BASE METALS

Chinese recovery drives strong 2021 outlook

Favourable conditions in several important markets underpins the stable outlook

Henry Lazenby

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According to the latest assessment, China's substantial infrastructure-focused government stimulus plan had supported metals and mining prices in the year to date, providing a platform for stable sector performance in 2021.

Risks of pandemic-driven supply disruptions and slower-than-forecast economic growth would, however, linger next year. Still, their impact on the sector is said to be "moderate" compared with the downturn in the first half of 2020.

Favourable conditions in several important markets, such as iron ore, copper and aluminium underpins Fitch's outlook.

"We expect prices to moderate in 2021 and align closer with market fundamentals. Supply-demand dynamics for individual commodities will evolve, reflecting economic growth in various regions and potential supply disruptions driven by pandemic-related restrictions or weather conditions," said the ratings agency.

Iron ore and gold miners will continue to benefit from "robust" demand and cashflow generation in 2021. Increasing supply from Brazil is critical for reducing the global iron market deficit, which could be delayed, leading to some upside potential to Fitch's price assumptions.

Fitch also sees broadly balanced copper and nickel markets in the medium term. Demand for nickel could be boosted by the European green recovery pledges that introduce tax breaks and purchase incentives for electric vehicles.

Commodities such as aluminium, zinc, metallurgical coal and thermal coal will remain oversupplied in the near-term.

 

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