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Clear outlookGain clarity into what’s driving your markets using our analysis and forecasts for key metals
LME week_Sept2018_updated_MattV2.indd 1 01/10/2018 17:49
© The London Metal Exchange (the “LME”), 2018. The London Metal Exchange logo is a registered trademark of The London Metal Exchange.
All rights reserved. All information contained within this document (the “Information”) is provided for reference purposes only. While the LME endeavours to ensure the accuracy, reliability and completeness of the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or implied, or accepts any responsibility or liability for, the accuracy, completeness, reliability or suitability of the Information for any particular purpose. The LME accepts no liability whatsoever to any person for any loss or damage arising from any inaccuracy or omission in the Information or from any consequence, decision, action or non-action based on or in reliance upon the Information. All proposed products described in this document are subject to contract, which may or may not be entered into, and regulatory approval, which may or may not be given. Some proposals may also be subject to consultation and therefore may or may not be implemented or may be implemented in a modified form. Following the conclusion of a consultation, regulatory approval may or may not be given to any proposal put forward. The terms of these proposed products, should they be launched, may differ from the terms described in this document.
Distribution, redistribution, reproduction, modification or transmission of the Information in whole or in part, in any form or by any means are strictly prohibited without the prior written permission of the LME. The Information does not, and is not intended to, constitute investment advice, commentary or a recommendation to make any investment decision. The LME is not acting for any person to whom it has provided the Information. Persons receiving the Information are not clients of the LME and accordingly the LME is not responsible for providing any such persons with regulatory or other protections. All persons in receipt of the Information should obtain independent investment, legal, tax and other relevant advice before making any decisions based on the Information. LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
New contracts. New opportunities. SETTING THE GLOBAL STANDARD
In the current socio-economic climate it’s becoming increasingly important to protect against price fluctuations.
At the London Metal Exchange we’re always working to provide more risk-management solutions for the physical and financial communities – especially during times of volatility.
From January 2019 onwards we’ll be launching hot-rolled coil, alumina, aluminium premiums, cobalt and molybdenum cash-settled futures and to follow, gold and silver options.
Developed to meet market needs, we’re giving the precious, ferrous, aluminium and electric vehicle industries yet more opportunities to hedge and trade their metals risk.
Find out more
lme.com/newproducts [email protected]
7393_LME_MB_AD_PDFReport.indd 1 19/09/2018 09:31LME week_Sept2018_updated_MattV2.indd 2 01/10/2018 17:49
Fastmarkets 3October 2018
Base metals
5 Aluminium: Price outlook bullish given numerous supply-side risks
6 Copper: When to buy the dip
8 Lead: Too early to turn bearish
9 Nickel: No avoiding the long-term bull story
10 Tin: Structural tightness will persist
11 Zinc: Supply has responded, have prices overshot?
12 Alumina
14 Aluminium premiums
16 Cobalt
18 US hot-rolled coil
20 Lithium
22 Nickel sulfate
Table of contents
Beyond base: other prices to watch in 2019
Tools to trade
Working in today’s metal markets means you need to be an expert on supply and demand, spot prices and the outlook for markets. You need to know what your competitors are doing, what your customers want now and next, and what both suppliers and clients will or won’t do as markets change. And, of course, you must now consider the ramifications of the amped-up trade conflict between the United States and China and its repercussions in the markets you trade, on top of considering what the fundamentals are telling you. As this year’s mating season takes place, we asked our team of price reporters and analysts to provide their outlook for base metals as well as their insight into other key markets to empower you in your negotiations. Alex HarrisonFastmarkets editorial director
© The London Metal Exchange (the “LME”), 2018. The London Metal Exchange logo is a registered trademark of The London Metal Exchange.
All rights reserved. All information contained within this document (the “Information”) is provided for reference purposes only. While the LME endeavours to ensure the accuracy, reliability and completeness of the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or implied, or accepts any responsibility or liability for, the accuracy, completeness, reliability or suitability of the Information for any particular purpose. The LME accepts no liability whatsoever to any person for any loss or damage arising from any inaccuracy or omission in the Information or from any consequence, decision, action or non-action based on or in reliance upon the Information. All proposed products described in this document are subject to contract, which may or may not be entered into, and regulatory approval, which may or may not be given. Some proposals may also be subject to consultation and therefore may or may not be implemented or may be implemented in a modified form. Following the conclusion of a consultation, regulatory approval may or may not be given to any proposal put forward. The terms of these proposed products, should they be launched, may differ from the terms described in this document.
Distribution, redistribution, reproduction, modification or transmission of the Information in whole or in part, in any form or by any means are strictly prohibited without the prior written permission of the LME. The Information does not, and is not intended to, constitute investment advice, commentary or a recommendation to make any investment decision. The LME is not acting for any person to whom it has provided the Information. Persons receiving the Information are not clients of the LME and accordingly the LME is not responsible for providing any such persons with regulatory or other protections. All persons in receipt of the Information should obtain independent investment, legal, tax and other relevant advice before making any decisions based on the Information. LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
New contracts. New opportunities. SETTING THE GLOBAL STANDARD
In the current socio-economic climate it’s becoming increasingly important to protect against price fluctuations.
