S&P Revises Its Price Assumptions For Metals On Continuing Price Weakness

Standard & Poor’s Revises Its Price Assumptions For Metals On Continuing Price Weakness

We have updated our price assumptions for metals for 2016-2018 to reflect the current market conditions and outlook for each commodity. Commodity prices have collapsed for the third year in a row, falling by 10%-45% over the past 12 months. In particular, iron ore and nickel prices have fallen well below our previous assumptions. Metal prices have come under pressure because of fears of lower demand from China, combined with excess supply, although the degree of the excess varies by metal. Currently, China is responsible for about 40%-50% of global commodity consumption. Our price deck assumes that steel production in China will not recover in 2016, after it contracted by about 2% in 2015. We expect this assumption to have a knock-on effect on demand for all related commodities, including iron ore, coking coal, zinc, manganese, nickel, and other metals.

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