Cum Clave analysis N.20 preview.
The destruction of demand caused by the pandemic will reduce the impact of the supply disruptions of industrial metals such as aluminum and zinc, leaving strong surpluses and inventory levels that will put pressure on prices and production this year.
Poor demand prospects have lowered base metal prices, cutting producers’ revenues, triggering cuts in capital spending and prospects for production reductions. The purchasing section for companies will undergo an unprecedented stop within 3 months.In the past, in our analyzes we have always indicated one to always negotiate and sign contracts, even with late delivery of supplies. But the real problem is not the supplies but the liquidity inputs for companies due to the closure of the transport system.
• Glencore said his expenses would drop $ 1 billion and $ 1.5 billion this year from an original estimate of $ 5.5 billion last month.
• Anglo American plans to cut spending from around $ 1 billion to $ 4- $ 4.5 billion.
Lower metal prices can benefit producers when input costs decrease, but generally only if they buy on the spot market as many operations are concluded in the long term. Some argue that copper and nickel will be the least affected since the contraction in demand will probably be partially offset by the supply losses caused by blockages in the producing countries, the writer only thinks that nickel will not suffer major repercussions.
The prices of industrial metals have increased since March, only for expectations and for a bet that the demand will recover as manufacturing activity resumes in the main Chinese consumers and consequently in the world, but the market in some moments, in the coming months will have to think again….
Warships around the corner, furniture crisis next?…
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