At the London Metal Exchange we’re always working to provide more risk-management solutions for the physical and financial communities – especially during times of volatility.
From January 2019 onwards we’ll be launching hot-rolled coil, alumina, aluminium premiums, cobalt and molybdenum cash-settled futures and to follow, gold and silver options.
Developed to meet market needs, we’re giving the precious, ferrous, aluminium and electric vehicle industries yet more opportunities to hedge and trade their metals risk.
Find out more
lme.com/newproducts [email protected]
7393_LME_MB_AD_PDFReport.indd 1 19/09/2018 09:31 LME week_Sept2018_updated_MattV2.indd 3 01/10/2018 17:49
Fastmarkets 4October 2018
Base MetalsWith tight supply-demand balances projected for 2019, the base metals are well positioned to enjoy price recoveries over the next 12 months when macroeconomic stresses disperse, according to forecasts from Fastmarkets’ research team.
LME week_Sept2018_updated_MattV2.indd 4 01/10/2018 17:49
Fastmarkets 5October 2018
Price outlook bullish given numerous supply-side risks
This has been an unusually volatile year for aluminium - changing trade policies and shifting trade flows, US sanctions on Rusal and unplanned disruptions to alumina supplies have coincided with a continuing clampdown by Chinese authorities on outdated and polluting capacity. Perhaps more than any other base metal at the time of writing, aluminium’s outlook is the hardest to read with great confidence given that so many aspects remain shrouded in uncertainty. On balance, though, we believe LME aluminium prices are likely to edge higher in 2019. Supply disruption threats and cost inflation should be net bullish drivers. The alumina situation is key. A supply deficit in the ex-China market has already stimulated Chinese alumina exports. But we expect the supply deficit of alumina in China itself to widen too due to low inventories and limited additional supplies. The commissioning of planned new refining capacity will be restrained due to environmental inspections in the provinces of Henan and Shanxi.
Tight supply of alumina is therefore likely to become the new norm for a while; alumina prices should continue to move higher too. Our primary aluminium supply/demand balance shows a substantial global supply deficit of well above 1 million tonnes in 2019, even while the pace of demand growth is likely to slow for the third consecutive year to 3.7%. This is down from 4.7% in 2018 and an average of around 6% per year over 2012-2017. Crucially, however, we forecast the pace of primary aluminium production growth to slip to just 2.1% in 2019 - the slowest rate since 2009, when the global financial crisis was at its height. In the intervening years, global primary aluminium
production has expanded at an annual average pace of 6.4%, ranging from 12.4% in 2010 to 3.3% in 2018. This situation will underpin the highest annual average aluminium price since 2011; our base-case forecast is $2,230 per tonne, up from our forecast for this year of $2,167 per tonne. The LME three-month price has hovered between $2,000 and $2,100
per tonne throughout 2018. It hit a low of $2,007 per tonne on Monday September 17, a drop of 11% from the start of the year, before rebounding to around $2,035 per tonne.
Aluminium
zinc
nickel
copper
lead
tin
al
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Fastmarkets high-low range
LME price and Fastmarkets forecast
5,000
15,000
25,000
35,000
45,000
55,000
3,000
5,000
7,000
9,000
11,000
1,000
1,500
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26,000
31,000
36,000
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3,500
200
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Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$2,167 $2,230
LME week_Sept2018_updated_MattV2.indd 5 01/10/2018 17:49
Fastmarkets 6October 2018
When to buy the dip
Copper has come under marked downward pressure so far this year, falling nearly 20% on the LME. This is in sharp contrast with last year’s stellar gains of 32%. We argue that the copper price weakness has not been driven by weaker fundamentals but more by macroeconomic fears. Most damaging have been concerns over China’s economic growth caused by:
• Tightening measures implemented by the authorities at the start of the year
• The escalation of the US-China trade dispute
Still, some negative fundamental forces have been in play, especially in the first half of the year. Supply was more resilient than expected due to far fewer mine supply disruptions than typical in recent years. And Chinese copper demand growth disappointed. The second half of the year has so far been better from a fundamental perspective; we think this will remain the theme for the rest of 2018 and for 2019 because we believe the global copper market has now switched into deficit. Once
macro tensions abate, investors will shift their focus back to the market’s positive fundamentals. We expect the global refined copper market to record annual deficits of 67,000 tonnes and 115,000 tonnes this year and next year respectively. The deeper deficit projected for 2019 should essentially stem from an acceleration in copper consumption growth, driven by the world ex-China. We expect copper consumption growth in China to be little changed in 2019 at 3.2% compared with 3.4% this year, while growth in the rest of the world will accelerate to 2.1% from essentially flat. On the supply side, we forecast global refined
production growth to slow slightly to 2.4% in 2019 from 2.5% in 2018. The concentrate market should tighten due to weaker mine production growth, resulting in lower treatment/refining charges (TC/RCs). The tightness in the refined copper market should exert downward pressure on reported stocks, which we forecast to fall to 4.9 weeks of consumption at the end of 2019 from 5.3 weeks at the end of this year. Against this, we forecast a base case for the LME cash copper price of $6,573 per tonne in 2018 and $7,163 per tonne in 2019. This bullish outlook also reflects investors beginning to price in ballooning supply deficits that loom in the early 2020s.
