Industrial metals have generally moved “in lockstep” with Chinese demand in recent years, says Bloomberg.com’s Agnieszka de Sousa. But they have started to diverge this year, suggesting that the supply outlook is now the main influence on prices.
Plentiful supplies have held copper back, while zinc, this year’s best-performing metal, has jumped by 50% because the market is so tight. Above-ground stocks are at a seven-year low, while an environmental crackdown in China has curtailed mine production.
Glencore, also a major producer of the metal used to coat steel, has reduced output. Goldman Sachs predicts a deficit of 360,000 tonnes this year. Prices look set to rise from around $2,320 a tonne to $2,500 by the end of the year, reckons Goldman, but that should be high enough to trigger “a major supply response” – so the market will then cool.