Discover why the market sentiment towards industrial metals is shifting and how US rate cuts and China’s stimulus plans are impacting the risk/reward dynamics. According to analysts at UBS, the recent coordinated efforts by China have the potential to improve the outlook for industrial metals and miners, reducing the risk of further deterioration in demand.
While the stimulus measures may not be as impactful as previous cycles, they are seen as more urgent and material compared to past efforts. To sustain the positive momentum, more clarity on China’s fiscal stimulus, improvements in real data, and developments in US elections and trade tensions are needed.
UBS highlights the positive trends in individual industrial metals, with expectations of tightening in the physical market over the next 6-12 months. The bank believes that large-cap copper pure plays are undergoing a structural re-rating that is likely to continue in the future.
Alumina prices are expected to remain elevated in the near term due to supply constraints, providing support for aluminum prices. The gold market continues to see high investor interest as a portfolio diversifier amid monetary policy easing.
On the other hand, the nickel market is experiencing a surplus, but supply cuts are helping to balance the market and stabilize prices. Iron ore fundamentals have deteriorated, but the China stimulus is expected to offer some protection to prices.
As for the lithium market, oversupply remains a concern despite potential demand implications from the China stimulus. Overall, the industrial metals sector is witnessing significant developments that could impact investment opportunities in the coming months.