Base metals demand picture likely to modestly improve in 2014: Barclays

London (Platts)--9 Dec 2013 1108 am EST/1608 GMT

Barclays said Monday that it believes it unwise for market participants to get too bearish on base metals price performance heading in to 2014, as demand growth looks set to post some modest gains.

"One positive for commodity markets is that demand growth is holding up much better than many expected it would a relatively short while ago, and should improve further in most markets next year," the bank said in an outlook piece published Monday.

Although the bank sees 2014 being bad for both oil and gold it foresees better potential for base metals.

"A big puzzle for financial markets is the lack of a commodity price response to what is turning into a robust improvement in global manufacturing confidence," Barclays said.

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In November, the Barclays index of global manufacturing confidence reached its highest since April 2011, yet commodity prices are on average more than 20% below the same period.

On the demand front, Barclays' current estimate of 2013 global copper demand is "now almost 50% higher than the low point for our forecasts reached in Q2. For 2014, we forecast demand growth to be a little slower, but if our forecast of around 800,000 mt is achieved, then demand growth in 2013-14 will be the third strongest two-year demand growth expansion in the copper market for more than 20 years."

Every base metal witnessed higher year-on-year production in 2013, but in 2014 the picture looks set to ease, according to Barclays' research.

"Most base metals have been stuck in structural surplus to a greater or lesser degree since 2007/08 after what was one of the strongest-ever periods of supply growth. However, 2014 is likely to mark the end of this phase," the bank said.

"Markets such as aluminium and lead are expected to move into deficit, while surpluses in nickel and zinc are set to shrink dramatically," it said.

--Ben Kilbey,
--Edited by Jonathan Fox,

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