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  • Commodity market report

    Global zinc short-term outlook August 2017

    • 31 August 2017

    After several attempts over the past year, the zinc price finally breached resistance at $3000/t to a reach a ten year high of $3142/t.

    $1,350.00

    Summary

    For the first time in a decade the zinc price has climbed above $3000/t. The price strength was driven by a combination of improving fundamentals thin markets and short covering with even retail investors in China getting involved. Although the latest price developments will be welcomed by zinc producers they will not be greeted with any enthusiasm by consumers. And ultimately it is consumers that drive the long term health of the zinc industry. With exchange stocks now at critically low levels and China the world's largest zinc producer failing to increase mine and smelter production in the face of growing demand and high prices the zinc market and industry is approaching a critical juncture one that could have long term and negative implications for the metal. With concentrate stocks already depleted and refined metal stocks depleting the market dynamic has become highly sensitive to the timing of supply increases. The most critical element of supply in the near term is the return to full production of Glencore's mines. If these operations do not return to full production by the end of Q1 2018 smelter production will be further constrained. Refined stock draw down to unprecedented levels would then drive prices even higher than our base case forecast peak of $3875/t. It is becoming increasingly clear that the critical risk beyond 2018 is smelter capacity or more specifically the lack capacity. The zinc market requires significant increases in both mine supply and smelter capacity over the next five years. There is a growing risk that the failure of zinc producers to deliver new supply in a timely manner will result in demand destruction. Zinc key forecasts 2016 % 2017 % 2018 % 2019 % Global (kt) Mine Production 12361 6.1 13160 6.5 14280 8.5 15046 5.7 Refined Production 13585 0.9 13681 0.7 14751 7.8 15416 2.9 Consumption 14208 2.5 14642 3.0 14999 2.4 15376 2.6 Concentrate Market Balance 786 0 75 190 Metal Market Balance 624 961 249 40 Prices Cash LME Price ($/t) 2090 2972 3875 3750 (c/lb) 95 135 176 170 Realised TCs ($/t concentrate) 211 172 165 185 Source Wood Mackenzie

    What's included

    • Document

      Global zinc short-term outlook August 2017

      PDF 736.97 KB

    • Document

      Data Tables Zinc STO August.xls

      XLS 297.00 KB

    • Document

      Global zinc short-term outlook August 2017

      ZIP 803.13 KB

  • Commodity market report

    Global steel short-term outlook August 2017

    • 31 August 2017

    This is a market underpinned by sentiment. A price correction is due imminently.

    $1,350.00

    Summary

    Global steel prices rallied this month. China saw both HR coil and rebar prices expand by 10% month on month. The rise means that HR coil is now more expensive in China than in Europe. The last time we saw this was in April 2016 a month when Chinese steel prices shot up over 20% only to quickly drop back in subsequent months. We expect history to repeat itself. The negative Europe to China spread will not be maintained. Chinese demand for steel just is not there. House completions plummeted in July wiping out all the gains from H1 and more. Despite this and despite stocks rising in July and August prices have soared. As soon as a reason for bullishness fades it is replaced by a new one. Excluding strong construction demand in H1 they all seem spurious. Production statistics in China show significant growth but the numbers are skewed by the movement of production from illegal induction furnaces to legal and reporting steel producers. Current production rates are further inflated as steelmakers are front loading producing and stockpiling steel now in anticipation of higher prices in winter triggered by pollution related production cuts. But we don't think the 2 26 policy will result in higher steel prices. This is because demand will continue to weaken in Q4 steelmakers will use scrap and other methods to mitigate the effect of mandated production cuts and the inventory built now will further soften the effect of lower winter output. If as we think construction demand in China is really falling the market is frothy and we think inevitably bound to a sharp readjustment in China first with Europe and the US to follow. With prices elevated steelmakers are enjoying exceptional margins. They will still be enjoying large margins if prices fall as much as we expect. In Europe construction is performing well and the automotive industry continues to expand. This is supportive of steel demand growth. But there are concerns that strong automotive growth is supported by credit and may not be sustainable. In the US sentiment may be responsible for bolstering domestic prices and encouraging domestic production but it has not stopped imports. There has still been no word on section 232 which looks increasingly unlikely to have any material impact as imports continue to enter the country. Prices and other key data Steel prices $/tonne 2016 2017 2018 2019 2020 2021 2017% 2018% 16 21 HRC N. Europe domestic ex mill 455 561 484 470 481 487 23.3% 13.8% 1.4% HRC USA Midwest ex mill 576 649 558 548 554 555 12.7% 14.1% 0.7% HRC China Shanghai (inc. 17% VAT) 409 504 409 404 410 420 23.4% 19.0% 0.5% Rebar Europe domestic ex mill 459 496 449 445 450 452 8.1% 9.5% 0.3% Rebar USA Midwest ex mill 572 585 522 500 506 507 2.2% 10.8% 2.4% Rebar China Shanghai (inc. 17% VAT) 352 498 365 351 366 392 41.6% 26.8% 2.2% Key annual data 2016 2017 2018 2019 2020 2021 2017% 2018% 16 21 Apparent finished steel use Global (Mt) 1 496 1 549 1 558 1 572 1 589 1 600 3.5% 0.6% 1.4% of which China 665 698 694 691 691 690 5.0% 0.6% 0.7% European Union 157 160 162 165 167 168 1.6% 1.4% 1.3% USA 92 100 103 107 110 110 8.9% 3.4% 3.8% Crude steel production Global (Mt) 1 630 1 679 1 682 169 1 704 1 716 3.0% 0.2% 1.0% of which China 808 821 809 802 800 802 1.6% 1.4% 0.2% Crude steel capacity utilisation Global 68.5% 71.2% 71.3% 71.6% 71.5% 71.6% China 66.3% 69.9% 70.0% 69.8% 69.6% 69.6% Source: Wood Mackenzie forecasts Platts World Steel Association; Compound annual growth rate 2016 21

    What's included

    • Document

      Global steel short-term outlook August 2017

      PDF 499.35 KB

    • Document

      Global steel short-term outlook August 2017

      ZIP 627.03 KB

    • Document

      Global steel markets short-term outlook data August 2017revised.xls

      XLS 310.50 KB

  • Inform

    How will China’s possible ban on scrap imports impact copper supply?

    • 27 July 2017

    Latest measure to protect the environment expected by the end of 2018.

    $700.00

    Summary

    What's included

    • Document

      How will China's possible ban on scrap imports impact copper supply?

      PDF 957.01 KB