zinc
nickel
copper
lead
tin
al
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Fastmarkets high-low range
LME price and Fastmarkets forecast
5,000
15,000
25,000
35,000
45,000
55,000
3,000
5,000
7,000
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11,000
1,000
1,500
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11,000
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21,000
26,000
31,000
36,000
1,000
1,500
2,000
2,500
3,000
3,500
200
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Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$6,573 $7,163
Copper
LME week_Sept2018_updated_MattV2.indd 6 01/10/2018 17:49
Fastmarkets 8October 2018
Too early to turn bearish
LME lead traded above $2,650 per tonne for the first time since 2011 at its highs in February this year before sinking to around $2,000 per tonne by August. As with many of the other metals, the retreat came despite the lead market’s own fundamentals appearing to justify a rise in prices rather than a fall. The global refined lead market is running another substantial supply deficit this year after a shortfall of more than 100,000 tonnes in 2017; the concentrate market remains very tight, with treatment charges still at bottom and limited new mine capacity in the pipeline; and metal stocks are near critically low levels. But the market’s focus has shifted away from this bullish fundamental backdrop to the uncertainties surrounding the US trade disputes, tighter monetary policy and a stronger dollar. The concerted global economic growth story of 2016 and 2017 is being undermined. Given the more subdued business and investment climate as well as the disappointing price performance since lead’s highs in February, we have recently revised lower our
price forecasts out to the end of 2019. Lead’s fundamentals still look bullish so we expect prices to recover in time while supply deficits continue to cause stocks to be drawn down. Indeed, physical shortages leave this metal well placed to be one of the fastest movers to the upside when risk appetite revives. But that recovery will now come from a lower base. We have lowered our fourth-quarter base-case cash price forecast to $2,275 per tonne from $2,450 per tonne and our annual average price forecast for 2019 to $2,500 per tonne from $2,644 per tonne. The long-term demand outlook for lead in the important automotive
market faces considerable headwinds from the displacement of internal combustion engines (requiring lead-acid batteries) by lithium-ion batteries in electric vehicles (EVs). The impact of the EV story on lead in 2019, however, will actually be bullish - miners are shying away from investing in the next generation of lead mines, which is keeping the lead concentrate market tight and primary refined supply restrained. So it is too early to get bearish on lead based on the bullish EV outlook.
zinc
nickel
copper
lead
tin
al
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Fastmarkets high-low range
LME price and Fastmarkets forecast
5,000
15,000
25,000
35,000
45,000
55,000
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26,000
31,000
36,000
1,000
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2,000
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3,500
200
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Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$2,328 $2,500
Lead
LME week_Sept2018_updated_MattV2.indd 8 01/10/2018 17:49
Fastmarkets 9October 2018
No avoiding the long-term bull story
Nickel is widely perceived to have a very bullish long-term outlook - it will benefit from the expected growth in electric vehicles (EVs) and lithium-ion batteries over the next decade or so. The question is: How much of this bullishness will be priced in during the next year? We err on the bullish side on the proviso that global trade-related stresses dissipate and risk appetite returns. History shows that when nickel has a bull narrative it can rally hard and fast. And it is still trading at historically low levels. We think the battery bulls will be back after the summer sell-off - we wouldn’t rule out nickel touching $18,000 per tonne in the second half of 2019 given a supply deficit in the global refined market that looks set to expand next year to 81,000 tonnes as well as the continuation of stockpiling of Class 1 nickel units down the EV supply chain. Our annual average base-case forecast is currently $16,825 per tonne after $13,859 per tonne in 2018, which assumes a return to $14,000 per tonne in the fourth quarter. The three-month LME nickel price
dipped to an eight-month
low of $12,085 per tonne on Wednesday September 12. Two areas of concern for the short term are:
• the emergence of oversupply in stainless steel in Asia
• growth in nickel pig iron (NPI) production in Indonesia, while capacity continues to ramp up; and in China, while ore stocks and average ore grades recover
This may precipitate a weaker patch in nickel’s fundamentals in the fourth quarter if stainless steel mills show some restraint while NPI continues to expand. The role played by China’s authorities may prove crucial. They have had
some success in curbing excesses in the carbon steel market but so far stainless has been somewhat overlooked. That may change this winter. But aside from government-enforced cuts, we believe there is a high probability that Chinese stainless producers will reduce production for market reasons this winter given the pressure on prices from a surge in domestic stocks. Rebalancing China’s stainless steel market this winter may provide some short-term pain for nickel in the form of a dip in demand, but it will lay the foundation for another fundamentally bullish year in 2019.
