01.04.2016, 02:20
Sberbank CIB Talks about Key Trends of Global Metals and Mining Sector
OREANDA-NEWS. Sberbank CIB held a press briefing for Dmitriy Kolomytsyn, Commodity Strategist, Sberbank Investment Research2. The speaker focused on the current situation in production of non-ferrous metals and precious metals, and outlined the potential opportunities and challenges for these sectors of the economy.
Mr Kolomytsyn began his presentation with an analysis of the gold markets. Looking at the price dynamics of gold, he commented that even after the correction from the peak of USD 1,900 per ounce, the current gold price is 175% higher than it was in 2000. Gold continues to be the best performing metal in terms of long-term investment. "The key factor determining whether gold appreciates or depreciates is the U.S. Fed's refinancing rate policy. Our current forecast points to a gold price of USD 1,100 per ounce, but if the Fed continues to increase rates, then a correction should take place. As a result the price may fall to the level of late 2105, i.e. USD 1,050," said Mr Kolomytsyn.
Describing key trends in the nickel market, he made comparative analysis of aggregate consumption of this metal and the volume of GDP in a global context. According to calculations, consumption of nickel in China is only just starting to grow compared to developed countries. In addition, China's relatively low level of urbanisation offers a certain level of support to the price uptrend - as urbanisation grows it is unlikely that the level of nickel consumption will fall below current levels. Consequently, nickel prices will begin to recover as global production falls, and nickel demand will depend on the Chinese economy.
The final part of Mr Kolomytsyn's presentation looked at the key trends on the global copper market. According to the strategist, January 2016 was the first time since 2009 when the copper price fell lower than USD 4,300 per tonne. This was caused by a global supply glut, a strong dollar and China's economic slowdown. Mr Kolomytsyn looked in detail at the situation on the Chinese market in light of the fact that 80% of global copper demand comes from China and a few other developing markets. In his opinion, future demand for this metal in China will be supported by electrification (more than 20% of demand) and urbanisation, which continues to drive demand for consumer and industrial goods in the country (30% and 15% of demand).
Over the past 10 years, global production of copper ore has grown by 2% annually thanks to the boom in demand from China and high copper prices, which stimulated investment in the industry. New copper mining projects continue to be launched and by 2018 output will have increased by 2-3 million tonnes (10-15%), which will lead to a surplus in 2016-17. Unless there is rapid growth of demand, and taking into account continuing launch of new mining and processing projects, copper price growth will be limited in 2016-17.
Mr Kolomytsyn began his presentation with an analysis of the gold markets. Looking at the price dynamics of gold, he commented that even after the correction from the peak of USD 1,900 per ounce, the current gold price is 175% higher than it was in 2000. Gold continues to be the best performing metal in terms of long-term investment. "The key factor determining whether gold appreciates or depreciates is the U.S. Fed's refinancing rate policy. Our current forecast points to a gold price of USD 1,100 per ounce, but if the Fed continues to increase rates, then a correction should take place. As a result the price may fall to the level of late 2105, i.e. USD 1,050," said Mr Kolomytsyn.
Describing key trends in the nickel market, he made comparative analysis of aggregate consumption of this metal and the volume of GDP in a global context. According to calculations, consumption of nickel in China is only just starting to grow compared to developed countries. In addition, China's relatively low level of urbanisation offers a certain level of support to the price uptrend - as urbanisation grows it is unlikely that the level of nickel consumption will fall below current levels. Consequently, nickel prices will begin to recover as global production falls, and nickel demand will depend on the Chinese economy.
The final part of Mr Kolomytsyn's presentation looked at the key trends on the global copper market. According to the strategist, January 2016 was the first time since 2009 when the copper price fell lower than USD 4,300 per tonne. This was caused by a global supply glut, a strong dollar and China's economic slowdown. Mr Kolomytsyn looked in detail at the situation on the Chinese market in light of the fact that 80% of global copper demand comes from China and a few other developing markets. In his opinion, future demand for this metal in China will be supported by electrification (more than 20% of demand) and urbanisation, which continues to drive demand for consumer and industrial goods in the country (30% and 15% of demand).
Over the past 10 years, global production of copper ore has grown by 2% annually thanks to the boom in demand from China and high copper prices, which stimulated investment in the industry. New copper mining projects continue to be launched and by 2018 output will have increased by 2-3 million tonnes (10-15%), which will lead to a surplus in 2016-17. Unless there is rapid growth of demand, and taking into account continuing launch of new mining and processing projects, copper price growth will be limited in 2016-17.
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