UBS sees some coronavirus commodity demand potential

Switzerland-based bank UBS has revised down its global, Chinese and US GDP forecasts because of the coronavirus outbreak. But it sees the potential for an uplift in demand for some commodities from the April-June quarter from pent-up demand and increased government stimulus.

UBS has revised up its iron ore, coking coal and copper average price forecasts for 2020, while cutting its outlook for thermal coal on weaker fundamentals. The bank said that while demand is depressed this quarter, it could lift next quarter, particularly in the steel-producing raw materials space as the Chinese government uses stimulus measures to reduce the impact of the coronavirus on its economy. It is less upbeat on thermal coal, where it sees the potential for increased Chinese domestic production and lower global demand weighing on prices.

Argus last assessed the ICX price for 62pc Fe fines at $91.10/t cfr Qingdao, which is back were it was in late January before it dipped to $80/t in early February amid growing fears about the impact of the coronavirus on the Chinese and global economy. Argus' premium hard low-volatile coking coal price has been creeping up despite the outbreak to $159.20/t fob Australia on 21 February from $139/t at the start of the year. The thermal coal price has been fairly stable at around $65-67/t fob Newcastle for 6,000 kcal/kg NAR and was last assessed at $67.04/t.

By Jo Clarke