This story has been updated since it was first published on Feb. 7
Look for recent steep hikes in metals prices to go into reverse by spring, as investors’ expectations run up against economic realities: A pokey U.S. economic recovery and waning demand from China, which had been stockpiling bargain priced supplies.
Manufacturing and other industrial use of metals will remain tepid. Meanwhile, even China’s voracious purchases of metals that boosted prices by 50% or more since fall won’t be enough to sustain further price run-ups, given the abundant supplies of metals. Nickel supplies, for example, are at about a 20-year high. China’s new, tighter bank lending policies and a strengthening dollar will further restrain metals usage and prices.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Moreover, the recent commodity rally sparked by fears of possible debt repayment defaults by Greece and Portugal will run out of gas soon; it’s just a hiccup in the overall trend of sliding metals prices.
Prices for nickel will slip 20% by fall, while aluminum and copper prices will tumble 25%. The decline for zinc prices should be around 15%. That’ll put prices back in the neighborhood they were in last fall for a few months, before they head up again around November in anticipation of a stronger 2011 economy.
Still, the average price this year will run much higher than last year, up about 10% for nickel, 20% for aluminum, 25% for copper and around 45% for zinc, mainly because prices early in 2009 crashed in the wake of a recession-induced selloff.
For steel, the opposite scenario: Prices will move modestly higher through June, due to a surge in prices that took hold last fall for scrap metal and iron ore. This was largely China’s doing, too. Its industries went on a buying binge for low-priced scrap that’s made into new steel in electric furnaces.
“There is great suspicion that China acquired vast amounts of iron ore so come March when (world) prices are negotiated, China can drop out of the market entirely and use its leverage” to secure lower prices, says John Anton, a steel analyst with IHS Global Insight.
For weekly updates on topics to improve your business decisionmaking, click here.
-
The Original Property Tax Hack: Avoiding The ‘Window Tax’Property Taxes Here’s how homeowners can challenge their home assessment and potentially reduce their property taxes — with a little lesson from history.
-
Is Mint Mobile's Home Internet a Game-Changer or Just Another Option?Mint Mobile recently unveiled its new home internet service. We break down how it works so you can determine if it's a great value for your needs.
-
Will AI Videos Disrupt Social Media?The Kiplinger Letter With the introduction of OpenAI’s new AI social media app, Sora, the internet is about to be flooded with startling AI-generated videos.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Banks Are Sounding the Alarm About StablecoinsThe Kiplinger Letter The banking industry says stablecoins could have a negative impact on lending.
-
Apple Readies for AI Upgrade with New iPhonesThe Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AIThe Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
-
After Years of Stagnant Growth, Hope Emerges for EU EconomyThe Kiplinger Letter Can a German fiscal push outweigh French political peril?
