Base metals navigating macroeconomic uncertainties

19th January 2024

Base metals navigating macroeconomic uncertainties

POTENTIAL REBOUND Recent price increases suggest a potential rebound for copper in the macroeconomic environment

With market dynamics presenting a mixed bag of challenges and potential opportunities, base metal nickel, specifically, has experienced notably low prices, averaging at $18 255/t in October 2023, which cross-commodity price reporting agency Fastmarkets says “prompts a cautious re-evaluation of price forecasts”, despite the absence of a significant bear market rally.

On November 8, 2023, the agency noted that the current market narrative enabled a short-term rebound in the first quarter of 2024, influenced by factors such as technically oversold conditions, existing short fund positions, seasonal patterns and a sense of optimism regarding China’s economic stabilisation.

An element of unpredictability is also introduced by the Indonesian government’s crackdown on nickel mining, the agency reports, noting that the intention to revamp mining licences, preserve ore reserves, and enforce stricter environmental scrutiny could “potentially reshape market sentiment, adding another layer of complexity to the nickel narrative”.

However, Fastmarkets reports that questions linger about the sustainability of any short-term gains for nickel value, considering the overarching long-term downtrend.

In contrast to a bearish physical market, prices for base metal aluminium have showed resilience, which Fastmarkets says “demonstrates a robust back test of key technical support”.

The result of this support, coupled with a meeting with the 200-day moving average, paints a “positive picture”, the agency notes.

This resilience, Fastmarkets details, is further underpinned by a macro backdrop featuring falling exchange stocks and production cuts in China, contributing to a short-term positive outlook for aluminium prices.

However, the contrast between weak demand from traditional sectors and the relatively swift embrace of green technology characterises the aluminium situation, Fastmarkets says, adding that despite lackluster demand in 2023, the surge in China’s new solar capacity and the International Energy Agency’s projection of a 35% year- on-year increase in global electric vehicle (EV) sales in 2023, “inject optimism into aluminium’s evolving story”.


With recent price increases suggesting a potential rebound for copper in the macroeconomic environment, Fastmarkets says the US Federal Reserve’s inclination is towards a more dovish stance in 2024, which Fastmarkets says creates a conducive environment for base metal prices.

The agency also points out that signs of China’s macroeconomic stabilisation and a potential depreciation of the US dollar amplify the positive backdrop for copper. However, Fastmarkets notes that the US Federal Reserve pivoted in October following influence from weaker economic indicators, thereby “setting the stage for a more accommodative monetary policy”.

Additionally, a potential US “economic soft landing” aligns favourably for copper, coinciding with a US dollar depreciation, conducive to copper prices; though despite recent setbacks, Fastmarkets notes that China demonstrates resilience, with targeted policy interventions aiming to stimulate economic expansion.


Lead prices, meanwhile, find themselves in a delicate balancing act, navigating a landscape marked by both bullish and bearish forces with rising seasonal demand from the battery sector providing short-term support, amplified by a reduction in speculative net length.

However, Fastmarkets notes that macro and geopolitical turbulence “cast a shadow”, challenging the sustainability of this positive momentum.

In addition, the “battery kill season” – winter months in the northern hemisphere – make way for a traditional surge in demand during winter, and innovations in lead-based batteries contribute to the bullish outlook, Fastmarkets notes; though the agency warns that underlying fundamentals reveal a surplus in the refined lead market, with concerns over rising supplies and macro uncertainties.

“The intricate dance between these opposing forces shapes lead’s trajectory, requiring market participants to carefully assess the unfolding narrative,” the agency states.


Fastmarkets reports that tin grapples with a confluence of challenges, as the LME “looseness and bearish bets create headwinds”.

Despite attractive price levels for long-term buying, negative momentum and sentiment persist, Fastmarkets notes, adding that the decline in the official tin cash price on the LME, coupled with persistently high inventories, underscores the prevailing weakness of the metal.

Fastmarkets points out that LME tin inventories, reaching 7 430 t, essentially double the five-year historical average and signal subdued consumer demand.

“The pronounced contango in the LME tin curve reflects market weakness, incentivising traders to build short positions. Fund managers, influenced by weak physical demand and increasing global inventories, raise bearish bets, adding a layer of uncertainty to tin’s trajectory,” the agency comments.


Further, zinc prices navigate a complex terrain, characterised by producer discipline and muted demand, Fastmarkets reports.

Despite an uptick in the LME cash price forecast, challenges persist, owing to weak physical demand and ample ready stocks, Fastmarkets notes, stating that the illusion of a “tighter feel” to underlying fundamentals, driven by strong LME stock outflows, masks the macroeconomic headwinds.

The interplay between tightening producer discipline and macroeconomic challenges creates a delicate balance for zinc, Fastmarkets says, referring to recent Purchasing Managers Index data, which indicate headwinds for manufacturing activity, setting a negative short-term outlook.