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Medium-term prospects for key commodities

Time:2016-12-08 14:20:00 Hits:
Copper
In 2016 copper should trade at around US$5,300/t. Demand will start to match supply as a string of production cuts start to filter through the supply chain.
Global copper metal consumption is projected to grow at a CAGR of 2% from up to 2020 to reach 24.7Mt, with China accounting for more than half of the global consumption.
Growth in China is mainly due to the expansion of electricity networks, as well as its rapidly increasing urbanization. In addition, the country is encouraging its industrial sector to produce advanced products such as cars and consumer electronics, which will further drive the country's copper demand.
In 2016, and then for the rest of the forecast period - due to substantial production growth expected from Peru, Zambia and the DRC - global copper mine production is projected to grow at a CAGR of 3.9%, to reach 23.8Mt in 2020.
Iron Ore
Iron ore prices should trade below US$50/t throughout 2016, as severe over capacity afflicts the industry and is made worse by reduced steel production in China. Expect the big three, Vale, Rio Tinto and BHP Billiton to increase their share of global supply, at the expense of smaller players.
Global iron ore consumption is projected to grow at a CAGR of 1.6% up to 2020, to a total of 1.8Bnt in 2020 mainly driven by demand from Asia - from the Indian and Chinese steel sectors supported by construction sector activities.
Continued ramp ups in previously committed investment in Australia and Brazil, by companies such as BHP Billiton, Rio Tinto and Vale together with new companies such as Roy Hill, will continue to drive production growth in the short term.
Gold
Up to 2019, global demand for gold is expected to increase at an average annual rate of 4%, reaching 5,119t. 2016 has been a significant year for gold. In the first quarter of the year, gold demand reached 1,290 tonnes in the March quarter, a 21% increase year-on-year, making it the second largest quarter on record. This increase was driven by huge inflows into exchange traded funds (ETFs), of 364t, fuelled by concerns around the shifting global economic and financial landscape.
Over the medium term the rise in demand for refined gold from Asian countries is mainly expected from its jewelry sector, with factors such as wealthy citizens, low gold prices and a supportive government playing major roles.
Global gold mine production is expected to grow, as low-cost operations will increase, as well as producing higher ore grades and increasing production rates, aimed at lowering the average production cost.
In Russia, gold production is projected to increase in the medium term in 2018, with the development of new upcoming mines, scheduled to be completed by 2017, including the Kinross Dvoinoye mine (7t); Polyus Gold's Natalka mine (15t); and Norlisk Nickel's Bystrinskoye mine (6t).
Similarly, Canada is expected to take over as the fourth-largest gold producer, as huge production is expected to commence from its gold mines - Detour Gold's Detour Lakes mine, Goldcorp's Elanore mine and Newgold's Blackwater mine - by 2018. However, long-term growth is expected to enhance gradually, as exploration and programs on low-cost expansion are likely to be in focus for attaining low operating costs and improving return on investment.
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