London 20/09/2016 - Macquarie has upgraded all of its base metal price forecasts apart from for copper, describing any meaningful upside in the metal as a "forgotten dream".
The bank has reduced its 2016 average price forecast to $4,685 per tonne, down 0.3 percent on its previous expectations. It also lowered its 2017 and 2018 forecasts by 4.7 percent to $4,563 and 6.6 percent to $4,413 respectively.
Copper has shown remarkable stickiness in the mid-$4,000s this year despite fears about China, indications of oversupply and aggressive LME inventory inflow.
"[This is] not for lack of shorting by many of the largest speculators, mind, and so we can only conclude that consumers were enthusiastic bidders during those vulnerable moments. Moreover, cost reductions are beginning to hit a wall as oil and other consumables costs have stopped falling and even rebounded in many cases," it said in a note on Tuesday.
Macquarie expects three years of big enough surpluses to wash over the market, snagging the price in the mid-$4,000. Prices could subsequently rally and even revisit $6,000 by 2021, with insufficient mine project development result in a deficit, it suggested.
The bank made the largest alteration to its price projections in tin after the metal pushed higher in recent weeks due to a continued drawdown in LME stocks. It raised its 2016 average price forecast by 7.7 percent to $17,085, its 2017 projection up 14.8 percent to $17,500 and its 2018 prediction up 12.5 percent to $18,000.
Citing continued tightness in concentrates, it lifted its zinc forecast by six percent for 2016 to $2,039, by 4.3 percent for 2017 to $2,200 and by 4.1 percent for 2018 to $2,700.
Macquarie increased its 2016 nickel forecast by 2.3 percent to $10,500 but kept its 2017 and 2018 projections unchanged at $11,625 and $13,000 respectively. This metal has seen upside this year due to spectre of greater disruptions to nickel ore shipments stemming from political developments in the Philippines.
It lifted its lead forecast by 1.8 percent to $1,816 for this year, by 2.3 percent to $1,910 for 2017 and by 0.6 percent to $2,190 for 2018.
It revised its 2016 aluminium forecast 1.2 percent higher to $1,547 for 2016 and also raised its 2017 projection by 5.5 percent to $1,450 and its 2018 prediction by 1.8 percent to $1,438 in 2018. Still, the bank maintains a bearish slant given eroding premiums outside China, a price trading out of the curve and new capacity still coming online inside China.
(Editing by Mark Shaw)