WHEN YOU ASK FOR THE TREND OF MAIN NON FERROUS METALS, SCENARI & TENDENZE REPLIES

Following the social distancing which has become part of our daily lives due to COVID-19, the 32nd date with “Scenari & Tendenze” (lit. Scenarios & Trends) was held online as a webinar. The circumstances observatory went on with the analysis of the current economic and financial situation and its potential developments in the short term. The webinar highlighted the importance of some elements which will condition the future scenarios: the uncertainty related to the pandemic and the respective health sector global management will play a significant role.
What stands out is the fact that the expectations for the future are various, also bearing in mind that the restart could be held back by changes in demand, a decrease in the expected investments and indebtedness both in the public and private sector.

In this climate of uncertainty, the outlined analysis provides an interesting view of the cycles and trends in the metallurgic market. What concerns us the most is the trend of the main non ferrous metals, which ground in for our production of bronze ingots.

Broadly speaking, the average prices for non ferrous metals, which are featured at LME (US$/MT), reached the top of recovery after the previous economic crisis in the first part of 2018 in concomitance with a decrease in stocks. Therefore, the expectation for the future was for an increase, justified by the progressive decrease of supply which then corresponded to demand. The stocks in the last few years underwent a decrease of -49.4% instead. The average prices reached a low level at the end of March 2020, followed by a subsequent jump in prices of +17.9%, which was in turn followed by an average increase in stocks of +33.5%. Therefore, an unusual behaviour can be pointed out: prices increase as stocks increase.

This contradiction can be seen also in the trend of the main non ferrous metals of our interest. Below is the detailed analysis of the single metals, based on weekly averages (US$/MT):

• Aluminium:

The trend of the aluminium price reached its peak in 2018, to be followed by a sharp decrease of -49.2% in the first quarter of 2020 until March, when an increase of +9.7% was reported. This reaction can be deemed not significant if compared to the plummeting trend of the last two and a half years. It should be noted that also the stocks, in the same months of 2020, underwent a slight increase (+8.8%).
Looking ahead, the expected average price could range from 1,530 to 1,700 US$/MT: this range is wider than usual due to the unpredictability of the future.

• Copper:

The trend of copper prices is similar to the aluminium’s, even if with a smaller decrease in the last few years (-34.0%). The subsequent reaction of the price that can be observed in March 2020 (+21.3%) can be deemed more significant compared to what can be seen for the aluminium and also the concurrent stock increase is more relevant (+67.7%). Such a significant reaction shows a general restocking, so the demand was not sped up by the weakening of the dollar, but rather by an actual demand. This can be seen as a potential sign of recovery.
The expectation for the coming month is that the copper price could go from 5,600 and 6,100 US$/MT.

• Nickel:

Nickel’s price, in contrast with the other non ferrous metals, reached its peak in mid-2019. Subsequently a drop of -38.2% and a subsequent reaction in March 2020 of +14.7% were reported. Meanwhile also an increase in stocks was reported (+53.6%). The recovery step, however, seems not connected to the strong increase in the stainless steel sector.
Therefore, the conditions are not such to believe that the nickel trend will have a substantial rise: the price is expected to range between 12,000 and 13,500 US$/MT.

• Zinc:

The trend of zinc price is consistent with the trend of aluminium, with a loss in the first quarter of the year of -49.3%. A slight rise of +10.9% was seen in concomitance with soaring stocks up to +143%, an increase which slows the perspectives of recovery of this metal, closely related to the crisis of the automotive industry.
The price is expected to go from 1,900 to 2,200 US$/MT for this metal, without any great price increase.

Source: Associazione Industriale Bresciana (AIB) - "Scenari & Tendenze", 24 June 2020