Miner Seeks Answers Amid Indonesia Nickel Shock: LME Week Update
(Bloomberg) -- LME Week, the biggest annual event of the London metals world, kicks off Monday.
Conversation topics for traders, miners and investors gathering around the city will include the recent turmoil in the nickel market, especially after Indonesia accelerated a ban on ore exports, and the protests in Chile that have disrupted copper operations.
This year’s event takes place against the backdrop of weak demand for most key metals.
- Copper demand will probably decline slightly this year, before increasing 1.4% in 2020, according to CRU Group.
- Nickel and gold were seen as having the most upside potential in a poll of attendees at an LME seminar.
- Mining companies are going to have to get used to being smaller and more nimble, according to Rio Tinto Group chief Jean-Sebastien Jacques.
Here are the latest developments, updated throughout the day. (Time-stamps are local time in London.)
Norilsk Seeks Answers (12:30 p.m.)
The nickel industry is digesting the news that Indonesia suspended exports of nickel ore with immediate effect, but producers need more details, said Denis Sharypin, head of market research at MMC Norilsk Nickel PJSC.
If the ban is implemented immediately, it will result in tighter supplies in the next two months amid demand from China, which will be positive for prices, he said.
Zinc Seen Declining (11:20 a.m.)
Zinc prices are likely to fall further in the near term on subdued demand, said Caroline Bain, chief commodities economist at Capital Economics Ltd.
Prices may reach $2,300 a ton by year-end with potential for a small revival to $2,400 by the end of 2020. Futures on the LME traded around $2,535 on Monday.
While risk appetite in general may start to pick up in the second half of next year, zinc threatens to remain a relative underperformer, Bain said.
Nickel Deficit (11:15 a.m.)
The nickel market remains in “fundamental deficit,” said Edward Meir, president of Commodity Research Group and senior commodity consultant at ED&F Man Capital Markets.
Stainless steel will remain the main consumer and driver for the metal, he said. “Some caution is in order” for expectations about the price impact on nickel and other metals from electric vehicle demand.
Meir sees nickel prices averaging $14,500 a ton next year, compared with Monday’s price of $16,950.
Copper Consumption (10:45 a.m.)
Copper demand will probably decline slightly this year, before increasing 1.4% in 2020, said Vanessa Davidson, head of base metals research and strategy at CRU Group.
CRU sees world copper mine output rising 1.3% in 2020 and refined copper production expanding 1.4%.
This year, the lower demand will be balanced out by flat refined production and a 1% drop in mine output.
Bearish Aluminum (10:40 a.m.)
Sentiment in the aluminum market is “extremely bearish,” said Jorge Vazquez, managing director of Harbor Aluminum. He sees a price rally in the next six months.
The aluminum surplus will widen as production capacity increases and demand growth is unlikely to increase substantially, he said.
Nickel, Gold Are Favorites (10:30 a.m.)
Nickel and gold won the most votes as the metals with the most upside potential in a poll of attendees at the LME seminar Monday.
Citi on Outlook (10 a.m.)
While there’s no clarity among traders and investors on demand growth and commodity prices next year, it is obvious that global trade is in retreat near-term due to tariff fights, said Catherine Mann, global chief economist at Citigroup.
It’s not only a bilateral war between China and the U.S., she said, “it’s a global war.”
Trafigura on Sourcing Plan (9:46 a.m.)
Trafigura Group’s head of corporate responsibility, James Nicholson, said the London Metal Exchange’s responsible sourcing strategy is a positive step forward for the sector.
The plan “shows an industry coming of an age,” he said. “The possibility of consolidation under an exchange as important as this one is a really significant step.”
Nicholson said he’s seen a dramatic shift over the past decade in the attention that Trafigura’s banks pay to social and environment issues.
Chile Effect (9:20 a.m.)
The unrest in Chile means that some delegates from the top copper-producing nation are missing LME Week this year. Codelco Chairman Juan Benavides canceled his trip and a scheduled event on mining in Chile will no longer take place. Some mines were disrupted last week and others were halted as the largest demonstrations in the country in decades wreaked economic havoc.
Rio on Growth (8:30 a.m.)
After losing billions on mega deals and projects, mining companies are going to have to get used to being smaller and more nimble, according to Rio Tinto Group chief Jean-Sebastien Jacques.
“In the past, most major miners have pushed for bigger mines, using bigger machinery, processing ever greater quantities of material,” Jacques said in a speech. “As demand for some materials remains flat or declines, and the circular economy takes hold, the push for scale will change.”
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