The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking data sets depict diverging fortunes for the different base metals in the coming months. A decline in global cargo order volumes for copper will likely translate into higher prices in the near future. On the other hand, zinc and nickel prices may face headwinds as demand for seaborne transportation of the two metals is trending higher.
Declining Global Cargo Order Volumes for Copper Could Support Prices
After a significant decline during the first half of the month, copper prices have stabilised and traded broadly sideways in recent days. A few days of a softer US dollar have contributed to the improving sentiments for the red metal. While yesterday’s closing price was somewhat below the mid-point of the year’s trading range, the traditional bellwether for industrial production and economic activities has had a volatile year. Despite shedding nearly seven per cent since the beginning of November, the three-month copper contracts listed on the LME ended Friday’s session around five per cent above the levels seen at the start of the year. Still, compared to the highs recorded in mid-May, the contracts are trading around eighteen per cent lower.
Like the copper prices, weekly global cargo order volumes for the metal have experienced volatile conditions throughout the year, with the recent past seeing an increasing variability. Chinese demand for seaborne transportation of copper trended higher throughout the first half of the year but has since faced downward pressure, albeit in changeable conditions. For demand in the rest of the world, weekly cargo order volumes have shown a higher degree of consistency.
After a period of weakness during the second half of October, weekly cargo order volumes for copper discharging in Chinese ports have recovered. With a week left of the month, the total for November has a good potential for outperforming October and returning to the levels recorded in September. Still, as the past week faced pressure on Chinese demand, some caution may be required. In contrast, after trending higher over the past two months, demand in the rest of the world looks set to fall short of October’s reading.
In a global context, demand for seaborne transportation of copper is currently experiencing a weak patch. While the past two months recorded totals just shy of the monthly average for the past two years, the current month could see a more significant shortfall. Hence, global copper markets look set to see some pressure on supplies, supporting prices in the short to medium term.
Robust Demand for Seaborne Transportation of Zinc Looks Set to Weigh on Prices
Since the beginning of the year, zinc has been the better performer among the base metals. The rolling three-month futures listed on the London Metal Exchange have risen by more than twelve per cent since the beginning of January. During the same period, the copper and aluminium contracts increased by around five and ten per cent, respectively, while nickel ended last week broadly in line with the reading at the end of last year.
Zinc has declined by around two per cent since the beginning of November, weighed down by concerns over the demand outlook amid market disappointments over Chinese stimulus initiatives and a stronger dollar. In addition, the global market for zinc is expected to be oversupplied next year, which is adding further pressure on sentiments.
After a significant decline in August, global cargo order volumes for nickel concentrate have staged a robust recovery over the past three months. The monthly aggregates for September and October were only a few per cent lower than the average for the past two years. The positive momentum has accelerated during the current month, with the November reading likely to be among the highest in recent years. An increase in demand from Chinese importers and higher order volumes for nickel concentrate cargoes loading in Australia have contributed to the strong reading. As the smaller segments dominate the zinc trade, the development will support handysize freight rates.
The recent strong showing for the seaborne zinc trade suggests that the metal’s prices may face headwinds in the near term as the global market becomes better supplied. In addition, the robust cargo order volumes align with the narrative of a glut in the new year.
Recovering Carogo Order Volumes for Nickel Will Support Global Supplies
Nickel prices ended the past week on a solid note amid mounting concerns that new Indonesian mining policies will weigh on the island nation’s output and global supplies. Despite Friday’s uptick, the rolling three-month nickel futures listed on the London Metal Exchange ended last week around 26 per cent below the level recorded five months ago. Still, despite the significant decline since the second half of May, Friday’s close was only marginally lower than at the beginning of the year.
While concerns over Indonesian supplies may provide some support for prices, any upside appears to be limited. Monthly global cargo order volumes for nickel ore and concentrates have been trending higher since June. The development has been supported by rising demand for seaborne exports from New Caledonia following a period of civil unrest on the islands, with this month’s cargo order volumes likely to match the levels observed in March.
With a week remaining of the current month, aggregate cargo order volumes for nickel loading globally look set to reach the highest level since April. Hence, the global nickel market will be well-supplied in the coming months, suggesting that prices will face continued headwinds.
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