Slowing Metal Market Adjustments

Several indicators of raw material usage released in the last few days add to the evidence of a slowing cyclical adjustment in metal markets. The change in tempo is not surprising since metal markets usually need an acceleration in global growth to perform at their best. The World Steel Association has reported that global steel output in the first four months of 2015 fell 1.7% and Chinese production declined 1.2%. The International Lead Zinc Study Group has reported a 2.3% increase in zinc metal usage in the first three months of 2015. The 74,000 tonne increase was swamped by a 261,000 tonne increase in metal production. The International Copper Study Group reported a 3.5% decline in copper usage over the first two months of the year but a 5.0% increase in refined metal production. While still early in the year, these indicators of market conditions are broadly consistent as they suggest delays in inventory adjustments which were expected to underpin higher prices. The zinc market is probably the market segment most vulnerable to a change in expectations.