BofA’s 2025 metals & mining outlook

Bank of America's 2025 Metals and Mining Outlook has been released, with a focus on the prevailing macro uncertainties that may lead to a decline in cyclical mined commodities in the first quarter of 2025. The report highlights the changing dynamics between the US and China, emphasizing that the two countries are no longer as interdependent as before. Moreover, it stresses the importance of energy transition spend amidst the caveats surrounding China's stimulus measures. CNBC Africa recently interviewed Michael Widmer, Head Of Metals Research at BofA Global Research, to delve deeper into the insights provided by the outlook. Reflecting on the performance of metals in 2024, Widmer shared that while they initially held a constructive view, they were surprised by the rapid market realization that certain factors were not just temporary add-ons. The second quarter witnessed a surge in copper prices due to the increasing demand for data centers and electricity infrastructure, driven by the energy transition narrative. However, these gains were short-lived as the market adjusted, underscoring the importance of understanding thematic trends within the metals industry. The discussion then shifted to the impact of the US election on metal prices. Widmer noted that during President Trump's first term, the trade disputes with China led to a general deterioration in global sentiment and a subsequent decline in metal prices. Following Trump's victory, the markets anticipated lower base metal prices and a rise in inflation and growth, impacting the dollar and rates. Gold also experienced a repricing as a result of these expectations, highlighting the interconnectedness of political events and commodity markets. Looking ahead to 2025, Widmer outlined the key factors influencing the metals market. He emphasized the significance of energy transition spend, particularly in China, where substantial investments have been made. The direction of the US-China relationship and its implications for base metals were also discussed, with a focus on potential market bottoming once the ongoing geopolitical uncertainties settle. Additionally, Widmer highlighted the importance of monitoring fiscal policies and investor sentiment, especially in developed countries, to gauge the demand for safe-haven assets like gold. Addressing the China stimulus measures, Widmer drew parallels to previous stimulus packages and their impact on the metals market. He noted that while infrastructure-intensive stimuli, like the one in 2008, had a sustained bullish effect on metals, consumption-focused measures had less lasting impacts. Considering China's current scenario, with excess capacities across various sectors, the emphasis on energy transition as a stimulus driver was underscored as a more sustainable and market-friendly approach. In the realm of aluminum, Widmer shed light on the evolving dynamics of the industry, particularly in Europe where the aluminum sector is shrinking. He explained that after years of oversupply due to easy access to capital for smelter construction, the market dynamics have shifted. With China imposing capacity caps and limited incentives for new smelter projects in Europe and the US, global production growth has halved, leading to a more balanced market. Few upcoming projects are expected to support aluminum prices in the foreseeable future. In conclusion, the insights shared by Michael Widmer offer a nuanced perspective on the metals and mining landscape as we approach 2025. With a focus on thematic trends, geopolitical developments, and market dynamics, the outlook provides valuable insights for investors and industry stakeholders navigating the evolving landscape of commodities.