The ongoing base metal rally has run its course and prices will ease in the coming months, especially in the case of copper, reports Fitch Solutions Country Risk and Industry Research.
It says copper prices could head back to 2018 levels, at about $7 300/t.
"The broader, deeper and stronger 2021 economic recovery generally expected by investor is now probably already priced in.
"Speculative positions are not extremely bullish compared with historical levels, which would limit further upside for prices," it notes.
Meanwhile, Chinese copper imports have been easing in recent months, while local stocks have started to pick up slightly, which Fitch Solutions says could signal a normalisation in demand growth.
The company also expects Chinese metal demand to remain robust this year, but notes that there will be less of an upside compared with 2020.
While the company expects prices to head lower from current levels, it continues to see them averaging significantly higher this year than in 2020.
For example, Fitch sees copper averaging $6 800/t in 2021, which would be the highest in seven years.
“We note that the recent strong rally in prices puts upside risks to our current 2021 metal forecasts, which we will be reviewing in the coming months,” Fitch Solutions states.