BASE METALS ON A BULL RUN – BUT, FOR HOW LONG?

copper base metals on a bull run

COPPER ON THE BIGGEST HIGH

November has heralded a price run for several base metals including copper, which sky-rocketed more than 20 per cent to US$5,600 a tonne from a low of about $4,600 per tonne in early October.

Almost overnight, between November 8 and 10, the copper price surged from a US$5050 per tonne to more than US$6,000 before closing at US$5,600, leaving analysts across the globe befuddled.

According to Bloomberg, this unpredicted growth was attributed to Donald Trump’s win in US presidential race and his promise to increase infrastructure spending. However, other analysts have concluded the unexpected rise was due to “a Chinese game”.

With no concrete fundamentals powering the growth, copper producers are urged to enjoy the high prices while they last as analysts are predicting a “sharp correction”, Commerzbank AG analyst Daniel Briesemann told Bloomberg.

NICKEL

Meanwhile, nickel also experienced a rally between October and November. The price leapt 17 per cent from less than US$10,000 per tonne in early October to about US$11,700 a tonne by November 10. This exceeds FastMarkets and Sucden Financial’s published bullish forecast in August 2016 which anticipated the nickel price to sit between US$9,000 per tonne and US$11,400 per tonne in the second half of 2016.

Unlike the copper spike, analysts are saying there is some substance behind the nickel increase.

FastMarkets reported the new environmentally conscious Philippine Government could shut several nickel mines in the coming months. Since taking power at the end of June 2016, the recently installed government has already suspended two nickel mines. It is currently auditing the country’s remaining mines. This is expected to have some impact on global nickel supply, with the Philippines accounting for 23 per cent of global nickel exports.

ALUMINIUM

Although its price has more volatility than copper and nickel, the aluminium price jumped from US$1,600 per tonne in early October to more than US$1,750 a tonne in early November.

Some analysts have attributed the approximate 10 per cent rise to changes in the London Metals Exchange warehousing structure, which includes a cap on rental rates, MetalMiner reported. However, Investing stated the two-year high was a result of stricter road regulations and weight transport limits in China, which have caused delivery delays. Analysts have also cited rising energy costs and strong demand as causes for the upward pricing pressures.

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