Moody’s warns of ‘deep and long’ commodity price downswing – by Natalie Greve ( – December 9, 2015)

JOHANNESBURG ( – Based on its revised, weaker global growth expectations for 2016, softening demand, the strength of the dollar and continued uncertainty surrounding metal demand in China, Moody’s Investor Service expects base metals prices to remain under pressure to the downside, warning that an impending downturn is likely to be “deeper and longer”.

“We have lowered our price sensitivities for base metals to reflect the steep decline recently seen to lows commensurate with or below 2009 levels.

“Improvement from current trading levels is viewed as unlikely over the next several quarters, [unless we see] meaningful production cuts,” the group said this week.

Elaborating on its commodity price assumptions, Moody’s put the 2016 base price of gold at $1 100/oz, metallurgical coal at $80/t, thermal coal at $55/t, aluminium at $0.70/lb, copper at $2.15/lb, nickel at $3.80/lb, iron-ore at $40/t and zinc at $0.75/lb.

Base metals prices continued to be driven down by uncertainty over global growth, with the latest leg-down over the past month having pushed zinc to a 12-year low and other metals to levels approaching those last seen during the 2008/9 financial crisis.

Copper and nickel prices were particularly hard hit in November, falling roughly 8% and almost 11%, respectively, from October averages – a material month-on-month decline.

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