BAKU, Azerbaijan, September 24. Metals prices bottomed out in July and are expected to remain elevated in historical terms over Q422 and 2023, Trend reports via Fitch Solutions.
That said, we see limited upside potential from current spot price levels, as subpar Chinese manufacturing, retail and real estate data lowers demand expectations and saps sentiment. The outlook for Europe is similarly bearish, as high energy prices hurts consumers and dents industrial activity. The production of most metals has been falling, providing some offset on the supply side. However, this has generally proven insufficient to spark a rally in the price.
"We now forecast the EU to fall into a recession next year, with economic activity contracting by 0.3% y-o-y, dragged down by high energy costs, which are curbing industrial output. We have also revised down our real GDP growth forecast for the US, from 1.6% to 0.9% for 2023 and put the probability of a broad-based recession at 40-50% for the next 12-18 months. For the metals complex, though, the biggest drag has been weaknesses in the Chinese economy. We recently lowered our 2023 growth forecast for Mainland China from 5.5% to 5.3%, reflecting growing headwinds to the external sector, in particular in the US and the eurozone, which together account for 32% of the country’s exports. This should be partly offset by a greater re-opening of the domestic economy and the carryover effects of a supportive policy environment this year, although the former depends on the success of the government’s expanded Covid-19 testing regime."