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ECONOMIC OVERVIEW January 2018
2017: Europe sees revival in growth, despite Brexit uncertainty

The global economic picture was quite positive in 2017 as activity strengthened in the latter stages of the year. In October, the IMF revised up its global GDP growth forecast for 2017 to 3.6%, with 3.7% for 2018. There was better-than-expected growth in the Eurozone, emerging Asia and emerging Europe. Despite the positive outlook, growth in the United States and United Kingdom was revised downward and inflation is falling below target in most advanced economies.

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ALUMINIUM January 2018
Impact of China's capacity control initiatives

In the first half of 2017, after an initial rise through January, the global aluminium price was relatively stable, fluctuating around an average of US$1,922/t. Following the progressive announcement and implementation of China’s central government mandated capacity control and environmental initiatives, which targeted significant aluminium production regions, market expectations of a potential supply shortfall saw aluminium prices rise to ~US$2200/t in October—the highest level in five years. Prices retreated to ~US$2100/t as the realised supply impact was less than anticipated albeit still 23% higher than January.

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LNG January 2018
Can China’s LNG regas terminals keep up with runaway demand?

China has been investing heavily in gas import infrastructure since 2009 to make up for the increasing gap between domestic supply and consumption. China currently has 16 LNG import terminals, for an annual, combined re-gasification capacity of 72Bcmpa, or approximately 56Mtpa. Although China possesses exploitable shale gas reserves of over 21.8Tcm, economic recovery has proved challenging and local supply growth has been slow. Within these changing dynamics, are China’s import terminals and the global LNG industry ready to meet China’s growing energy needs?

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STEEL January 2018
Turnaround in fortune

The steel industry has seen a sustained turnaround in fortunes in the 18 months since the June Quarter of 2016, lasting 18 months. Global steel prices in 2017 are expected to be 32% higher year on year, driven by increased raw material costs, a series of Chinese supply side reforms, and strong demand growth in China. Chinese domestic prices saw significant growth in 2017, with HRC and rebar mid-December prices rising above US$650/t and US$700/t respectively.

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OIL & GAS January 2018
Recovery to continue in 2018

Underpinned by the OPEC supply freeze deal and better than expected demand growth, the global oil markets staged a staggering recovery in 2017. Brent prices averaged at around US$45/bbl in 2016, before improving by almost 20%. The benchmark ended 2017 with an annualized average of US$53.3/bbl. The supply freeze deal played a pivotal role in improving market conditions. OPEC’s surplus oil production capacity stood at an all-time high of 2.1Mbpd in 2017 as compared to 1.15Mbpd in 2016. This surplus capacity will have a cushioning effect on any upward price movements in the near-term. OECD commercial oil inventory levels equated to about 64 days of supply in 2016, as compared to 65 days in 2017.

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NICKEL January 2018
Expected shift from deficit to surplus

2017 was a year characterised by a false dawn, retreat and a late recovery driven by strong stainless steel demand and the promise of future electric vehicle (EV) battery demand. The year commenced with buoyant sentiment as prices continued their recovery from a 13-year low of US$7,562 (US$3.43/lb) reached in February 2016.

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ZINC January 2018
2017: Year in review

It has been a good year for zinc producers. The zinc price commenced 2017 at US$2,558/t (US$1.16/lb), 42% higher than the 2016 start with traders and producers believing the strong market fundamentals would keep the zinc price buoyant over 2017. The forecast was not wrong for January, as Chinese manufacturing, which grew for the sixth month in a row, spurred the zinc price 12% higher to close the month at US$2,853/t (US$1.29/lb).

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IRON ORE January 2018
Prices and demand revived in 2017

The iron ore 62% Fe fines CFR North China spot price is expected to average US$70/t in 2017. Following significant gains in late 2016, 2017 opened with the Fe 62% price nearing US$80/t. A temporary coking coal supply deficit overlaid on stimulus driven increases in steel production from China lifted the Fe 62% price to a peak at around US$95/t in late February, the highest level since August 2014. Increasing divergence between the Fe 58% and Fe 62% prices commenced with the coking coal price spike.

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COPPER January 2018
Capacity additions in 2018

The copper price rose through 2017, building on its late 2016 recovery when the price surged 20% through November 2016 due to expectations of improved metals demand. The price rose through January and February 2017 on supply disruptions at three of the world’s biggest copper mines, BHP’s 1.1Mtpa Escondida, Freeport’s 500ktpa Grasberg and Freeport’s 500ktpa Cerro Verde, and at Mitsubishi’s 275ktpa Gresik smelter and refinery. The February average copper price of US$5,755/t (US$2.69/lb) was a 21-month high.

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THERMAL COAL January 2018
Rising supply in 2018

The Newcastle premium thermal coal spot price started 2017 at US$99/t, fell to a low of US$71/t in May, before steadily climbing to end the year on a high of US$104/t. The price rise was triggered by adverse weather in China, Colombia, Indonesia, South Africa and Russia, and industrial action in the Hunter Valley. China relaxed its production restrictions at its coal mines over the winter, causing thermal coal prices to fall, then implemented rolling safety checks at its mines in the latter part of the year, which resulted in strong demand for coal imports. Once these are complete, and with more favourable weather conditions in 2018, AME expects thermal coal prices to decrease.

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METALLURGICAL COAL January 2018
Growing demand in 2018

It has been a turbulent year on the internationally traded metallurgical coal market, with several supply-related events significantly impacting prices. The spot price for premium HCC started 2017 at around US$230/t, declining steadily throughout the March Quarter until Tropical Cyclone Debbie hit the key metallurgical coal-producing region of Queensland, Australia in late March. This resulted in widespread rail and port outages for up to six weeks, causing the premium HCC spot price to exceed US$300/t by mid-April.

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