Posted on 23 Jun 2023
Fitch Ratings has reduced short-term prices for copper, aluminium, zinc and thermal coal in a revision of its global metals and mining assumptions. We have increased our 2023 assumptions for iron ore and gold, the 2026 assumptions for copper, aluminium, gold and Chinese thermal coal, the 2024-2026 assumptions for Australian thermal coal and our mid-cycle assumptions for gold and Australian thermal coal. All other price assumptions are unchanged.
A marginal reduction in our copper assumption for 2023 reflects weaker year-to-date pricing due to softer economic sentiment. We forecast moderate global refined copper consumption growth in 2023, matched by rising mines production after some disruptions in early 2023. The increased 2026 assumption incorporates solid medium-term demand growth, supported by the energy transition and our expectations that the market will remain tightly balanced.
The increased 2023 iron ore assumption reflects year-to-date price performance due to robust demand from Chinese steel production in early 2023, particularly due to infrastructure spending, while iron ore exports from northern Brazil were low in early 2023, with shipments starting to increase only in June. Demand from Europe is still weak, as expected. We assume prices will reduce in 2H23 as we anticipate steel production to moderate in China in line with the government policy and iron ore supply to rebound.
Fitch’s metallurgical coal price assumptions are unchanged. Prices have fallen on weak Asian demand with customers delaying purchases in anticipation of further price declines, while supply has improved, with shipments from Australia exceeding 2022 levels since March.
We have trimmed our 2023 aluminium price assumption, reflecting lower year-to-date prices linked to weak market sentiment, although we expect some recovery in 2H23 as China aims to meet its GDP growth target. The increased 2026 assumption reflects our expectations of stronger medium-term demand, particularly due to the energy transition and the use of aluminium as a replacement for copper in some applications.
Fitch’s reduced 2023 zinc price assumption reflects its weaker year-to-date price performance as global zinc demand struggled to recover and pricing was weighed down by macroeconomic woes. CRU expects demand recovery to be slow, smelting supply to grow and a concentrates surplus to weigh on prices.
We have increased our gold price assumptions for 2023, reflecting higher year-to-date prices. Our higher 2026 and mid-cycle prices are supported by the metal’s investment status, which will help to rebase prices at more elevated levels than at previous mid-cycles.
The reduced 2023 Newcastle thermal coal benchmark reflects lower prices in 1H23 as China’s domestic coal production growth reached record levels, outpacing demand. Competition intensified due to increased imports from Russia and Indonesia, while north Asian countries reduced imports. Our increased assumptions for 2024-2026 and mid-cycle prices reflect our expectations of lower demand destruction due to the energy transition and higher marginal production costs. We anticipate that the pace of coal phase-out will increase in Asia after 2030, but between now and 2030, China’s demand will be broadly stable or modestly decline, while southeast Asian countries’ demand for coal may rise as power consumption grows steadily to support their booming energy-intensive manufacturing industries.
The lower 2023 assumption for the Chinese thermal coal benchmark is driven by similar factors to the Newcastle benchmark. The higher 2026 assumption reflects our view on the pace of the energy transition in China, which is increasing its coal-fired power capacity as base load, in addition to building renewable power capacity.
All nickel price assumptions have remained unchanged. Spot pricing is broadly in line with our expectations, while in the medium term we expect the market to remain in surplus with Indonesian capacity additions offsetting rapid demand growth from battery production, putting pressure on prices.
Source:Fitch Ratings
