Future Outlook for Base Metals
For the past few months, the prices of base metals, predominantly Aluminium, Copper and Zinc have experienced a dramatic surge following a rise in confidence amongst global investors, which has been fuelled by a slight recovery in the worldwide economy.
In line with these price increases, the aftershocks have been felt across the metal industry with non-ferrous metal companies experiencing a rise in stock, productivity and sales.
Following the collapse of the global economy last year, analysts are approaching the situation with caution. As a result of this, experts are slightly more dubious about the potential room for further market growth in regards to the recent rally in base metals.
There are several factors that could influence the future market outcome and movement of base metals. These include the recovery of the US economy, US dollar movements and demand from China to name but a few. The base metal and non-ferrous market will be relying on external factors from various continents.
If the US dollar remains weak however, the rally could continue further. It"s the decision of worldwide banks that will have the biggest material impact on dollar movements, and consequently base metal prices.
In line with the rally in commodity prices, the stocks of non-ferrous companies have also surged upwards in the last 6 months. These companies could also experience an expansion in operating margins over the coming months mainly on account of a rise in sales realisation. Expansion would vary from company to company depending on operating margin levels.
For companies with lower operating margins, the impact of rising LME base metal prices will be higher.