zinc
nickel
copper
lead
tin
al
500
1,000
1,500
2,000
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3,000
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26,000
31,000
36,000
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LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$13,859 $16,825
Nickel
LME week_Sept2018_updated_MattV2.indd 9 01/10/2018 17:49
Fastmarkets 10October 2018
Structural tightness will persist
Tin has been one of the most resilient LME base metals this year, especially during the first half, when LME prices edged only 1% lower while the broader LMEX was down 6%. We attribute this resilience to two main factors:
• The reaction in prices to macroeconomic tensions stemming from China was comparatively smaller because speculators tend to express their macro views through other industrial metals with better liquidity conditions, such as copper.
• The refined tin market temporarily tightened in the early part of the year due to a supply bottleneck in Indonesia - which accounts for 20% of global refined output - which was created by export permit delays. Indonesian refined tin exports were down 31% year on year in the first quarter but by July had recovered to show a modest gain of 3.7% year on year over the first seven months, according to our records.
We project a stable demand outlook for tin this year and next,
supported by healthy prospects for tin’s main end-use sector, solder, thanks to robust indicators for growth in electronics markets. We forecast refined tin demand to grow by 1.5% in 2018 and 1.2% in 2019. Given the stable demand profile, we believe that supply dynamics will be the key determinant of tin’s price direction. In Indonesia, tin production has rebounded after the disruptions earlier this year; this trend should continue given investment in new capacity. But we caution that persistently low LME tin prices below $20,000 per tonne may undermine the supply recovery - three-month prices were struggling to hold above
$19,000 per tonne in mid-September.
In China, refined tin production, having risen an unexpected 8% in the first half thanks to strong shipments from Myanmar and solid domestic mine production, will contract in the second half and next year if supply from Myanmar falls as expected and China tightens environmental controls on domestic production. We therefore forecast growth in global refined tin production of 2.4% in 2018 before it slows to 0.9% in 2019. This should result in a deficit of 7,000 tonnes this year and 8,000 tonnes next year. Against this tight fundamental backdrop, we forecast a base-case cash tin price of $20,388 per tonne in 2018 and $20,753 per tonne in 2019.
zinc
nickel
copper
lead
tin
al
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1,000
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LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$20,388 $20,753
Tin
LME week_Sept2018_updated_MattV2.indd 10 01/10/2018 17:49
Fastmarkets 11October 2018
Supply has responded, have prices overshot?
The zinc market is in a phase of transition in supply and demand back to a balanced state from deep deficits of recent years. This readjustment process is being led by the concentrate market moving from undersupply to oversupply. Major mine projects such as MMG’s Dugald River and Vedanta’s Gamsberg have started up production this year while Century, Myra Falls and Lady Loretta are resuming operations after long suspensions. How quickly will this additional concentrate feed through the supply chain to rebalance the refined zinc market? Indicators suggest this rebalancing is already in progress. Global refined zinc production contracted by 3.7% in 2017 but has managed to return to growth this year, increasing by 2.1% year on year during the first half. As well, spot concentrate treartment charges (TCs) rebounded to two-year highs of $80-95 per tonne cif Asia Pacific as of the end of August from $65-75 per tonne in July and lows of $10-30 per tonne at the concentrate market’s tightest point at the start of this year.
Despite this recovery in mined zinc supply, metal stocks have so far maintained a downward bias, particularly in China. Smelters have been stymied by China’s strict environmental inspections and the sharp 8.6% drop in mine production in the first half due to falling ore grades and because several small mines have been forced to close. As well, smelters are unlikely to be able to boost output significantly in the short term because China’s winter heating season is due to start imminently. So 2018 looks set to be another deficit year overall for the global refined zinc market while 2019 looks balanced at worst.
We are reluctant to forecast oversupply yet. LME prices, which have been sliding since peaking near $3,600 per tonne in February, may have overshot on the downside this year - in mid-September, the LME
three-month price was not far above the August 15 low at $2,283 per tonne. Our price forecast for 2019 is currently $2,600 per tonne. TCs should continue to work higher while the concentrate market moves deeper into oversupply next year.
