BackA mixed outlook for non-ferrous metals in 2015
If China's economic growth continues to slip and its appetite for non-ferrous metals declines, then some impact on prices should be expected
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China’s uncertain economic situation is likely to hang heavy over the non-ferrous metals sector in 2015. The country is one of the largest consumers and producers of non-ferrous metals and its decision to re-balance economic growth from an investment-focused one to a consumption-oriented one has upset demand-supply balances.
It has not helped that the other emerging markets, too, are seeing slower growth, while Europe’s growth continues to disappoint. Moreover, capacities that were planned in the years when the prices were high are coming on line at a time when demand is flagging. Despite all these factors, non-ferrous metals such as zinc and aluminium were better off in 2014.
Let’s take a look at how prices fared. Copper was in poor health for most of the year. China’s crackdown on financing transactions using metal as collateral was also said to be a reason for copper’s fall from grace. The metal has fallen by around 14% since the start of the year. But Indian copper firms are smiling because excess copper concentrate in the market gives them an upper hand as the fees paid to them by mining firms have risen sharply. These fees are expected to remain firm in 2015, too. Indian copper smelters should be in good health in 2015.
In relation to copper, aluminium and zinc prices did better with their prices rising by around 5% and 4%, respectively, in the year. Aluminium metal premiums have been rising steadily during the year as buyers have been forced to pay extra for quicker deliveries. Higher prices have helped the margins of domestic firms.
Zinc was expected to see higher demand in 2014 due to demand for galvanizing operations in China. That did happen and zinc use rose 5.9% on the back of higher Chinese demand, while refined metal production rose by only 3.8%, causing a deficit situation. In aluminium, reacting to weakening demand conditions, companies have been shuttering unviable capacities. A tighter supply market has supported prices and metal premiums. In 2015, copper prices may see some volatility depending on whether supply declines in response to falling prices. While zinc and aluminium had a good year in 2015, there’s no saying for sure that it will continue next year, too. If China’s economic growth continues to slip and its appetite for non-ferrous metals declines, then some impact on prices should be expected.
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