Although a strong start to the year could be sustained in Q112, we expect base metals to experience a difficult and volatile year as macro headwinds continue to weigh on equities and metals. Below we outline our key views on the metals sector in 2012.
China’s hard landing will weigh on global metal demand, particularly for metals tied to fixed capital investment. Whilst we are below consensus regarding metal prices in 2012, we are not calling for a crash and expect prices to remain elevated on a historical basis.
Copper and tin will be outperformers in the metals complex Iron ore, lead and zinc, will lag the metals complex due to record inventories and a significant slowdown in Chinese economic activity. Out of the laggards, we expect lead to outperform zinc as it is less tied to fixed capital investment in China.