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3,000
5,000
7,000
9,000
11,000
1,000
1,500
2,000
2,500
3,000
3,500
4,000
6,000
11,000
16,000
21,000
26,000
31,000
36,000
1,000
1,500
2,000
2,500
3,000
3,500
200
6
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
200
6
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
200
6
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2007
200
8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets high-low range
LME price and Fastmarkets forecast
Fastmarkets 2018 Fastmarkets 2019 average price forecast average price forecast
$2,951 $2,600
Zinc
LME week_Sept2018_updated_MattV2.indd 11 01/10/2018 17:49
Fastmarkets 12October 2018
The worst of the supply disruptions are
over - the Alunorte refinery could restart
in the fourth quarter after Hydro signed
environmental and social development
deals with the Brazilian government in
September; a strike by Alcoa workers in
western Australia was called off at the end
of September; and sanctions against Rusal
could be removed. There should be more
stable supply in 2019.
The lack of supply from traditional
suppliers can be offset by China, which
has been exporting more and at cheaper
prices in 2018.
Still, buyers acknowledge that supply is
tighter than it was and are prepared to
pay a higher price than they did a year
ago to secure some tonnage for 2019.
Supply tightness means that buyers
are unable to secure large tonnages of
alumina. This shortfall forces them to bid
for tenders at high premiums amid strong
competition for material.
There are fewer sellers. A lack of
availability enabled sellers to push for
record-high prices this year but many
producers sold out; some are even short
and are unable to fulfil their contractual
obligations.
Sellers have therefore been competing
in recent months with tenders for Indian
alumina material - they have been
concluding once a week, setting the
market level. A tender for Nalco Indian
material traded at $650 per tonne at
the start of September, up 22% from the
previous month’s $530 per tonne.
What buyers are saying: What sellers are saying:
AluminaEnabling trading:
LME week_Sept2018_updated_MattV2.indd 12 01/10/2018 17:49
Fastmarkets 13October 2018
Key quote:
“ The supply deficit outside China has
stimulated Chinese exports of alumina.
But we expect the deficit in China to
widen due to low inventory and limited
capacity to increase supply. We therefore
believe that tight supply of alumina will
become the new norm for a while. We
expect alumina prices to rise further.
According to our estimates, total
alumina capacity potentially affected by
disruptions amounts to 68 million tonnes
per year, accounting for more than half
of global alumina capacity. ”
Fastmarkets senior analyst Yang Cao
Our index and forecast:
Alumina fob Australia index, $/t
2017 2018 YTD 2019 average average price average price price forecast
$367.61 $476.86 $580
Extreme tightness is propelling Fastmarkets MB’s benchmark fob Australia alumina index price higher.
The fob Australia index was $644.17 per tonne on Monday September 17, up 63% from the start of
2018. The index hit a year high of $703.75 per tonne during April, when US sanctions against Rusal were
announced and a month after Hydro’s Alunorte refinery declared force majeure.
Alumina was trading in August at 30% of the LME outright aluminium price - traders note that any
level above 19% causes non-integrated smelters to lose money. The market has been monitoring
developments at Alunorte, and a strike in western Australia since the start of August is disrupting
supply at Alcoa’s three-refinery system, which produces more than 8 million tonnes per year of alumina.
Sanctions against Rusal have disrupted the Russian producer’s alumina shipments from its refineries in
Aughinish, Ireland, and Windalco, Jamaica.
Supply tightness ex-China is spreading to and across China, where alumina inventories at refineries and
smelters are very tight; and the commissioning of planned new capacity will be limited and will proceed
slowly due to environmental inspections in the provinces of Henan and Shanxi. Capacity closures will be
enforced again during the winter months.
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 13 01/10/2018 17:49
Fastmarkets 14October 2018
Aluminium premiums
There is no shortage of aluminium in the world
- the market’s main feature remains one of
overcapacity in China’s production and rising
exports in the form of coils for re-melting and
flat rolled products such as foil.
Sanctions against Russian producer Rusal will
be removed at some point in 2019; the market
will be flooded with aluminium when that
happens so there is no need to pay extra to
secure metal for next year.
Indeed, there is so far no evidence of a
contango in forward premiums: Parcels for
2019 are being offered at flat to slightly higher
premiums than spot levels in Europe and
at flat to lower levels in the United States.
Offers for the first quarter of next year have
been reported around $160 per tonne duty-
paid in-warehouse Rotterdam, in line with
Fastmarkets MB’s assessment of $155-165 per
tonne, for instance.
Although buyers aim to conclude 2019 supply
contracts by the end of LME Week, they are
holding back from finalizing next year’s deals
until market direction is clearer. Some are
reluctant to contract for any Russian material
in case US sanctions remain in place.
Supply is tightening due to sanctions
against Rusal and record-high prices
for alumina. Physical premiums are likely
to rise after the October 23 deadline to
wind down supply contracts with Rusal,
especially because consumers are running
on low stocks and not booking much
volume forward.
Aluminium stocks on the LME are at a
decade low, with just 755,750 tonnes on
warrant, while off-exchange stocks are
also many million tonnes lower than in
recent years, reflecting strong demand
for the metal.
Volatile spreads will remain a major
risk for suppliers, with backwardations
expected to return to the market to make
stock holding unprofitable.
