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Nickel October 09, 2015 07:27:42 AM

Nickel to rise 9 percent next year, copper to end four years of falls: GFMS

Paul Ploumis
ScrapMonster Author
Nickel prices will lead the base metals complex to gain 9 percent next year following dramatic falls this year, with supply constraints meeting strong consumption as China's economy avoids a hard landing, consultants GFMS said on Thursday.
Nickel to rise 9 percent next year, copper to end four years of falls: GFMS

Nickel prices will lead the base metals complex to gain 9 percent next year following dramatic falls this year, with supply constraints meeting strong consumption as China's economy avoids a hard landing, consultants GFMS said on Thursday.

The group also forecast copper prices will rise 4 percent in 2016, and said it was least bullish on aluminum as output continues to increase amid the expansion of lower cost capacity in China.

It sees aluminum prices falling 4 percent to $1,639 a tonne next year.

"While we acknowledge that there is plenty of scope for negative sentiment as global growth fears remain, we have started to look for turning points," said GFMS, which is owned by Thomson Reuters.

"The clock has turned back commodity prices and revenue to levels last seen in 2008/09. Free cash flow is holding up only thanks to drastic cuts to capex. In this regard further downside to commodity prices will be much tougher to absorb."

On nickel, GFMS sees prices averaging $13,200 next year, after falling an estimated 28 percent this year, as supply is cut back further, tipping the market from a 40,000 tonne surplus this year into a 30,000 tonne deficit next year.

"This (deficit) is unlikely to set nickel alight given that it will make only a small dent in the continued vast inventory overhang, (but) its fundamentals will be moving in the right direction," said GFMS.

It said copper is close to bottoming out as its surplus contracts to little more than 100,000 tonnes next year, pushing prices up to an average $5,850 a tonne, and ending four years of falls, including an expected 18 percent drop this year.

"Production cutbacks to date will help reduce the expected surpluses this year and next. Global copper demand growth will also play a part ... helped ... by investment in China's power network (and) the One Belt One Road policy," it said.

GFMS sees zinc prices rising just 1.5 percent next year to average $2,030 a tonne - after expected falls of 7.7 percent this year - as major mine closures will again fail to lead to substantial deficits.

On lead, GFMS sees prices falling 1 percent next year to average $1,810 a tonne - after losing an expected 13 percent this year - as global refined production reverses this year's falls amid just marginal demand growth.