Material Matters: Iron Ore, Nickel, Aluminium, Oil

Commodities | Mar 09 2021

A glance through the latest expert views and predictions about commodities: iron ore; nickel; aluminium; and oil

-Iron ore prices remain buoyant but should peak in 2021
-New production route signals disruptions for nickel
-Limited impact on aluminium from China's energy control plans
-Global growth rebounding, buffering higher oil prices


By Eva Brocklehurst

Iron Ore

JPMorgan finds value support among the large miners, particularly the diversified miners and large iron ore producers. Upgraded cash flow forecasts, low gearing and limited capital expenditure should mean pay-out ratios remain strong for several years. Prices have hit a fresh cyclical highs at US$177/t, levels not seen since 2011.

Fiscal stimulus in the US has led JPMorgan to revise up growth forecasts to 6.2% and this should have a positive impact on the rest of the world.

On the supply side, the major miners have maintained production guidance. Moreover, iron ore price tension has been tighter than the broker previously estimated, and in the absence of an unexpected supply response there are limited catalysts to cause prices to correct materially lower.

JPMorgan believes the mood should remain buoyant and upgrades 2021 estimates for iron ore prices to US$162/t. In the second half, the broker suspects trader enthusiasm may settle down because of more subdued outlook in 2022 and forecasts prices ending this year at US$150/t.


Nickel prices on the London Metal Exchange have corrected, falling -16% and underperforming copper by around -18% over the year to date. Morgan Stanley attributes this to news coming from Tsingshan. A statement from the company has been sufficient to trigger an aggressive sell-off.

Tsingshan has indicated that, from October 2021, it will start to produce 75,000tpa of nickel-in-matte from satellite ore in Indonesia for conversion into sulphate for the electric vehicle battery market.

The significance for the market, the broker asserts, is similar to the commercialisation of nickel pig iron for stainless steel production in China in the mid 2000's. Moreover, the route to market will now be both quicker and easier as, until now, efforts are centred on producing nickel pig iron for stainless steel and HPAL (high pressure acid leach) for processing laterite ore into sulphate.

There will be costs from the new production route, and the broker finds it unclear just where the long run level of support will be. Tsingshan has indicated overall volumes of matte are likely to grow to 1.3mt by 2023 from 600,000t in 2021.

The broker notes stainless steel industry globally has produced at a very high rate while there has been supply disruptions at number one nickel producer, Norilsk.

As a result no further drop in nickel to cost support levels is anticipated but equally, without incremental bullish news, a rebound is considered unlikely. Morgan Stanley retains a base case forecast for nickel of an average of US$16,066/t in 2021.


Aluminium prices have rallied, spurred on at the Shanghai Futures Exchange. Nevertheless, Macquarie envisages limited impact on the physical market as supply losses are small and cost increases minimal when compared with elevated smelter margins. There are risks around future supply including potential for more frequent disruptions in China from government energy consumption control plans and delays to new capacity additions in Inner Mongolia.

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