Happy New Year to all, we hope you had a great Christmas and have returned to work safely.
**** This Week in Metals: Dec 29th – Jan 2nd ****
Patricia Cauley, Director of Business Development – North America
Phil Burgert, Contributing Editor & Market Specialist
The US economy ended on a high note with the stock market near record levels, unemployment levels at a low 5.8%, and a strong dollar. The outlook for 2015 is bullish with economic growth pegged at just under 3% and job creation to continue. Most economists believe this will allow the Federal Reserve to raise interest rates this year. The US, however, is not immune to global risks and economic uncertainties: Russia with possible further military actions and fuel-supply ramifications; Europe’s stagnant growth compounded with Greece’s recent election and the possibility of forfeiting its bailout; China’s growth rate being expected to drop below 7%; and the expectations that the Japanese economy will remain in recession.
Aluminum – prices are expected to remain range bound in 2015; on the other hand the US MW premium is expected to remain high, supported by US demand, while Europe’s outlook is questionable. Also in question are China’s exports of semi-finished into the US (to avoid tariffs on primary), the impact of new rules for LME registered warehouses and financing deals once the United States raises interest rates.
Copper – closed out the year with the lowest prices in four years; thin trading and low physical demand during the holiday week contributed. The outlook for 2015 is weak for copper with China’s demand expected to be much lower as they look to restructure their economy to focus more on domestic consumption.
Nickel – premiums dropped this week in Europe with softening demand and mounting supplies from China. However, nickel prices are expected to remain strong in 2015 with expected lower Chinese inventories and Indonesian’s ongoing ore ban.
Zinc – Increased zinc consumption is expected to continue in 2015 with carmakers investing in China, and the nation is expected to expand zinc production. Premiums out of Rotterdam steadily increased during the last quarter.
Lead & Tin – Most analysts agree lead forecast fundamentals are strong for 2015. Lead consumption for batteries is expected to remain strong, with supply drying up. Lower grade scrap reportedly is being used as a substitute. Lead and copper prices have been trending downward since the beginning of 2014. Among a host of reasons for their price decline, including a slowing global economy, investor confidence in the commodity sector has eroded confidence in the asset class.
Iron Ore – Seaborne iron ore prices made gains in the last three days of trading for 2014 but the metal recorded its biggest annual decline in five years with supplies from leading producers outstripping demand growth in China and other markets. China’s seaborne prices for 62 percent Fe imported iron ore fell 47 percent during the year.