Base metals complex largely flat-lined – Standard Chartered

According to the analysts at BBH, the base metals complex has largely flat-lined over the past month and they think this reflects a lack of evidence (so far), since the end of the Lunar New Year holiday, of a sufficient improvement in onshore demand to retighten refined metal physical market conditions.

Key Quotes

“Given that macro-level and downstream data quality has been healthy so far in 2017, we continue to believe that the sluggishness in refined metal markets reflects downstream raw material destocking, in turn reflecting the impact of higher prices. Onshore feedback across the complex is that semi-fabricators have yet to restock.” 

“The current phase of price stability, combined with order book improvements in AprilMay and seasonally tighter balances, should stimulate a pick-up in metal demand. If this materialises in the data over the coming weeks then prices across the complex should start to regain some upside momentum during Q2. We think the main risk to this base-case scenario relates to the potential for China’s Ministry of Environment Protection (MEP) to undertake inspections and closures at downstream demand operations.”