The stance of Federal Reserve on interest rate hike along with fluctuating signs on China’s economic growth have been keeping the metal prices in a narrow range.
 
Short term Iron prices outlook looks positive while long term headwinds might be witnessed: Chinese steel mills have been producing steel at accelerated rates at the back of rising steel prices and this has resulted into short-term jump in demand for iron ore driving its prices in H1CY16. Owing to this, iron ore has moved up over $70 a metric ton. At the same time, China’s move to reduce imports of the new raw material owing to weakening demand from domestic steel makers gives rise to a different picture. The China iron and steel association has reported that iron ore imports can even fall to 920 million metric tons from 953 million metric tons of 2015. Thus, iron ore production and a drop in imports suggest for headwinds for the prices for the raw material. Chinese iron ore imports have been reported to drop in June by 5.9% from May’s level of 81.6 million metric ton with Chinese steelmakers drawing on inventories of the raw material. In July, China’s port inventories jumped up 11% climbing to an 18-month high of 102.5 million metric tons. The month of September also witnessed pressure on China at the G-20 in terms of overcapacity reduction. About 250 million MT of new supply has been said to hit an already saturated market over the next three years if iron ore production is not curtailed. Market now speculates that China’s steel demand might be reinforced post the upcoming October short break given investments in the housing and infrastructure e sectors.
 
Positive outlook for copper: Copper prices saw significant counter-trend rally in which they had peaked at $5,131, a rebound of 18.8%. According to International copper study group (ICSG), the copper market was in supply deficit of 57,000- 167,000 tonnes in 2015. In 2016, with output cuts partially offset by new production, the ICSG expects mine output to rise 1.5% to 19.4 million tones and refined production to rise 1.6% to 22.9 million tones. China accounts for 45% of global copper consumption and the country’s GDP is expected at around 6.5%. This has been expected to support copper demand rising by more than 0.5%. The price has been expected to be better in second half of 2016.

Copper Forecasts (Source: ICSG, FastMarkets forecasts)
 

 Recovering short term outlook for coal: Coking coal moved up 170% this year at the back of lower output from China under pressure from the government to cut overcapacity. Earlier, Chinese import demand from a stimulus led uptick in economic activity has been set to fade in the second half of the year and likely to prevent a more substantial rebound in prices than had already seen since the February low of $47.6/t. It is expected that the average price forecast for 2016 is at $53/t up from $51/t and for 2017, it will be $57/t from $52/t. Coal remains a dominant source of power generation worldwide despite the increasing use of other sources. The natural gas and renewables are eating away coal’s share at a rapid pace. The clean power plan announced in August 2015 by the US Environmental protection agency calls for CO2 reduction of 32% by 2030 from 2005 levels. These plans can lead to the closure of more coal based power units.
 
Nickel trying to move up: On the back of sustained global deficits and declining inventories, nickel prices are expected to be at $90000/t in 2016 and expected a recovery in 2020. By the second half, strengthening fundamentals in the nickel market and a more general bounce in metal prices are expected to start pushing nickel prices towards $10,000/t. The partial relaxation of Indonesia’s ore export ban and Indonesian nickel pig iron smelter coming online by 2017, the supply crunch in nickel market would be released.  Nickel prices are expected to be in the range of $10,500 in 2017 and $11,500 by 2019.