In a metals note, BofA’s commodities team said it was updating forecasts for most metals “mostly marking to market prices” after China’s faster reopening pulled forward rallies the bank expected later in the year.
“Indeed, a re-acceleration of China’s economy should push aluminium and copper up into year-end,” the team said. However, “we are making more aggressive calls on nickel (bearish), iron ore (bullish), coal (cautious) and lithium (bearish)”.
In line with others, including Goldman Sachs and Fitch Solutions, BofA said it expected iron ore to reach $US150 a tonne in the June quarter. “Iron ore inventories at [Chinese steel] mills have fallen to all-time lows,” and re-stocking should bolster prices.
BofA is less optimistic about coal. “Benchmark Newcastle thermal coal prices retraced from a high point of $US456 a tonne in September 2022 to a recent low of $US172 a tonne.
“The sharp collapse in prices was driven by a confluence of factors, including a warm winter in the northern hemisphere and supplies from Australia recovering after a severe La Niña season. Looking at forward balances, we now forecast Newcastle to average $US199 a tonne in 2023 and $US160 a tonne in 2024, down from $US300 a tonne and $US260 a tonne previously.
“With forward markets pricing in $US216/t and $US186/t for 2023 and 2024, we remain bearish on coal but see a floor eventually emerging.”