Some metals have overshot the fundamental improvement – Goldman Sachs

Research Team at Goldman Sachs, suggests that in their view the outlook for some metals which already had a fundamentally bullish supply and demand outlook into 2017 – zinc and nickel – has improved following the recent stronger than anticipated Chinese demand growth, and with the prospect of a major US infrastructure stimulus, owing to their constrained supply dynamics.

Key Quotes

“By contrast, even with stronger Chinese demand forecasts we still see copper moving in to a moderate surplus in 2017, and find that the market is pricing an unrealistic tripling in global copper consumption growth in order to justify current price levels. Indeed, with net speculative positioning very long across the base metals, we take the view that this length will be more persistent in the metals with sustained fundamental bull cases, most notably, in zinc and nickel, and unwind to some degree in copper and aluminium.”

“Raising our base metals forecasts, with supply differentiation key to the outlook

Overall, while stronger demand leads us to raise our base metals price forecasts across the complex, we see that the market has become too bullish too quickly on some metals, namely copper, and we continue to see supply differentiation going forward.”