Base Metal Commentary
By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region
Base Metals Rocket in 2023, But Will New Highs be Hit This Year?
The base metal suite has had a robust start to the year, with the index jumping 9% YTD, posting its highest level since June 2022, driven by a softening in the macro headwinds that kept prices constrained last year. Indeed, with China abolishing its zero-tolerance stance on COVID-19 officially on 8th January (with international travel resuming within the country), in addition to growing expectations that western central bank rate rises will decelerate over 2023 (and the U.S. dollar trading at its weakest level in seven months), the suite has rallied strongly in the opening weeks of this year. However, with China about to close for business for the Lunar New Year Holiday (21-27th January), in today’s commentary, we will weigh up the key price moves that have taken place, and what we expect as we move forward.
Prices – Macro Versus Fundamentals
In our view, base metal price direction is continuing to be led by the macro picture (as it was over Q2-Q4 2022); however, we do suspect that fundamentals will play a more pivotal role this year, particularly upon a demand recovery within China, with the recovery in different sectors, set to be uneven. Meanwhile, the threat of supply disruptions stretching from South America to Europe to Indonesia (particularly given a low stock environment), will keep price volatility very much on the table over 2023.
BBG BASE METAL INDEX
Type or use Ctrl+Shift+V here to paste source
LME 3M BASE METAL PRICE PERFORMANCE YTD
Type or use Ctrl+Shift+V here to paste source
COPPER HAS HELD 3-DAY MOVE ABOVE GOLDEN CROSS
Type or use Ctrl+Shift+V here to paste source
BASE METAL INDEX APPROCHING GOLDEN CROSS
Type or use Ctrl+Shift+V here to paste source
The Macro Picture – A Chinese Recovery & U.S. Federal Reserve Policy Decisions Remain Front & Centre – What Do We Expect?
The Federal Reserve
The next FOMC meeting will take place on 31st January -1st February, with mixed forecasts over likely rate hike patterns:
• December FOMC Meeting Minutes
Based on the minutes of the December FOMC meeting, the all-important dot plot, which highlights the median outlook for the target Federal Funds Rate by year-end, displayed a terminal rate of 5.25%-5.50% (please note current levels are 4.25-4.50%).
• Pantheon Macroeconomics
Suggest we will see a 0.25% basis point rise in the January meeting, with rates then steady over the remainder of the year, citing that the reduction in core inflation is gathering pace, with consumers’ inflation expectations likely to drop sharply in the next few months. Pantheon argues that “The entire increase in the December core, net, was due to the 0.79% jump in the weighted average primary and owner equivalent rent components” and that it is expecting a sharp drop in the rate of increase in primary and owners’ equivalent rents. Shelter is 33% of CPI and if the Pantheon projection is correct then the heat should be off well before the end of the year.
• Fed Funds Futures
Suggests that we will see rates peak in June at 4.9%, before moving lower over the remainder of the year.
U.S. DOLLAR VERSUS LME 3M COPPER
Type or use Ctrl+Shift+V here to paste source
FEDERAL FUNDS FUTURES
Type or use Ctrl+Shift+V here to paste source
FEDERAL FUND RATES
Type or use Ctrl+Shift+V here to paste source
FEDERAL RESERVE DECEMBER 2022 FOMC DOT PLOT
Type or use Ctrl+Shift+V here to paste source
• December 2022; end 2023 called at 5.25-5.50%
FEDERAL RESERVE DECEMBER 2021 FOMC DOT PLOT
Type or use Ctrl+Shift+V here to paste source
• December 2021; end 2022 called at 0.75-1.00%; outturn was 4.3
China
Firstly, of course the largest single change we have seen within China is that on 8th January the country dropped its zero-tolerance stance on COVID-19, with international borders being opened, while all quarantine restriction were lifted. Here, we forecast (as we have seen in the majority of global countries that dropped COVID restrictions), that China will learn to live with the virus. As it stands, although we forecast a negative impact to economic growth as the wave of the virus spreads through the country in the near-term, we have already seen peak cases hit and then decline across major cities – and our view is that while the virus will remain a disruptive force in entirety, as new strains reduce in severity and larger quantities of the population are vaccinated, the virus will have a less impinging impact on economic growth.
