Financial services firm Moody’s Investors Service has a stable outlook for the global base metals industry over the next 12 to 18 months, although indications are that economic growth rates may have peaked.

The firm said in a release on Tuesday that synchronised economic growth rates in 2018, particularly early in the year, had contributed to improved consumption for the base metals complex and to the rally seen in prices in the first half of the year.

“While we expect growth rates to slow in 2019, they should remain at a level supportive of the stable outlook,” Moody’s stated.

While purchasing managers’ indexes (PMIs) in the US, Europe and China are still in expansionary territory, there is evidence of softening. Growth expectations for the Chinese economy and its supply and demand fundamentals will remain driving factors for the industry’s performance, it pointed out.

Moody’s central macroeconomic scenario for 2019 forecasts slowing gross domestic product (GDP) rates for the US, Europe and China, as well as the Group of Twenty international forum of governments which include Argentina, Australia, Canada, France, India, Indonesia, Japan, Russia, Saudi Arabia, South Africa, South Korea, the UK and Turkey.

In terms of pricing, Moody’s noted that base metal prices are expected to be range bound in 2019, generally on par with this year, with no material upward movement. Trade tensions, particularly between the US and China, tariffs, changing trade patterns and event risk will drive price sentiment.

Further, exploration and development expenditures will remain critical to the development of new mine supply. Investments are needed in copper, nickel and zinc following a number of years of underinvestment.

Aluminium, however, remains in overcapacity, though fundamentals have improved on lower inventories.

The firm pointed out that the outlook for base metals could move to negative if PMIs in the US, Europe and China track below 50 for two consecutive months and if Moody’s’ global macroeconomic outlook for GDP growth changes to less than 3%.

China remains a key market for the base metals industry from both a supply and consumption perspective and expectations for Chinese economic growth levels have a strong influence on sentiment towards base metals prices and contribute to increased volatility. China’s official PMI has hovered in the low 50s for all of this year and decreased to 50.8 in September from 51.3 in August.

Third-quarter GDP growth for China was at a nine-year low of 6.5%, compared with 6.7% for the second quarter. Moody’s central economic scenario forecasts 6.6% GDP growth for China for this year and 6.4% for 2019.

Moody’s concluded that the market is meaningfully influenced by sentiment and trading activity and, therefore, the firm anticipates that heightened volatility will remain the hallmark of the base metals industry.