While near-term caution has been warranted after recent strong price gains in base metals and bulk commodities, Quantum continue to feel very positive about the overall fundamentals surrounding prices going forward. Stronger global industrial activity has given new life to the demand for many base metals and bulk commodities, with Chinese supply-side reform and the potential for a more metals-intensive agenda in China being supportive of prices as well. While some reform is seasonal in nature, China’s focus on environmental preservation over the long-term should drive supply-side policies going forward. As a result, industries like aluminium have become investible for the first time in over a decade.
As the US makes trade policy of greater importance with its global partners (renegotiating NAFTA, raising the possibility for imposed duties/tariffs on US imports from China & elsewhere, other), the value of the US Dollar could come under pressure through either direct intervention or via indirect channels such as reduced trade, which can be a positive for gold prices.
In our view, the potential for another metals-intensive growth phase remains. Of note as a recent example is China’s plan to build 12,000 new electric vehicle charging stations by 2020, a positive development for copper demand – especially if global production levels begin to roll over in 2019-2020.
