Commodities, for good reason, are not the flavor of the month with investors but for anyone looking ahead 2019 could be a good year for copper and nickel, if 400 metal industry professionals are correctly reading their crystal balls.
The flipside of the optimism in a survey taken in the British capital during London Metals Week is a negative outlook for two other metals, zinc and aluminum.
Conducted by Macquarie, an Australian-based investment bank, the survey asks LMW delegates to rank their metal preferences for the next 12-months in terms of those in which they might take a long (or buy) position and those they are likely to short (or sell).
Copper components for generator units sit ready for installation at a plant in Ukraine. Photographer: Vincent Mundy/Bloomberg
Copper was seen by 45% of respondents as the metal they would most likely buy, followed by nickel with a 31% positive response.
Interestingly, they are the same two metals which topped last year’s LMW survey when the scores were 33% for copper and 31% for nickel — though the result has been mixed.
Dr Copper Caught A Summer Cold
Copper as anyone exposed to the metal which is sometimes referred to as Dr Copper for its linkage to manufacturing activity and its wide range of uses, started 2018 well at $3.20 a pound, peaking at $3.30/lb in June, before collapsing in the face of the China v U.S. trade war to $2.62/lb and only now creeping back to $2.83/lb
Undeterred by last year’s incorrect tip LMW delegates have gone even harder on copper with their latest 45% long tip, matched by a sharp fall in the number of delegates taking a short view of copper with last year’s 23% short dropping to 5% for 2019, the lowest of all the metals.
Nickel is the only member of the base metal family that also includes aluminium, lead, zinc and tin, to be trading at a higher price this year than at the last LMW gathering with the positive view of nickel based on demand in its traditional market of stainless steel and its new-found role as a key metal in long-life batteries used in electric cars.
Zinc, the top metal short last year is also the top short this year thanks to concern about rising supply, while aluminum has seen its short ranking creep up from 22% last year to the latest reading of 24% with the biggest influence on aluminium likely to be tariff-hit supply on Rusal, the big Russian producer of the metal.
Blame The Speculators
Copper’s sharp fall after June, according to responses from 47% of delegates, was largely a result of speculative trading and likely to be temporary, while 38% agreed with a suggestion that it was part speculative and part deserved.
Perhaps the most useful aspect for investors from the metal traders survey is price expectation with 55% expecting copper to trade in range from $2.98/lb to $3.31/lb and 29% seeing the range being from $2.63/lb to $2.98/lb.
The aluminum price, according to 45% of delegates, will be between 93 cents a pound and $1.04/lb while 65% of delegates expect nickel to trade above $6.13/lb, up modestly on its current price of $5.80/lb