BASE METALS
Tin
Figure 1: Base Metal Index, Jan’04 = 100
Until the price surge in July brought the tin cash quote to around
US$15,500/tonne – seemingly due to a revival in investor interest –
the metal’s performance has been fairly stable. In the second quar-
ter, the cash price averaged US$14,014/tonne, trading within a rel-
atively narrow range of US$12,450 - 14,700/tonne. This was in con-
trast to most of the other base metals (lead and nickel in particular)
and reflected unchanging fundamentals. There had been a dearth
of significant developments since the early part of the year, which
saw disruption to Indonesian mine output, with The World Bureau
of Metal Statistics (WMBS) reporting a 6% drop in production last
year and a 14.2% drop in refined exports. LME stocks dipped at
that point, but since then have increased by around 5,000 tonnes,.
In late July they were largely unchanged from the beginning of the
Source: NCM
year, at around 13,000 tonnes.
but with refined production seemingly Meanwhile, latest figures suggest that the growth in Chinese
only limited by concentrate availabili- refined production is tailing off. June output fell by 2.9% year-on-
ty, supply looks likely to outstrip year to 12,692 tonnes, according to the National Bureau of
demand and go some way towards Statistics. There is little or no production growth outside these two
refilling the warehouses. NCM predict countries which account for 60% of global production. Tin produc-
a 50,000 tonne surplus for 2007, fol- tion in Peru has fallen by 4.7% year-on-year in the first five months
lowed by 160,000 tonnes in 2008. of 2007 to 12,917 tonnes.
Demand growth has been weaker than expect-
TABLE 3: OUTLOOK: NATIXIS VS CONSENSUS, US$/TONNE *
ed, with signs that the European market (which
Natixis Consensus Difference accounts for approximately 20% of total con-
2007 2008 2007 2008 2007 2008 sumption) entered the summer slowdown earli-
Al 2,750 2,300 2,723 2,587 -1.0% 12.5%
er than usual. However, WMBS figures have
Cu 6,750 5,750 6,951 6,270 3.0% 9.0%
European consumption for May up by 3.4%
Ni 37,000 27,500 40,688 32,334 10.0% 17.6%
year-on-year. Japanese and American consump-
Pb 1,925 1,600 2,117 1,917 10.0% 19.8%
tion dropped by 21% and 20% respectively
over the same period.
Sn 13,750 11,000 13,585 12,701 -1.2% 15.5%
Demand is, however, expected to pick up as
Zn 3,500 2,750 3,566 3,136 1.9% 14.0%
the year goes on, leading to a levelling-out of
* Mean forecast from Reuters survey, July 2007
the LME inventories. This should lead to an aver-
Sources: Reuters & NCM
age price for 2007 of US$13,750/tonne, drop-
Aluminium ping to US$11,000/tonne in 2008.
Aluminium has been perhaps the
most stable metal over recent months.
Industrial production growth rates are
Both prices and LME inventories have
up again in China and India
been steady, and there is nothing in
the fundamentals to suggest signifi- Going Forward
cant movement during the summer With supply disruptions still holding sway in the lead and copper
months outside the currently estab- sectors, zinc supply also scarce, and with aluminium and tin largely
lished range. Whereas a bullish outlook in a supply-demand balance, the bull market looks set to continue
could contend that the metal is under- unabated. Industrial production growth rates are up again in China
performing (and therefore could and India. The OECD six-month rate of change indicator moved
attract fund interest) it is more likely sharply higher this summer after six months of barely moving, sug-
that the seasonal lull will lead to a gesting modest growth for the rest of the year and the potential for
downward drift in prices. NCM antici- stronger gains late in the fourth quarter and into 2008. The only
pates an average annual price for 2007 straggler looks to be nickel with secondary material availability, cou-
of US$2,750/tonne, dropping to pled with increasing substitution pressures – making it the wallflower
US$2,300/tonne in 2008. at the base metals bull party
•
We anticipate a smaller deficit for
2007 of 50,000 tonnes, as compared to
Across a range of commodity markets – including energy, metals and
357,000 in 2006, as the market
agricultural products – Natixis Commodity Markets assists customers in
remains balanced. In 2008 we have the
managing their commodity price risks.
Natixis Commodity Markets, August 2007.
deficit increasing to 250,000 tonnes,
largely as a result of strong non-
www.natixiscm.com
Western world demand.
68 SEPTEMBER 2007 COMMODITIES NOW
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