More upside for base metals
On the other hand, industrial metals could be another story. Supply growth will start to slow this year while demand is improving. Leading indicators from manufacturers and industrial production figures from around the world have been strengthening, and a steady improvement in global growth is still anticipated.
All this'll mean more demand for base metals as they're used up by stainless steel, the auto industry, electrical components, building and packaging to name a few. Also, investors have become more optimistic on Chinese demand.
In her note Berry says industrial metal prices will strengthen through 2014 helped by an increase in demand and what she forecasts as the end to one of the strongest periods ever for base metals supply growth. In some cases, such as aluminium, this will be due to production cuts (prices are very low, and producers outside China have been making big cuts). In other cases, like Nikkel, the Indonesian iron ore export ban will lead to production cutbacks.
(Watch: What the F-150 says about the aluminum industry)
According to Barclays research, both copper and zinc supply growth is due to peak this year and then slow, causing the bank to revise up its 2015 forecasts for both metals. Berry adds that, while we saw selling of base metals on rallies last year, 2014 will see buying on dips.
Berry explains that the metals markets are at an important turning point: moving from rising stocks, strong supply and surpluses, to an environment of inventory draw downs, slowing supply growth, and deficits. Overall, Barclays' message is clear: more upside to come for base metals..
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