At the start of 2016, we expected some stabilisation in the metals demand environment at a subtrend level, with aluminium among the major metals having demand growth >2.5% and steel demand negative. However, latest data points point to some optimism across commodity markets, led by strong hopes for the coming Chinese construction season plus a nascent global industrial production recovery.
To be clear, fundamentals do not point to any inflationary bottlenecks ex-raw material constraints (such as zinc). Much still rides on Chinese policy, and even our revised demand growth would be considered sub-trend. However, confidence that January 2016 marked a price bottom that will not be repeated in the near term continues to grow.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
