Nickel reversed the downward trend from Q418 after settling at $4.73/lb to finish off 2018 the metal rallied hard in early 2019 and averaged $5.60 for the quarter. From the early March peak of $6.20/lb, the stainless steel component metal gave back some of its gains going into quarter end.
We see continued strength in the red metal through the year and expect the prospect of material deficits in 2019 to support our thesis. Cobre Panama which is currently in the commissioning phase is the last of the previous cycle mega projects. Modest demand growth driven by electrification of emerging markets and transportation networks should drive copper and the base metal complex higher.
Following the strengthening base metal prices during the quarter, the base metal equities performed very well to start the year. Our coverage list was lead by ERO Copper up 69% in the first three months. Markets appear to be aligned with our thinking of strengthening prices in the base metal complex for 2019.
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The big question is how much damage was done to the global economy by last year’s quantitative tightening. The underperformance of industrials was brought into focus yesterday with UPS and 3M disappointing. South Korea, one of the world’s most trade dependent nations, contracted in the first quarter. It looking likely Japan did too. While central banks seem eager to help, they have so far been rather reticent to splurge in the same manner as years past.