1. Commodity Market Fundamentals Forum
A Session on Base Metals
Presented by:
Aurobinda Prasad Gayan
Head- Commodities Strategies

2. Metals Performance- 2018 Commodity -18% -21% -18.50% Aluminium (Al)
LME (%)
MCX (%)
Aluminium (Al)
-18.50
-11
Copper (Cu)
-12.50
Nickel (Ni)
-16.50
-6.10
Lead (Pb)
-18.75
-12
Zinc (Zn)
-26
-18
LMEX- Index
-18%
NIFTY Metal Index
-21%
Bloomberg indus. Metal Sub Index
-18.50%
“Entire Sector has declined, Macro Factors have played the Pivotal Role, Some of the Metals Fundamentals are too weak”

3. The Major Chunk of Price fall took place in Second Half of 2018!!!
Metals Performance- 2018
The Major Chunk of Price fall took place in Second Half of 2018!!!

4. Macro Reasons for So much of Price Drop
Bleak Economic Picture- Waning Global Growth, EM’s Decelerated
Appreciating US dollar, Fed Hiking Interest Rate
Global equities shading gains, China declined over 20%
Trade Worries- US-China
Recent Economic numbers are unhealthy
Overall Rise in the Commodity Supply

5. Decelerating Health of Global Manufacturing Section
Late that started to decline is the US, China has been under performing at a lower Avg.

6. Rising US dollar in 2018 has kept Commodities under Stress
Minimum 2 Fed Rate Hikes in 2019, High Volatility, Metals May remain under stress in early 2019, Hopes of Revival in the Manufacturing Sector may be a respite

7. Should the current losses be extended completely in 2019, or Market may revive in H2 ?

8. Al- Supply continues to rise, Cap on Price
Significant amount of Chinese Supply still in the Pipeline
Chinese Consumption: Not too Optimistic but Steady
Input cost Curve ( Primary Production) continues to be high
Smelters faces Depressed Margin
Winter cut may not have significant reduction in production
Note-1: 1.90 MMT Deficit hasn’t lift Al price implicitly in 2018, 1.20 MMT (deficit) estimates is unlikely to cause Al price to rise much higher in 2019
Note-2: Aluminium prices can easily spike on policy news and supply disruptions
3/6 Months Forecast – LME Aluminium Price to Range: USD/MT

9. Cu- Near-term Chapter is weak, Long Term Trend is Positive
Macro Factors Pushed Metal price Down: 2018 Ruthless year for Copper
The Broader EM Growth has come under pressure
The USD has strengthened against major currencies
US-China disputes Escalated to level that many had not anticipated
1st Quarter of 2019 or early second continues to look Depressing
Long term Fundamentals are supportive to Copper:
China Per-capita Consumption is twice as high as other countries- Expected to grow in the long term
EV’s Demand continues to grow: China contribute more than 50% of global consumption
Scrap Metal Shortage in China, Scrap to Refined substitution is high & Refined Apparent Demand is high
3/6 Months Forecast –LME Copper price to Trade in the Range of USD ,

10. Zn- Global Supply- Demand Narrow/Widen
General Macro Weakness has pressured Metal price lower, Zinc has led the league
Higher US Dollar and Disappointing Chinese Economic Numbers
Expectations of Higher Supply & slower Demand- ILZSG expects mine production to rise by 1.50% in 2018 and increase in Refined Zn demand to decline to 0.5%
Treatment Charge (TC) on Imported Concentrate rose from $20 to $165 per MT- Incentivise to Smelters- Optimum Capacity Utilization Rate…
These factors may continue to weigh on Zinc price- At least 1st Quarter of 2019.
Other Hand-, Zinc Warehouse stocks are at multiyear low, Cas-Forward Premium high volatile…
3/6 Months Forecast –LME Zinc price to Trade in the Range of USD

11. Ni- Supply to reign the market
Macro Factors continues to ruin the broader trend of Metals.
INSG- Supply Estimates to 8.40% in 2019, 3%-
2019-Trade deficit- Narrows down, Excessive supply
Philippines, Indonesia Production setting higher, China’s NPI production is soaring up
Relaxed norms on Mine Closure ( Now Mines can continue to run at full capacity, Environmental Issues)
Demand, World Crude Stainless Steel Output – Estimates t rise by 5% in 2019 at 54.2 Million MT
Stock Performance at LME & SHFE- declining sharply, Stock to Use Ratio ( SUR) have halved to 35 Days of Global Consumption
3/6 Months Forecast –LME Nickel price to Trade in the Range of USD / MT

12. Thank you
Disclaimer: The views expressed in this presentation are of Tata Asset Management Ltd. and are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you. Please consult your Financial/Investment Adviser before investing The views expressed in this presentation may not reflect in the scheme portfolios of Tata Mutual Fund. This presentation has been prepared using information believed to be accurate at the time of its use. The scrips discussed in this presentation are for illustration purposes only and it should not be construed as an investment advice to deal in such scrips. This presentation captures the end-data of indices, stock prices, and market caps as of beginning 2019