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Metals and minerals industries share 2014 optimism

By Simon Moores
Published: Friday, 11 October 2013

Comment: Positive sentiment from the metals industry at London’s LME Week tallies with IM Data expectations for industrial minerals

The world of metals has descended on London this week on the back of a torrid 18 months which have seen prices plummet and consumption volumes slow.

This year alone the exchange-traded commodity price for copper has fallen 12%, aluminium is down 16% and nickel 21%. Yet sentiment from the annual London Metal Exchange (LME) Week has been positive.

The expectation of a brighter 2014 has been driven by the industrial engines of the global economy: China and the US. Signals that China’s growth will still satisfy global demand for industrial metals and minerals, even at the lower rate of 7% GDP expected by President Xi Jingping, was enough to buoy the metals community this week.

There is a feeling that China has settled into a new lower rate of economic growth as the government seeks traction of its 12th Five Year Plan which focuses on quality of growth and not just quantity. This could see volumes of industrial raw materials slow, but more niche minerals and metals used in hi-tech applications increase as China develops its hi-tech industries to add depth to its economy.

The federal government shutdown in the USA has not done much to dampen the medium term mood either. Up until events of the last week, the world’s biggest economy was one of the bright spots in terms of economic recovery. Although political difficulties may delay the prospect of sustained growth until 2014, there is belief that the US economy will remain on course for expansion. 

Meanwhile it appears that many companies are not anticipating solid economic growth in Europe anytime soon with the strategy being one of a hope of maintaining sales volumes while finding growth elsewhere.

The International Monetary Fund has reacted to these devleopments by cutting its global growth forecast for 2013 to 2.9% (down 0.3 percentage points), while the forecasted growth for 2014 has also been reduced 0.2 percentage points to 3.6%.

Minerals v metals 

Despite metals being fundamentally different markets from minerals in terms of structure, the drivers for many are the same.

Natural flake graphite for example is driven by its use in steel refractory bricks and has suffered in particular from a slowdown in three of the world's major steel producing regions: Asia, Europe and the US. 

There appears to be little chance the graphite industry will see the all-time-highs in prices that were experienced in 2011, certainly anytime in the next few years. The price spike which saw high quality flake graphite reach $2,500/tonne (CIF, Europe basis) served as a wake-up call to the industry which is now experiencing somewhat of a restructure with new supply set to come on-stream in the next 3 years.

On average flake graphite prices are down 20% in 2013.

For those in the fluorspar industry this year has been even worse. Prices have fallen 25% in 2013 alone as a demand slowdown has seen consumption from Asia, Europe and the US fall.  

Demand for high-grade fluorspar (acidspar) from the fluorochemicals industry – a wide range of chemicals used in fridges, freezers and air-conditioning units to name a few applications – has collapsed in 2013 as individuals delay purchasing new white goods until improved economic conditions prevail.

Low grade fluorspar demand (metspar) has also been hit, but to a lesser extent, as increased domestic consumption from China's steel industry has insulated global markets from severe price decreases.

IM Data’s outlook for both the graphite and fluorspar industries mirror the sentiment coming out of the metals industry this week in London: a recovery in both prices and demand is expected in 2014, but do not anticipate a strong rebound as seen in 2011. 

Chatham House analysis: Volatility in commodity markets 1980-2012


Extreme price volatility has been seen across all commodity markets since 2008. The indexed examples above show a very similar performance to many industrial minerals including graphite and fluorspar. 

Source: Resources Futures (Report), Chatham House, London, December 2012 



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