The outlook on China’s macroeconomics appears more bullish than it was at the start of the year, according to reports.
It was clear at the start of the year that China looked to slow down growth by tightening credit and cutting infrastructure spending, given stronger global economic growth.
However, China is “slowing the slowdown” against the backdrop of trade tension with the US, he said.
With better liquidity conditions and positive underlying demand in the second quarter, “we’re more optimistic for the outlook this year”, Roper said.
In fact, if steel inventories continue to be drawn, “the market may start to be freaking out about lack of steel”, he said. Roper maintained his bullish views on the ferrous complex with housing “pretty well supported” this year.
For aluminium, he said “there was too much bullishness” towards the lightweight metal previously as China looked to close capacities. The market, in fact, still looks “very much oversupplied” with 4 million mt of capacity ready to go online this year in China.
He expects SHFE aluminium prices to remain on the cost curve this year, while alumina prices would be dependent on when Hydro’s Alunorte refinery returns online.
We estimated China has exported 300,000 mt of alumina this year as of early May.
For zinc, while the market has been tight for a few years, Roper sees it returning to a more balanced state with 1 million mt of zinc concentrate coming online in the second half of the year.
“We’ve probably seen the best of zinc prices now,” he added.
Roper also touched on nickel and said that there is no shortage of fundamental nickel unit. LME nickel prices have been high as the battery story was at play.
He said there is “a lot of downside risk” for nickel prices as Chinese stainless steel mills would use more nickel pig iron and import less nickel.