Moody’s Investors Service is revising downwards price forecasts for aluminum, copper, gold, silver, steel and metallurgical coal, reflecting weaker demand in base metals as a result of the global economic slowdown
It also lowered the medium-term price “sensitivity range” for the steel in Asia and raised the 12-month estimate and medium-term price “sensitivity range” for thermal coal.
The international rating agency notes in a report that it estimates that the G-20 economies they will slow to 2.5% in 2022 and 2.1% in 2023, from 5.9% in 2021.
“THE China it is a major consumer of base metals, coal and iron ore and the world’s largest steel producer. A slowdown in the country’s economic growth would reduce demand in the metals and mining sector,” says Moody’s Vice President Barbara Matos.
“Prices, which were already volatile, are easing from the highs of late 2021 and early 2022, but will remain historically high,” he adds.
Moody’s also notes that supply will remain tight for most base metals over the next 12 months as production has not kept up with demand in the last two years. Supply chain jitters have also disrupted production in the metals and mining sector. And inflation will remain high.
- For aluminumeven though Moody’s downgraded the ratings, prices are expected to remain high and above historical averages.
- Its prices copper will continue to reflect fears of an economic slowdown in key developed countries and the slowdown in China’s property market.
- Also its price predictions steel have declined globally as demand weakens.
- Finally, the estimates for the nickel and the zinc remain unchanged.
Its price of gold faces pressure from the current environment of rising interest rates and a stronger US dollar, while estimates for precious metals prices have been lowered. Although gold is seen as a hedge against inflation, higher US interest rates and bond yields increase the cost of holding gold, which does not earn interest.
Its pricing of silver it is likely to face the same pressures as gold, even though about 60% of demand comes from industrial users (solar and electrical applications).