There is a risk of selling forward - no
one wants to miss out on any increase
in premiums. Some sellers would rather
take a chance on the spot market. Thus,
more people are also looking to sell on
a quarterly basis rather than an annual
basis for next year.
What buyers are saying: What sellers are saying:
Alumina
Enabling trading:
LME week_Sept2018_updated_MattV2.indd 14 01/10/2018 17:49
Fastmarkets 15October 2018
Key quote:
“ The US sanctions on UC Rusal
remain a strong supporting factor for
physical premiums. At the same time,
alumina prices have rocketed and on-
warrant aluminium stocks at LME-listed
warehouses have been around their lowest
in a decade in recent months. Continued
cancellations and outflows have tightened
availability. ”
Fastmarkets senior analyst Yang Cao
Our price assessment and forecast:
P1020A US Midwest delivered, cents/lb
P1020A Rotterdam duty-paid in-warehouse, $/t
2017 2018 YTD 2019 average average price average price price forecast
$147.66 $173.79 $200-220
2017 2018 YTD 2019 average average price average price price forecast
8.92 19.68 22-24
Aluminium premiums are down sharply from their April peak in Europe and Japan - by 36% and 53%
respectively - while falling by only 8% in the US. They remain well above start-of-year and pre-sanction
levels.
The market is keeping close tabs on the Rusal sanctions, which are restricting most participants from
transacting Rusal-branded metal. If the sanctions are removed, the market will return to relative
normality. There will be more usable material and increased supply. Primary premiums could remain
low while aluminium product premiums could fall dramatically. But if the sanctions are not lifted, supply
will tighten progressively. Many market participants will be short of metal for 2019 deals; if so, premiums
could soar.
Availability of raw materials remains tight - alumina prices are at record highs, with Fastmarkets MB’s
benchmark fob Australia index surpassing $640 per tonne in September. These factors are likely to filter
down to aluminium premiums at some point.
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 15 01/10/2018 17:49
Fastmarkets 16October 2018
Cobalt prices overshot in the first half
of the year and, given the current
fundamentals, a short-term rally back
to $40 per lb and above is unlikely.
Benchmark low-grade cobalt prices,
assessed by Fastmarkets MB, peaked at
$43.70-44.45/lb, in-warehouse Rotterdam,
in the second half of April this year.
The cobalt market must absorb a large
supply response: increased availability
of hydroxide from Glencore’s Katanga
and ERG’s Metalkol Roan Tailings &
Reclamation operations eases the
tightness in battery raw materials. Spot
payables against the metal price have
already fallen since hitting highs at the
start of the year. Higher cobalt prices
have also boosted scrap supply, offsetting
demand for spot purchases.
Changes to China’s electric vehicle (EV)
subsidy policy have expedited a shift to
battery chemistries with higher nickel
and lower cobalt content, resulting in less
demand for the latter.
The fact that consumers continued to
declare maximum volumes on their
long-term contracts, even during the
traditionally quieter summer months,
is a bullish sign for demand, even while
spot market interest - and prices - waned
considerably. Low-grade cobalt prices fell
24.5% over the summer, reaching a low
of $33-33.60 per lb at the end of August,
before a slight recovery in September.
While new hydroxide output pushes
the market to a surplus in the short
term, stockpiling by original equipment
manufacturers (OEMs) is likely to obsorb
that new material. Supply of metal,
meanwhile, is likely to remain tight
because of strong demand for traditional
uses of cobalt outside the battery sector.
The pricing structure of the cobalt market
is such that hydroxide and salts are
exposed to this tightness.
Despite shifts to nickel-rich cathode
chemistries, battery sector demand is
still bullish for cobalt given forecast EV
production figures and the shift from LFP
and LMO cathodes to NCM.
What buyers are saying: What sellers are saying:
CobaltEnabling trading:
LME week_Sept2018_updated_MattV2.indd 16 01/10/2018 17:49
Fastmarkets 17October 2018
High prices in recent years and an extremely bullish outlook for lithium-ion batteries have led to a one-off
supply response via the ramp-up of Glencore and ERG’s large cobalt operations in the Democratic Republic
of Congo, with material coming on stream this year and next.
The switch to NMC battery chemistry from LFP/LMO will boost cobalt demand significantly, even if the
volume of cobalt in each cell is set to decline. Larger battery packs will mean more cells per EV.
Cobalt faces a supply surplus from new supply coming on stream but, once demand has grown to absorb
it, shortages are likely to reappear. We expect any surplus to be snapped up by downstream consumers
and OEMs.
