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Kalkine in a research note said that COVID-19 has been charging the whole world and dragging the economies. The first of its essence is felt in the commodity space where base metal and oil and gas faced pressured with the outbreak in the Q1 2020.Though economic turmoil has increased the gold price further at the start of the quarter, the future seems to be dicey with economy rebounds. To quantify, copper LME price fell by 22% from USD 6165 per tonne on 2 January 2020 to USD 4821.5 per tonne on 2 April 2020. Similarly, Brent crude (tumbled by 55% in the same interval to USD 29.94 per barrel. Contrary to the base metal, gold surged by 6% in the same time frame from USD 1525.5 to USD 1612.1 an ounce. The S&P/ASX 300 Metals and Mining index fell by 30% from A$4503.735 on 2 January 2020 to AUD 3163.004 as on 16 March 2020. The index recovered a bit to AUD 3580.499 as on 2 April 2020. The worldwide spread of COVID-19, first emerging in China, has impacted the commodity market heavily. Lunar New Year holidays, travel restrictions inhibiting the return of workersand affecting the operations played a role in twining the commodity prices. China has resumed the majority of work which is likely to be fully operational by the end of June 2020. The influence on commodity prices due to China is the testimony to its massive metal consumption capacity and key role in the supply chain. The uncertainty is not over yet as the world except China is facing the wrath of COVID-19 now.
Even if we take all the optimistic factors into account and believe that the phase of the virus will be over by first half 2020, then also other major macro factors will come into play driving the prices in the commodity space. On such example can be the US Presidential election in September 2020, where the US president is anticipated to pledge to leave the Paris agreement in November 2020. Hence, we can expect some of the major policy changes for 2021 in the field of emissions and other environmental regulation driving the industry.
Copper: With economy rebound after COVID-19, the consumption of copper is anticipated to outpace the production providing support to the commodity price. The copper price is likely to be in the range of USD 5,990 a tonne in 2020 and USD 6,900 a tonne in 2025. Similarly, earnings from copper export of Australia are expected to increase to AUD 13 billion in FY25 from AUD 10 billion in FY19.Globally, copper production is projected to increase by 2.5% CAGR from 20,512kt in 2019 to 23,805kt in 2025.
Nickel: Solid demand from stainless steel in the near future is likely to boost the nickel consumption supporting the price. The price is expected to be around USD 15,300 per tonne in 2020 and USD15,800 per tonne in 2025. The rise in price is likely to increase the export earnings from AUD 3.7 billion in FY19 to AUD 6.6 billion in FY25. Nickel total mine production is likely to increase with CAGR of 2% from 2,558kt in 2019 to 2,885kt in 2025.
Zinc: The price of zinc is anticipated to fall in the near future due to the high-grade zinc production building up on stock due to lower price in 2020 which may further pressurize price in the next five years. The zinc price is forecast to reduce from USD 2,605 per tonne in 2019 to USD 1,864 per tonne in 2025. Unlike the above two commodities, export earnings of Australia is likely to fall from AUD 4 billion in FY19 to AUD 3.1 billion by FY25. The mine production of zinc is projected to surge with CAGR of 0.3% from 12,929kt in 2019 to 13,158kt in 2025.