Is 2016 the year of base metals?

Nickel, copper, and zinc have been picked as the metals to watch next year.

A new report by Morgan Stanley analysts have labelled the metals, which saw steady slumps throughout 2015, as the top picks, according to Bloomberg.

We are stubborn nickel bulls in 2016,” the report stated.

They forecast a nickel average of $10,692  per tonne next year, zinc at $1747 a ton and copper at $5236 a ton.

Speaking to ANZ senior commodities strategist, Daniel Hynes, he told Australian Mining the outlook for base metals into next year is positive.

“The outlook is better…the oversupply is not as bad as the bulk markets [such as iron ore],” he said.

“We’ve seen the start of a readjustment in base metal supply, but the market has not been that interested to date.

“They’ve been lost amongst the noise [of coal and iron ore], but the fundamentals are better, and for nickel and zinc we expect a market in deficit next year, but as always the poster price depends on Chinese demand.”

Morgan Stanley stated that it continues “to see only a modest abatement in China-led commodity demand growth, not the capitulation that year-to-date price performances imply”.

“The fact that economic activity everywhere remains buoyant, commodity-trade flows are intact, and that producers are rapidly rebalancing their trades in reply to shock-low prices tells us that downside price risk is limited.”

Credit Suisse has also backed nickel, expecting a dearth of the metal as operators will be cutting supply “given the scale of losses that producers are incurring”.

 

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