The first half of December saw cobalt price fall to an average US$60,368/t, suppressed by rising supply and reduced demand. Early in the month, Glencore reported that some Chinese cobalt consumers had reneged on sales contracts, following the September Quarter’s price decline. The short- to medium-term supply outlook remains relatively unaffected by Katanga Mining’s temporary suspension of exports from its Kamoto operation in the Democratic Republic of the Congo. The operation is also free from the shadow of customs restrictions which saw a suspension of exports in early November.

OPEC's (plus friends) and Alberta state's cuts will combine to lower 2019 supply by 1.5Mbpd. Further cuts are possible, especially with potential for additional involuntary declines from Libya as militias continue to intrude on the fragile security of its fields. In contrast, US producers will lift national production of crude to approach 11.8Mbpd, a new record. OPEC’s imposed 1.2Mbpd of cuts will not include Venezuela Libya and Iraq who are predictably demanding an exemption.

The combination of higher gas and LNG pricing along with high freight rates has effectively closed the West to East arbitrage window over both November and December and this situation looks likely to be continued into the next quarter.

With regional supply issues continuing to offset low demand, AME is forecasting the average contract price for premium HCC to fall slightly year on year. The decline is smaller than initially forecast, with regional supply disruptions continuing to have a considerable impact on prices.

US Gasoline inventories, whilst under the pressure from weak energy markets over November and December, increased by 4.8Mbbl month on month, suggesting ongoing weakness. This contrasted with a fall in forward cover by distillate stocks to 25 days; it is the lowest coverage since 2008 and at 119.9Mbbl, sits 11% below the five-year average. AME’s derived US 5-3-2 crack vs Brent fell below US$6/bbl in December; significantly lower than September quarter’s US$12.8/bbl spread. The bearish trend in this quarter is not reflected overall in the medium-term outlook; comparatively crude oil and distillate commercial inventories data are showing weak signs of impending short-term drawdown.

After China’s National Development and Reform Commission (NDRC) suspended all coal import for the remainder of 2018, the December spot price for premium Australian thermal coal averaged US$100t/ FOB Newcastle, up 1% from November. The price remains the flat at US$100/t with little fluctuation through the month as international buyers are waiting more clear seaborne markets.

The gradual start of winter production cuts in November depressed iron ore demand. The iron ore spot price (CFR China, 62% Fe fines) averaged US$68/t in in the first half of December, down 6.4% compared to the November average. Prices for 58% Fe ore fell 5.7%, while prices for 65% Fe ore had a greater decline of 9.7%. Lower grade iron ore prices were less affected as China steel margins continued their decline although at a slower rate than in November.

Steel demand growth in China is expected to end 2018 up by 9.3%, supported by growth in the real estate market in the first 9 months despite efforts to reduce leverage, while government support for the economy to counter to the effects of the trade dispute with the US is expected to provide upside to demand in the near-term.

A refined copper market deficit of 349kt is estimated in 2018 on demand growth of 1.6% to 24.10Mt and production growth of 0.9% to 23.75Mt. Smelter outages this year—including those owned by Vedanta, Mitsubishi, Codelco, Glencore, BHP and Aurubis—caused a supply shortage. Planned maintenance at major smelter in next year is expected to continue tighten the market but at a narrower deficit of 137kt.

2018 registered a year-on-year increase of 22% driven by growing demand from stainless steel industry and the rapidly expanding battery market. Although the market price has been suppressed by current macroeconomic situation and growing trade protectionism since May, AME expects continuous developments in the downstream stainless-steel industry will provide underlining support for price recovery, with the average finished nickel price in 2019 forecast to rise.

The price growth over 2018 has been suppressed by a diminishing finished zinc deficit. Downstream demand suffered a setback in 2018 as galvanisers reduced outputs amid ongoing trade disputes. Into 2019, AME estimates the average finished zinc price will retreat as an injection of new concentrate and finished zinc supply into the market will likely revert current deficit into a surplus state.

The aluminium price is expected to finish December down 14.4% from the start of the year and resulting in an estimated year average of ~US$2110/t, up 7.1% year on year. The subdued price performance through December continues to be attributed to the apparent slowing of growth in China, and the ongoing trade tensions with the US which sees market participants taking a cautious approach to transactions. December’s price was the lowest since August 2017.