ANZ Cuts 2015 Industrial Metals Forecasts on China SlowdownAlex Davis
Australia & New Zealand Banking Group Ltd. cut its price forecasts for industrial metals this year by as much as 19 percent on concern that further economic troubles are ahead for China, the world’s largest consumer.
The bank lowered its estimate for both copper and tin by 19 percent and for nickel and lead by 17 percent each, commodity strategists Daniel Hynes and Victor Thianpiriya said in a report published Thursday.
“With the likelihood of further weakness in economic growth in China, the headwinds for base metal markets are unlikely to ease,” the bank said in the report. “Base metals are unlikely to see any sustained period above current levels in the first half of 2015.”
The bank’s revised outlook comes after data this week underscored concerns over a slowdown in China. An official gauge of the country’s manufacturing strength registered a contraction for the first time in more than two years and a private reading of the services sector showed the weakest pace of expansion in six months. The economy grew at the slowest rate since 1990 last year as the government focused on market reforms instead of rapid growth.
ANZ lowered its forecast for copper this year to $5,850 a metric ton, from $7,263 a ton, and reduced its outlook for nickel to $17,625 a ton from $21,112 a ton.
Copper for delivery in three months on the London Metal Exchange fell 1.3 percent to $5,657.50 a ton at 4:25 p.m. in Hong Kong. The metal has dropped 11 percent so far this year.
“The key commodity demand market surprised on the downside in 2014 and is likely to do the same in 2015 while authorities remain focused on difficult economic reforms,” the bank said in the report.
While it cut its price estimate for nickel, the bank forecast the metal used in stainless-steel making will rise abaout 19 percent from its current price as the full impact of Indonesia’s ore-export ban hits the market this year. China’s producers of nickel pig iron, a lower-grade alternative to the refined metal, will struggle to replenish stockpiles with ore from the Philippines due to mine closures and falling ore quality, the bank said.
Chinese NPI output will drop 15 percent from a year earlier to 365,000 tons this year, according to Sumitomo Metal Mining Co. The metal in London was down 2.1 percent to $14,805 a ton.