HONG KONG, May 6 (SMM) – China began 2019 on a strong note, with greater onshore confidence over demand for 2019 and infrastructure spending, said Ian Roper, general manager of SMM Singapore. Gross domestic product (GDP) rose 6.4% year on year, and growth in industrial production, consumption, investment, imports and exports all accelerated.
Construction appears upbeat, as the private market for housing stabilises, but the key will be how quickly these effects fade in the second half of the year as construction of shanty town housing declines some 3 million units, Roper said at the Asia Metals Seminar jointly held by SMM, Bloomberg and HKEX on Monday May 6 during LME Asia Week in Hong Kong.
On base metals, copper remains a favourite. “Smelter TCs for copper tightened rapidly this year and are set to remain firm,” said Roper. TCs for the second half of 2019 could receive a boost from strong Chinese smelter output.
Roper expects some volatility in zinc prices in the short term. Recovering consumption in the second quarter is likely to lower inventories and offer support to prices. But inventories are set to rebound in the second half of 2019 as production picks up from the end of the second quarter.
Nickel and battery materials are likely to struggle in 2019 but to remain strong in the long term. NPI production is likely to continue to pressure the nickel market this year, and the global destocking of nickel inventory is likely to slow.
Roper highlighted growing interest in manganese, with prices holding up high for a while. Manganese mines in China have seen significant closures and the country is raising its reliance on imports.
For ferrous metals, Roper said that infrastructure is set to support steel prices in the first half of 2019. This will also support prices of iron ore.
Primary aluminium production cuts in the third and fourth quarters of 2018 and a peak consumption season in 2019 that will lower inventories, accounted for gains in aluminium prices since the start of 2019, Roper said.
Capacity in operation is expected to grow by 1 million -1.3 million mt/year by the end of the second quarter, and greater production is likely to weigh on the market in the third quarter. Prices of alumina have seen recent volatility and are likely to trend lower in the second half of the year.