Commerzbank Sees Limited Upside for Base Metal Prices Amid Economic Uncertainties
Commerzbank reported today that there is limited scope for further upside in base metal prices, suggesting that the potential has been exhausted or even overdone. The German bank had previously attributed the rise in metal prices to a more positive economic outlook due to the prospect of interest rate cuts in major economies. However, in today's report, the bank stated that economic recovery is unlikely to be particularly strong, as most central banks are expected to cut interest rates only moderately due to persistent inflationary pressures.
"On the other hand, we are sceptical about the effectiveness of the expected stimulus measures in China," the bank said. "Recent mixed purchasing managers' indices have also underlined once again that the economic recovery is more than bumpy, probably also due to the ongoing weakness in the real estate sector."
Commerzbank anticipates that China's real estate sector will only see a recovery in the second half of the year. Until then, metals linked to the construction sector are likely to face challenges.
For nickel, the bank expects prices to stabilize around $20,000 per ton this year.
Regarding aluminium, Commerzbank noted that supply constraints in the global market due to sanctions on Russia are likely to support prices. "As Russia has been an important source of supply in the past, the supply available to Europe is becoming scarcer," it said. While aluminium from China might seem like an alternative, given its status as the world's largest producer, the bank believes China could also reduce production due to the threat of sanctions or punitive tariffs amid the current trade situation. "In general, we believe that the aluminium price still has some catching up to do, and we see the price at $2,800 per ton by the end of the year," it said.
As of 1957 IST, the three-month nickel contract on the London Metal Exchange (LME) was at $17,723 per ton, and the aluminium contract was around $2,577 per ton.