Key quotes:
“ Next year looks surprisingly
bullish. The summer correction was
expected, and buyers were reducing
their inventories and waiting for the
market to bottom out. But now there’s
demand coming for material that
just isn’t there.”
a trader
“ The demand outlook is second to none,
with lithium-ion battery demand growth
expected to see CAGR of 15-20%. ”
Fastmarkets MB head of battery raw materials research William Adams
Our price assessment and forecast:
Low-grade cobalt, in-warehouse Rotterdam, $/lb (low of range)
2017 2018 YTD 2019 average average price average price price forecast
$25.97 $39.12 $35.80
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 17 01/10/2018 17:49
Fastmarkets 18October 2018
Concerns about price declines amid a
glut of readily available material in the
domestic market are keeping buyers out
of the market. By how much might prices
fall further? US hot-rolled coil was trading
at $41.54 per hundredweight ($915.80 per
tonne) in mid-September, down 9.4% from
its 2018 peak of $45.84 per cwt.
Buyers who locked in contracts in 2018 did
well to avoid earlier price increases but
they will be at a disadvantage because
next year’s long-term deals will reflect this
year’s spot market reality. Contractual
discussions are due soon.
Prices declined over the summer because
backlogs and lead times shortened and
mills were more aggressively negotiating
for deals amid the summer slowdown.
Although buyers appear to have stocked
up earlier in the year to avoid price
increases, they might need to replenish
before the end of the year. Still, end-
of-year inventory taxes could cap stock
builds.
Domestic prices are still well above prices
elsewhere, hinting at a possible correction
before the end of the year. For example,
HRC in mid-September was selling for $615
to $626 per tonne at ports in southern
Europe and for $570 per tonne exported
from China. But Section 232 tariffs are
providing a buffer.
What buyers are saying: What sellers are saying:
US hot - rolled coil
Enabling trading:
LME week_Sept2018_updated_MattV2.indd 18 01/10/2018 17:49
Fastmarkets 19October 2018
Key quote:
“ Increasing volatility has made
it more important than ever for
businesses to keep track of pricing.
A properly constructed daily price
index could help drive better price
transparency for its users. ”
Tim Stevenson, partner at commodity advisory Metal Edge Partners, on Fastmarkets AMM’s decision to increase the frequency of its US Midwest Hot-Rolled Coil Index from weekly to daily on Monday October 1.
Our index and forecast:Hot-rolled coil index US domestic Midwest fob mill US$/cwt
2017 2018 YTD 2019 average average price average price price forecast
$31 $42.08 $41.15
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
The maximalist trade policies of the Trump administration - unpredictable in the best of times - have made
US steel prices - volatile in the best of times - harder than ever to forecast.
Steel prices in the United States are at their highest compared with those abroad since the 2008 financial
crisis. For HRC specifically, high prices dovetail with a sluggish demand environment: Apparent steel usage
has declined modestly so far this year. Mill sales have retreated but imports have soared. In general, this
contrasts with the steel market, where mill sales have risen at the expense of falling imports.
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 19 01/10/2018 17:49
Fastmarkets 20October 2018
Rising prices at the end of 2015 and the
promise of a new energy vehicle (NEV) era
prompted a producer response, especially
from junior miners, with some reaching
the production stage at staggering speed.
This resulted in a supply response that is
now reaching China.
China’s investment in recent years in
lithium processing resulted in slight
oversupply of lithium compounds during
2018, causing prices to trend lower.
The system of subsidies Beijing made
available to battery makers was put on
hold in the first half of 2018, leading to a
decline in consumption. Combined with
availability of cheaper units of lithium
compounds from China’s Qinghai region,
this pushed prices down.
Downstream consumers in China remain
partially covered by contracts. But
the opportunity offered by lower spot
market prices is persuading downstream
consumers to source higher volumes on
a spot basis.
Auto manufacturers in China have led
the surge in NEVs over the past couple
of years; traditional auto manufacturers
around the world are now accelerating
their NEV production.
While lithium-ion battery prices fall, not
only will NEV prices also drop but more
battery energy storage systems (ESS) will
become viable. NEVs and ESS - key sectors
for lithium-ion batteries - are set for
exponential growth.
China’s 2015 five-year plan, endorsing
NEVs, created a demand shock -
Chinese companies started to invest
both in vehicle and lithium-ion battery
manufacturing, triggering a rally in
lithium prices.
Although lithium prices have fallen in
the Chinese spot market throughout
2018, lithium producers anticipate a new
demand surge toward 2020 and remain
committed to increase production
capacity to fulfill the expected
increase in battery demand.
What buyers are saying: What sellers are saying:
LithiumEnabling trading:
LME week_Sept2018_updated_MattV2.indd 20 01/10/2018 17:49
Fastmarkets 21October 2018
Key quotes:
“ Current higher contract market
prices and the availability of Chinese
material are persuading smaller
producers in China to step into the
international market and sell their
material in the rest of the world
at very competitive prices. ”
a lithium producer
“ We see that the price will be slightly
lower in the second half of the year,
although still significantly higher
than in the second half of last year. ”
SQM, in its second-quarter earnings call
Our price assessment and forecast:
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-works domestic China, yuan/tonne
Oct-Dec 2017 2018 YTD 2019 average average price average price price forecast
170,333 yuan 131,680 yuan 66,875 yuan
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
A supply response is under way via the ramp-up of hard rock production in Australia. Demand growth
slowed while the market adjusted to changes to China’s NEV subsidies in the second and third quarters
but it will rebound.
