The document summarizes global metals and materials outlook for 2016. It is expected that the long-term decline in precious metal prices may lead to significant production cuts as platinum and gold miners struggle financially. China continues to be a major driver of gold demand and is seeking more influence in the global gold market. For base metals, the Chinese economic transformation is expected to reduce demand for some metals that saw high construction use, which may lead to price declines and mine closures. Chinese production and demand are also major factors for other metals like lead, zinc and slab zinc.

1. Global metals & materials:
2016 outlook
Kenneth Hoffman, Zhou Zhang, Eily Ong
Bloomberg Intelligence analysts

2. Global precious metal 2016 outlook

3. Precious metals price slump may prompt output cuts

4. The long-term decline in precious-metals prices may finally lead
to significant production cuts in 2016. Platinum-group metals
producers such as Lonmin plan to reduce output as they struggle
to stay in business, and high-cost gold miners are beginning to
shutter operations.
The supply response could signal a bottoming of prices. Demand
from China could again push gold to a record, while a strong U.S.
dollar will be bearish for all metals.

5. Gold travels east via Switzerland as Asia seeks safe haven

6. China is still showing an appetite for gold, as physical gold
deliveries soared to almost 2 million kilograms during the first
nine months of 2015, according to the Shanghai Gold Exchange.
More gold is heading east, with outflows into Asian countries
from exchange-traded funds in North America and Europe.
China and India, which claim to be the top global consumers, are
importing large quantities of gold from Switzerland, which is
taking in gold from the U.K. Gold is viewed as a safe haven in Asia.

7. China seeks larger role in world gold market

8. China has been the world’s largest consumer and producer of
gold, and the nation is seeking more influence in the global gold
market, being very much a price-taker. Shanghai Gold Exchange,
the world’s largest trading platform for physical gold, introduced
the international board in the Shanghai Free Trade Zone, a move
that allows more trading.
Two Chinese banks have joined the London Bullion Market
Association’s price-setting auction. China’s gold consumption
is expected to determine global demand and prices.

9. Platinum group metals net demand may decline in 2015 on China

10. The deficit between demand and supply for the main platinum
group metals will likely narrow this year, according to data from
Johnson Matthey, amid a recovery in South African production
and reduced investment use.
Jewelry demand is also expected to decline as an increase in
purchasing from India is offset by weaker demand from China.
Autocatalyst needs may increase as a result of higher emission
limits and growth in vehicle production.

11. Global base metal 2016 outlook

12. China supercycle ends, metal returns vary greatly

13. Chinese demand for metals reversed course in 2015, causing
prices to decline by 11-36%. As the Chinese economy transforms
to one more consumer based, metals that were in high demand
during the construction peak may not be needed.
Using metals as collateral in the financing of the “carry trade”
may also be ending, causing both a decline in demand and
excess supply coming back into the market.

14. China lead production, demand drive global market

15. Lead prices fell 10.6% this year through Nov. 6, due to concerns over
China’s economic slowdown and plunging demand in the country,
the world’s largest producer and consumer of the metal.
Global refined lead demand has fallen faster than production, leaving
a surplus of 17,392 metric tons through August after a deficit in 2014.
China accounts for about 40% of both global supply and demand,
and tightening environmental regulations may be restricting the
nation’s lead production and consumption.

16. Zinc mine closings in store as price at 6-year low

17. Mined zinc closings are beginning to be announced or discussed
as the metal’s price reaches a six-year low. Glencore said it would
close 500,000 metric tons of capacity -- one-third of its production
and 3.5% of the industry’s global total.
Nystar said low prices could push it to make further cuts after it
closed its Campo Morado, Mexico and Myra Falls, Canada mines
in 2015. A four-year bear market may come to a head as miners,
who have seen large losses, throw in the towel and close significant
amount of capacity.

18. Chinese zinc slab producers drive market to surplus from deficit

19. China continues to drive global zinc slab output, with more than
4.1 million metric tons produced in 2015 through August. While
China’s slab output jumped 11.2% from a year earlier, the global total
increased just 6.4% to 9.38 million tons.
China’s rising supply pushed the refined zinc market into a surplus
of 207,800 tons from a 2014 deficit, as end-market demand failed to
keep pace. Galvanized sheet production, a primary use for refined
zinc, was up 5.8%.

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