News & announcements

Macquarie’s LME Week Base Metals Summit Survey

09 October 2013

Developed world recovery and growth in China to drive modest commodity price increases in 2014

Macquarie’s 2013 LME Week Summit Survey, a barometer of market sentiment in the metals industry, indicates that participants remain surprisingly confident of an upside in LME metals prices into 2014 and are bullish about a developed world recovery and growth in China. The results also show a large swing in participant preference away from copper to the smaller LME metals, with lead and tin viewed as offering the best opportunities on a 12-month view.

More than 325 market participants were polled on October 7 for their views on the outlook for base metals over the next 12 months at Macquarie’s Base Metals Summit, a linchpin of LME Week for more than a decade.

Commenting on the results, Macquarie’s Head of Commodities Research, Colin Hamilton said “The results reflect increased confidence that, despite ongoing supply pressures, a recovery in the developed world coupled with robust growth in China will offer upside to metals prices.  The results also suggest that fundamentals have returned as a differentiator between individual metals, with a concentrate surplus set to subdue copper relative to lead and tin”.  

Further highlights from the survey include:

• Over a third of the audience expected the global economy to be stronger over the next 12 months, while nearly half expected it to be much the same. Only 2% predicted a growth shock.
• Over half the participants expect global metal demand to grow modestly in 2014 while 16% think it will contract.  
• 47% of the audience expects Chinese growth to be around the 7-8% level in the coming year compared with 2013, with 43% expecting moderately weaker growth as deleveraging takes hold.  
• When asked whether financial or fundamental factors were more important in the base metals outlook, fundamentals reigned by a decent majority, reversing last year’s result.  
• 23% of participants believe the impact of capital expenditure cuts will be the key theme being discussed by the market in mid-2014.
• 32% consider the dependence on China for growth as the biggest issue in current base metals markets, closely followed the excess supply capacity (27%).
• When asked in which metal they would most like to hold a short position on a 12-month view, aluminium was the favourite, while copper was not far behind.  
• When asked in which metal they would most like to hold a long position on a 12-month view, tin and lead shared first place each with 28% of votes cast.  For the first time since 2008, copper was not the favourite, chosen by only 17% of participants vs. 55% last year.
• Delegates see a developed world recovery as the biggest risk to the upside over the next 12 months, while a China collapse posed greatest downside risk, polling 50% of votes – the same as in 2012.  

In terms of the individual metals: 

• The audience's weighted average price expectation for cash copper was $7,307/t a year from now, compared with Monday's LME official price of $7,217/t.  This is 12% lower than 2012 Summit expectations.  
• The growing concentrate surplus is viewed as the most important driver of the copper market in the coming year.
• The audience's weighted average price expectation for cash aluminium was $1,897/t a year from now, compared with Monday's LME official price of $1,808/t.  This is 7% lower than 2012 Summit expectations.  
• The aggression of supply cuts is viewed as the most important driver of the aluminium market in the coming year.
• The audience's weighted average price expectation for cash nickel was $17,767/t a year from now, compared with Monday's LME official price of $13,881/t.  This is 5% lower than 2012 Summit expectations.  
• A potential ban or export tax on Indonesian ore is viewed as the most important driver of the nickel market in the coming year.
• The audience's weighted average price expectation for cash zinc was $2,030/t a year from now, compared with Monday's LME official price of $1,836/t.  This is 1% higher than 2012 Summit expectations.  
• The ongoing concentrate surplus is viewed as the most important driver of the zinc market in the coming year.
• The audience's weighted average price expectation for cash lead was $2,278/t a year from now, compared with Monday's LME official price of $2,035/t.  This is 3% higher than 2012 Summit expectations.  
• The audience's weighted average price expectation for cash tin was $26,294/t a year from now, compared with Monday's LME official price of $23,638/t.  This is 5% higher than 2012 Summit expectations.  

 

For further information, please contact:

Nicole Grove
Corporate Communications
Macquarie Group
Tel: +44 (0) 20 3037 5602
Email: nicole.grove@macquarie.com

EDITORS’ NOTES

About Macquarie
Macquarie Group (Macquarie) is a leading provider of banking, financing, advisory, investment and fund management services. The Group has offices in all major financial centres. Founded in 1969, Macquarie employs more than 13,600 people in 28 countries. At 31 March 2013, Macquarie had assets under management of €282 billion.

 Macquarie Capital (Europe) Limited is authorised and regulated by the Financial Conduct Authority.

The products and/or services mentioned herein may not be available in all jurisdictions.

Other than Macquarie Bank Limited ABN 46 008 583 542 (“MBL”), any Macquarie Group entity noted on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits liabilities, protected accounts or other liabilities of MBL and MBL does not guarantee or otherwise provide assurance in respect of their obligations.

Contact us

For further information please contact:

Media enquiries