The market is moving into a supply surplus and is likely to remain in one for some time. Fastmarkets MB’s
research team is bullish over the long term.
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 21 01/10/2018 17:49
Fastmarkets 22October 2018
Since nickel sulfate prices have been
over-inflated due to the premature focus
on demand growth in the electric vehicle
(EV) sector, there is downside potential
in the near term. Prices were trading at
26,000-26,500 yuan ($3,792-3,865) per
tonne in mid-September; the overall
price trend has been downward.
A boost in nickel sulfate consumption
from the EV boom will start in 2020
at the earliest.
Many producers are ramping up their
nickel sulfate output in response to
the growing need of consumers and in
anticipation of further demand growth,
increasing availability and broadening
the range of sources of material.
Increased usage of nickel sulfate will allow
battery producers to meet requirements
for longer driving distances.
The high cobalt price should lead to
increased nickel sulfate usage because
nickel is cheaper and provides higher
energy density, making it more attractive
than cobalt for now.
What buyers are saying: What sellers are saying:
Nickelsulfate
Enabling trading:
LME week_Sept2018_updated_MattV2.indd 22 01/10/2018 17:49
Fastmarkets 23October 2018
Key quote:
“ The volatility of the nickel sulfate
price can’t be independent from the
nickel full-plate price at the moment
- if the price differential between
the two widens too much, we will
see a correction in the nickel sulfate
price. The significant pick-up in nickel
sulfate consumption on the backdrop
of wide application of nickel-rich
batteries won’t take place any
time before 2020. ”
analyst
Our price assessment:
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, yuan/tonne
2018 YTD average price: 26,571.42
New nickel sulfate capacity is being built and capacity at some existing operations is set to be ramped
up from the second quarter of next year. BHP’s Kwinana Refinery in Western Australia is expected to
produce 100,000 tonnes per year by April 2019. LME and SHFE stocks of Class 1 nickel - which can be
used to make nickel sulfate - are likely to feed demand until new nickel sulfate capacity comes online.
The market is very China-centric at present - direction will be closely linked to EVs and EV battery
demand, in which China is at the vanguard.
The shift from LFP/LMO battery chemistries to NMC (lithium nickel manganese cobalt oxide) chemistries
will increase nickel sulfate demand significantly in the years ahead, as will demand from Tesla’s NCA
(lithium nickel cobalt aluminium oxide) batteries while the company’s EV output rises.
alumina
cobalt
ali prem
200
250
300
350
400
450
500
550
600
650
700
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Alumina FOB Australia index, USD/tonne
0
5
10
15
20
25
30
35
40
45
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
Low-grade cobalt, in-warehouse Rotterdam (USD/lb)
0
50
100
150
200
250
P1020A Rotterdam Duty-Unpaid In-Warehouse (USD/tonne)
P1020A Rotterdam Duty-Paid In-Warehouse (USD/tonne)
Lithium
HRC
nickel sulfate
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2017Q4
2018Q1
2018Q2
2018Q3(f)
2018Q4(f)
2019Q1(f)
2019Q2(f)
2019Q3(f)
2019Q4(f)
Lithium carbonate min 99.5% Li2CO3 battery grade, spot price range, ex-worksdomestic China (RMB/tonne)
0
5
10
15
20
25
30
35
40
45
50
26,000
26,100
26,200
26,300
26,400
26,500
26,600
26,700
26,800
24-Jul2018
31-Jul2018
7-Aug2018
14-Aug2018
21-Aug2018
28-Aug2018
4- Sep2018
11-Sep2018
Nickel sulfate min 21%, max: 22.5%; cobalt 10ppm max, China ex-works, RMB/tonne
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019* (f)
* full year forecast
US Mid-West HRC index (USD/short ton)
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3 (f)
2018Q4 (f)
2019Q1 (f)
2019Q2 (f)
2019Q3 (f)
2019Q4 (f)
What are the fundamentals telling us?
LME week_Sept2018_updated_MattV2.indd 23 01/10/2018 17:49
October 2018
Enabling trading
We’ve been benchmarking commodities since 1882
Being deeply embedded in the markets we serve allows us to provide truly market-reflective prices to enable global trade.
By combining our expertise from across Metal Bulletin,American Metal Market & Industrial Minerals, we now provide you with one definitive source for commodity data & insights.
Visit the Fastmarkets stand or ‘Enabling trading’ lounge to find out more about our transformation.
fastmarkets.com
LME week_Sept2018_updated_MattV2.indd 24 01/10/2018 17:49
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