Column: Analysts wary of base metals after China recovery rally – by Andy Home (Reuters – February 1, 2023)

LONDON, Feb 1 (Reuters) – Base metals have enjoyed a strong start to the year, the London Metal Exchange (LME) index rising by 9.4% over the course of January on high hopes for China’s post-COVID reopening.

However, analysts are cautious that China’s recovery may not live up to bullish expectations and that prices have got ahead of themselves, judging by the latest Reuters base metals poll.

Median 2023 price forecasts for all the core LME base metals are lower than both last year’s price and current trading levels. Depleted exchange inventories are seen limiting the immediate price downside but analysts are also expecting supply to recover from the combination of pandemic disruption and high power prices.

Supply will be a key differentiator next year, with copper, aluminium and tin outperforming nickel, lead and zinc. Copper is back in favour with investors, who have been building long positions in the metal as one component of the broader China recovery trade.

For the rest of this column: