On the 30th of November, OPEC in its 171st meeting in Vienna, Austria, reached its milestone decision to reduce the cartel’s production to 32.5Mbpd, equating to a drop of around 1.2Mbpd from its record October output of almost 34Mbpd. This resulted in an instantaneous surge in the Brent, which rose 8.8% from the previous day to November’s closing price of US$50.47/bbl. However, on a monthly basis, the November Brent marker average was down 8.4% month on month to an average of US$47.08/bbl.
The November spot price for premium low-volatile HCC averaged US$301/t FOB Australia, up 29% from October, with prices starting November at US$265/t and remaining relatively steady above US$300/t for the last three weeks of the month. This sees the premium low-volatile HCC spot price currently around 42% higher than the US$200/t December Quarter contract price that was settled in October.
The Newcastle premium thermal coal spot price averaged U$103/t in November, up 9.8% month on month, but decreasing approximately US$20/t to end the month at US$92/t. China’s two largest coal producers, Shenhua Group and China National Coal Group, signed long-term contracts with major domestic power generators at CNY535/t (US$78.60/t) on an FOB Qinghuangdao 5500 kcal/kg NAR basis, lower than the domestic spot price of CNY585/t (US$86/t) to limit thermal coal prices.
The iron ore spot price (CFR China, 62% Fe fines) lifted 24% in November to average US$73/t. Prices peaked at US$80/t near the end of the month, a level that was last reached in October 2014. During the last few days of November, the price retracted around US$3/t. AME retains its iron ore spot price forecast of US$55/t for 2016 and 2017. In the medium term, AME forecasts an iron ore spot price of US$50/t for 2018 and 2019 driven by the ramp-up profile of committed low-cost supply from major projects.
Average global steel prices soared 14% in November, after rising 2.7% in October. This spike in prices was somewhat expected following surging coking coal prices in October. Prices were forced higher still with a resurgent iron ore price, which briefly topped US$80/t in late November. However, the associated increase in steelmaking raw material costs is putting pressure on steelmakers’ profitability in China, as raw material prices have risen faster than steel prices over the past few months.
AME’s copper price forecasts for 2016 and 2017 are unchanged for now at US$4,750/t (US$2.15/lb) and US$5,050/t (US$2.29/lb), respectively. The refined copper market forecast for 2016 remains at a modest surplus of 95kt, with a surplus of similar size (110kt) forecast for the 24Mt market in 2017. After remaining essentially flat during February to October 2016, the LME copper cash price increased sharply through November.
AME retains its short-term price forecast of US$9,623/t (US$4.36/lb) for 2016, with prices expected to rise to an average of US$10,900/t (US$4.94/lb) in the December Quarter, an increase of 6% on the September Quarter. During November, the LME nickel price averaged US$11,125 (US$5.04/lb), an 8.4% increase month on month, with prices jumping from around US$10,400/t in the first week of November to over US$11,000/t, reaching a peak of US$11,582/t (US$5.25/lb) towards the end of the month.
The zinc price has been trumped. The US presidential election result, and planned increase in infrastructure investment, coupled with China approving a US$36bn plan for new rail links, has resulted in the zinc price closing in November at US$2,686 (US$1.22), 9.5% higher than the October close. Strong real estate and infrastructure construction growth in China is expected to keep zinc demand high in the near term, resulting in the zinc price averaging US$2,050/t (US$0.93/lb) in 2016 before increasing to US$2,249/t (US$1.02/lb) in 2017.
AME’s aluminium price forecast is US$1,590/t (US71.4¢/lb) for the December Quarter of 2016 and US$1,575/t (US71.0¢/lb) for the full year. In 2017, the average aluminium price is forecast to increase modestly to US$1,675/t (US76¢/lb). For alumina, AME forecast the price to average US$245/t in the December Quarter of 2016 (FOB Australia), which will contribute to an average 2016 forecast price of US$238/t.
The Henry Hub spot price in November dropped 15.2% month on month to a low of US$2.5/MBtu from US$2.95/MBtu in October, as storage levels in the Lower 48 states rose above the five-year historical range to 114.54Bcm. This effectively ends the five-month rally of the Henry Hub marker, which started in June—following a staggering 34% month-on-month gain to US$2.57/MBtu—and brought the benchmark to a high of US$2.97/MBtu in September.
The average of Japan’s contracted and arrival-based spot LNG import prices rose 4% month on month in October to US$5.9/MBtu. This is in line with the movement of the Brent marker, with a lag of 4–6 months, following the crude rise from July 2016. The October spot LNG average gained 40% on the May record-low average of US$4.2/MBtu, although it remains 24% lower on a year-on-year basis. On a 2016 basis, the October average represents a 21% discount from January’s US$7.5/MBtu.