Global prices for non-ferrous metals continue to grow
For two months global prices for non-ferrous metals grew by 9 to 32% and returned to the highs of 2014-2016. Investors actively bought metals amid expectations of further growth of the global economy, as well as the forthcoming transition of European countries to electric cars.
This last month the index of six major non-ferrous metals, traded on the London Metal Exchange, reached 3143.6 points, updating the record of November 21, 2014.
The ongoing growth continues from mid-June, and since that time the index has increased by 16%. Nickel became the leader of growth among other metals. Prices for it since June have grown by almost 32%, to US$11,750 per tonne – the maximum value since November 11, 2016.
The same is applied for other metals. Copper prices rose by 13.2%, to $6,560 per ton – the maximum since November 25, 2014. Aluminum has risen by 9%, to US$2,100 per ton – the maximum figure for the last three years.
The expectations of the growth of global economy stimulate further growth in prices. The growth of global GDP in Q2 accelerated to a 2.5-year high and amounted to more than 4% in annual terms. In general, this year the world economy will grow by 3.4%. The predictions for 2018 are set at +3.5%. Analysts of the Russian Kommersant business paper believe global economy has been able to avoid serious shocks in recent years that could affect the demand for industrial metals.
Such confidence is also supported by positive macroeconomic indicators from China. The country’s economy, despite the risks of the crisis, continues its rapid growth without any significant problems and threats.
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The ever improving prospects for the Chinese economy has already resulted in the improvement of forecast for prices for non-ferrous metals, along with iron ore and coal.
Analysts at Citigroup believe strengthening growth rates in Chinese real estate, industrial production and consumer spendings, will result in the decline of supplies of metals to the global market in the middle-term.
The recovery of prices for non-ferrous metals is also drived by the reports of some global media about the intention of the EU to speed full transition to electric cars. In late July, the UK and France said they want to stop selling diesel cars and plan to ban sales of all new cars running on gasoline or diesel fuel from 2040.
Similar initiatives were taken by Spain and Greece. Norway plans to stop using gas and diesel cars by 2025. The transition to electric cars will lead to an increase in demand for non-ferrous metals, which are actively used in the production of these types of cars.
In such conditions, metal prices may continue to grow, but there is a high probability of corrections. According to some analysts, the expected recovery of the US dollar, as well as the instability of the Chinese economy can lead to a reversal of metal prices.
Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>