2018 Looks Like a Bull Market for Base Metals

“Zinc has risen to a decade’s high due to positive trader sentiment on the back of the decline in zinc production forecasted for 2018, as well as a current zinc deficit. LME zinc stocks have now hit a low not seen since 2008,” said Lisa Reisman, executive editor of MetalMiner.

December proved the magic month to take short-term forward positions for both zinc and aluminum, Reisman said. January started with a bang as most of the base metals—HRC, CRC and HDG—have all shown upward price momentum. Although zinc prices remain in a long-term bull trend, prices have started to shift to a sideways trend, which often happens after prices increase rapidly.

Zinc has not moved alone. Aluminum, copper and nickel have led the base metal price rally. Steel price momentum has also increased.

Besides the rising zinc prices acting as a support to hot-dipped galvanized prices, two additional factors appear in play, Reisman said. The first involves China’s circumvention of existing antidumping and antisubsidy orders and the U.S. Department of Commerce imposing stiff import duties on steel forms from Vietnam originating from China. The second factor involves rising Chinese HDG prices, which helps set a price floor for the U.S. domestic HDG market.

Reisman also noted that the U.S. dollar has continued to decline. “A declining dollar is bullish for commodities as a whole, while commodities and the DBB index have now returned to their historical pattern of moving in tandem—in this case, higher,” she said.

Buying organizations will need to pay careful attention to market signals to determine when and how much to buy, as well as when to stand pat. MetalMiner has issued buy signals across base and nonferrous metals as recently as this month.