In addition to this, we forecast that the outcome of the Central Economic Work Conference (held in December 2022), has acted as a guide to what we can expect in the Two Sessions meeting in March (which is an annual event in which China’s top economic and legislative decisions for the year are made). As it stands, while no specific (numerical) targets were provided, the key takeaways are:
• That China has replaced the key term ‘stability’ of 2022 with ‘growth’ for this year, with ‘pro-growth’ strategies targeting:
- Domestic consumption (which should benefit from the move away from zero tolerance on COVID-19, while the Government will further support growth by providing incentives to boost confidence)
- The property market (ensuring stabilisation in the sector by providing reasonable financing to developers - although the country will maintain its hard line that ‘houses are for living in and not speculation’)
- The tech sector (with a gradual easing in restrictions, to increase self-reliance)
- Foreign capital (in order to increase inflows into the country)
Please note, based on the statement released after the December Central Economic Work Conference, monetary policy will remain prudent while fiscal policy will remain proactive (meaning stimulus will be moderate & highly targeted).
As it stands, the World Bank is forecasting GDP growth of 4.3% this year, a recovery from 3% growth in 2022, although remaining well below 2021 levels of 8.1% and the average five-year growth level pre-pandemic of 7%).
2022 VERSUS 2021 KEY CHINESE ECONOMIC READINGS
Type or use Ctrl+Shift+V here to paste source
WORLD BANK GDP FORECASTS
Type or use Ctrl+Shift+V here to paste source
Outlook for Prices
We believe that base metal prices are likely to peak in H1 (although remain below the on-record highs reached last year), upon a pickup in demand in China and growing expectations of a deceleration in Federal Reserve rate hikes, while stocks remain at historically low levels, leaving the door open for prices to benefit from supply side risk stories. However, we are cautious here that the unpredictable nature of COVID-19 could delay a Chinese recovery, reducing investor appetite. Further ahead, following a seasonal lull over the summer months, prices are forecast to lift towards year-end upon restocking and any signs of a recovery within the developed nations (this of course is dependent on the ability of regions like North America and Europe to avoid a hard landing).
- Base Metals
This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.
The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.
References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.
StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. StoneX Financial (Canada) Inc. (SFCI) is registered in Canada and is a member of CIRO and CIPF. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.
R.J. O’Brien & Associates, LLC (RJO) is registered with the CFTC as a Futures Commission Merchant and is a member of NFA.
StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorized and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorized to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorized and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorized by the FCA.
This communication is issued in the European Economic Area by StoneX Financial Europe GmbH (SFEG). StoneX is the trade name used by STONEX GROUP INC. and all its associated entities and subsidiaries. StoneX Financial Europe GmbH (“SFEG”) is a securities trading firm registered in Germany under Company No. HRB 80844.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.
StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licence holder (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for domestic and cross-border money transfer services).
SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism.
StoneX Financial (HK) Limited (CE No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX Financial Pty Ltd (ACN 141 774 727) holds an Australian Financial Service License (AFSL: 345646) for Dealing in Securities, Exchange-Traded Derivatives Contracts, OTC Derivatives Contracts and Foreign Exchange Contracts, and is regulated by the Australian Securities and Investments Commission.
StoneX Securities Co., Ltd. (“SSJ”) (Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
© 2026 StoneX Group Inc. All Rights Reserved.
Discover more insights
Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
Related articles for Base Metals
StoneX TV:Indonesia's Metal Export Ban Shocks China
Natalie Scott-Gray, StoneX Senior Metals Analyst, explains how Indonesia's tightening control over mineral exports, China's upcoming Politburo meeting and new carbon regulations are reshaping the outlook for nickel, aluminium, copper and other base metals. She discusses why supply-side risks may prove more influential than broad stimulus expectations during the second half of the year.
Natalie Scott-Gray
- Base Metals
StoneX TV: Copper's Next Move Is About Supply, Not AI
Copper prices are back in focus as physical supply tightens, inventories decline and demand strengthens. Natalie Scott-Gray, StoneX Senior Metals Analyst, explains why the copper market is becoming fundamentally tighter, how Section 232 tariff uncertainty and China's buying patterns are reshaping global flows, and why AI, electrification and grid investment continue to support the long-term outlook despite recent weakness in technology stocks.
Natalie Scott-Gray
- Base Metals
Indonesia Export Curbs Tighten Nickel Supply Outlook
Indonesia's tightening grip on mineral exports is becoming one of the most important supply-side drivers for global metals markets. As export controls expand and nickel production quotas are reviewed, supply constraints may outweigh demand uncertainty during the second half of the year.
Editorial Team
- Base Metals
StoneX: We open markets
Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.
Reach
With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bilateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency
As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve, our financials and track record are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise
From our proprietary Market Intelligence platform to “boots-on-the-ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.