Commerzbank raises base metal outlook but cuts nickel forecast amid soaring premiums

The recent sharp price increase in base metal prices have prompted Commerzbank AG to raise their outlook for the commodities in the short-term. 

"We have adjusted our base metal price forecasts and now expect them to be higher than previously thought in most cases," Thu Lan Nguyen, head of FX and commodity research at Commerzbank, said in a report. 

Price forecasts

The German bank expects copper prices to average $10,500 per ton by the end of the year compared with previous forecast of $9,600 per ton. 

In terms of aluminium, the bank sees prices averaging $2,900 per ton at the end of the year compared with $2,600 per ton predicted earlier. 

Zinc prices are also seen averaging $3,000 per ton compared with $2,800 per ton. 

“Here, too, we assume that the upside potential has been exhausted for the time being,” Nguyen said. 

The German bank, however, scaled down its forecast for nickel prices, and expects prices to average $15,000 per ton against $16,000 per ton forecast previously. 

Aluminium premiums rise

The price premiums for aluminium imports to the US have reached a new all-time high, continuing their sharp ascent. This follows a short dip at the start of the month.

The situation is likely a result of domestic supply shortages, triggered by the 50% US import tariffs, combined with a tightening of supply in the global market outside of the US.

The rising premiums in Europe indicate this trend. Initially, these premiums dropped at the start of the year because the prohibitive US aluminium tariffs had temporarily improved the supply situation in markets outside the US.

“However, this now seems to be over,” Nguyen said. 

The significant jump in inventories at the end of October, which more than offset the recent decline, was likely the result of a large commodity trader delivering stock for financial deals, according to Nguyen.

Inventories have since begun falling again. This decline, coupled with increasing premiums, suggests that China—the primary producer—may be prioritising domestic and regional demand, likely due to a slowdown in metal production.

Furthermore, Western companies have ceased considering metal sourced from Russia. Prior to the war in Ukraine, Russia was a significant supplier of this material to Europe.