of Congo, Indonesia, Peru, Russia, and Uzbekistan,” it said. 

The AOCE said weaker Chinese recovery, manufacturing and trade headwinds are weighing on copper prices.

Surplus nickel supply

The World Bank said lead prices are expected to remain relatively stable in 2024, after declining by 2 per cent in 2023, amid a steady increase in supply. “Mine production growth is expected to accelerate in 2024 and grow moderately in the medium term,” it said. 

AOCE said the global surplus supply in nickel will likely persist on supply growth in Indonesia and China.

The World Bank expects nickel prices to drop a further 10 per cent in 2024 from the 14 per cent in 2023 as production in Indonesia and the Philippines (the two largest global producers) continues to grow. 

It said tin prices are expected to decrease by an additional 4 per cent in 2024. “Demand for tin, a key component of electronic manufacturers, is expected to remain subdued reflecting weak economic activity in major economies in 2024,” the bank said.

According to Tom Langston, Senior Market Intelligence Analyst of the International Tin Association, the volatility in the tin market on the London Metal Exchange continues as prices drooped last week to their lowest level since March below $23,000.

Zinc prospects weak

“Promising semiconductor growth and an improving global inflation picture adds some positivity to a weak demand picture. Concerns over supply issues in Wa state and Indonesia persist as we look towards 2024,” he said.

AOCE said China’s ongoing property crisis has weakened the prospects for zinc demand over its outlook period, with the price forecast to average $2,600 a tonne in 2025. “Zinc prices are expected to drop in 2023 and fall by a further 4 per cent in 2024 on weak demand and growing supply. Zinc supply is set to expand in the medium term, particularly from large projects in the Democratic Republic of Congo, Russia, and South Africa,” the World Bank said. 

The AOCE said China is projected to see a modest fall in total steel output over the outlook period to 2025. “As China accounts for almost 60 per cent of global iron ore demand, this is expected to soften the rate of growth in global iron ore demand in the coming years, driving iron ore prices down,” it said.

The World Bank said as a result, iron ore prices are expected to decline further in 2024 from the 11 per cent projected decline in 2023. 



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