Moody’s base metals optimism rises despite seeing price fall back this year – by Henry Lazenby (MiningWeekly.com – January 19, 2017)

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TORONTO (miningweekly.com) – Market analyst and ratings agency Moody’s Investors Service has adjusted upwards its pricing sensitivities for base metals in 2017, but says despite the recent run-up in base metal prices not being sustainable, some of the positive sentiment will remain.

Moody’s said Wednesday it expected the market to be more volatile than usual, based on continued high trading activity, as traders and investors responded to changing market sentiment on growth expectations.

Metal prices have risen in response to stimulus spending in China and expectations that the incoming US Presidential administration under Donald Trump will increase infrastructure spending.

“We believe the run-up in base metal prices, particularly since the US Presidential election, will fall back over the course of the year. With the exception of zinc, the higher prices do not stem from meaningful improvement in supply/demand fundamentals. Nonetheless, we anticipate political issues and speculation will continue to drive shorter-term market activity and high volatility,” stated Moody’s senior VP Carol Cowan.

However, Moody’s said higher metal prices would not be the sole driver of any rating upgrades in the metals industry. The agency does not rate to spot prices, but instead uses base prices and a range of prices for sensitivity purposes.

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