A PENT-UP demand for commodities in 2021 has prompted Fitch Ratings to increase most of its short-term metals and mining price assumptions.
Although the rating agency expects stronger pricing sentiment to spill over into early 2022, it has maintained its long-term assumptions.
“We have increased our copper price assumptions due to exceptionally strong pricing conditions year to date (YTD), supported by low inventories, economic recovery, stimulus packages and expectations of increased medium-term demand due to energy transition,” Fitch Ratings pointed out.
“We expect some price correction in 2H 2021 due to slowing demand, fewer potential supply disruptions and rising mine output. We expect the market to be largely balanced in 2021-2022.”
Although the current high iron ore spot prices are driven by strong China’s demand, Fitch Ratings expects some price correction later in 2021.
The Chinese Government recently raised concerns over growing steel and raw materials prices which may affect end-markets. Supply has marginally increased in 2021 but the market remains in deficit.
Moreover, Beijing also intends to cut emissions from most polluting industries, including steelmaking. While this has provided short-term support to steel margins and iron ore demand and prices, reduced Chinese steel output could affect long-term demand for iron ore.
Meanwhile, demand for aluminium has been supported by the economic recovery and supply restrictions in China.
Expecting China to remain a net aluminium importer due to its decarbonisation efforts, the rating agency has slightly raised its 2023 price assumptions as a result in addition to increases in 2021 and 2022.
Elsewhere, modest increases in its gold price assumptions reflect stronger prices year-to-date (YTD) and the potential for investment opportunities elsewhere as stimulus subsides, added Fitch Ratings. – May 27, 2021
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