Base Metals: Investors will remain cautious – ABN Amro

Concerns about the ultimate economic impact of the coronavirus are still high. Investors in base metals markets will, therefore, remain cautious, according to strategists at ABN Amro.

Key quotes

“Since the end of March, prices for copper, nickel, and zinc are on an upward trend, mainly due to significant economic stimulus measures from the Fed, ECB, and the PBoC. With the current easing of the lockdowns, economic activity can recover and so too can copper prices. This will however be slow and bumpy.” 

“Energy costs are historically low. This translates to lower production costs for all base metals, but especially for primary aluminium. This also contributes to lower prices. As a result, even inefficient smelters are able to keep producing. Oversupply will thus continue to weigh on markets.” 

“Uncertainty is the common denominator in base metals markets and will continue to weigh on sentiment. This will raise price volatility. Moreover, there is no deficit in base metals markets anymore and inventories are higher compared to 1 January levels. This will hang over the market for some time and cap prices.”