LONDON When will base metal prices stop falling?
They have been trending lower for months, even years in the case of copper, and most have plumbed new lows in the first few days of 2016.
The current macroeconomic gloom is overwhelming as China wobbles, emerging markets falter and stock indices the world over swoon.
Have we yet reached the point of maximum despair?
Yes, according to the bulk of analysts who participated in this week's Reuters poll.
The median expectation pretty much across the base metals board is for prices to bottom out this quarter and then start heading higher again.
Some are expected to do better than others with nickel and zinc seen recovering strongly from current levels. Most out of favor is aluminum, unsurprisingly given its toxic combination of structural overcapacity and high stocks.
Of course there are some contrarians among the 32 analysts who submitted forecasts.
JPMorgan is in the super-bear camp when it comes to both copper and nickel. Its price forecasts for both metals in 2016 are the lowest of all and it expects lower prices still in 2017.
Macquarie Bank takes a similar no-recovery view of aluminum over the next two years, while Oxford Economics is equally bearish about lead's prospects.
But for the most part the message seems to be that we are right now very close to the bottom.
Graphic on 2016 and 2017 forecasts vs Jan 28 price:
Graphic on quarterly 2016 forecasts vs Jan 28 price:
For full details of the survey:
NICKEL BOUNCE BACK?
Relative to Thursday's London Metal Exchange (LME) cash settlement price, it is nickel that is viewed as having the greatest recovery potential.
The median expectation is for cash nickel prices to bounce back by over 20 percent in the fourth quarter of this year and by almost 40 percent next year.
It's not an entirely unsurprising finding, given nickel has fallen harder than any of its peers to the point that it has been trading below even the price troughs of the 2008-2009 Global Financial Crisis.
As price-related closures start to accumulate, particularly in Australia, the median expectation is for the global refined nickel market to record supply-demand deficits both this year and next to the tune of 31,000 tonnes and 34,000 tonnes respectively.
JPMorgan and INTL FC Stone are the only naysayers. Both have pencilled in surpluses for both years and JP is the super-bear with a forecast for average cash pricing of $7,000 per ton next year, a full $2,000 below the next lowest forecast from ICBC Standard Bank.
Zinc, lead and tin are also expected to record supply deficits in both 2016 and 2017, according to median expectations.
Zinc is viewed as having the second-best upside prospects after nickel over a two-year time horizon with a median forecast for a near 25 percent increase in prices from current levels.
There are tangible signs that the raw materials part of the zinc market is tightening on a combination of mine closures and price-related cutbacks.
Chinese smelters have reacted by promising 500,000-tonne of capacity cuts this year and the impact already appears to be manifest in sharply-accelerating imports of refined zinc into the country.
Sister metal lead doesn't attract the same level of optimism despite a similar median expectation of supply deficit this year and next.
Indeed, over a two-year horizon only aluminum is expected to perform worse.
Rather, it is tiny tin which takes third place in the bull parade with a median forecast for prices to average $16,000 per ton next year, a 15 percent improvement from yesterday's LME settlement price.
COPPER SLOW BURN
Copper is going to be a slow-burn mover.
The median forecast for the first quarter of this year is an average price of $4,512.50 per ton. That's lower than Thursday's cash settlement and only aluminum is expected to fare worse this quarter.
The copper price is then expected to gradually recover over the balance of 2016 and through 2017. A median forecast of $5,182 for next year would represent a 14 percent rise from current prices.
What's interesting is the wide divergence of market-balance estimates among those analysts proffering a view.
The median call is for a supply surplus of 150,000 tonnes this year but expectations range from a deficit of 310,000 tonnes (Capital Economics) to a surplus of 316,000 tonnes (JPMorgan).
The spectrum of opinion widens still further in 2017, although the consensus seems to be for a smaller surplus with a median forecast of 60,000 tonnes.
Capital Economics continues to fly the bull flag with a forecast for a 280,000-tonne deficit. JPMorgan remains bearish with a forecast 447,000-tonne surplus, exceeded only by Julius Baer's expected 450,000-tonne supply overhang.
Aluminum wins the dubious honor of being the most unloved base metal right now.
The median forecast is for aluminum prices to average below yesterday's LME settlement price through the third quarter of this year.
And although prices are expected to rise next year, they will lag the rest of the complex. The median forecast for 2017 is for an average price of $1,600 per ton, representing only a highly modest 5 percent increase from current levels.
Aluminum's cocktail of structural overcapacity, too much production and high stocks do not a rosy picture make.
Only two analysts see anything other than a year of supply surplus this year and only one (ICBC Standard Bank) is forecasting deficit next year.
But the fact that even aluminum is expected to stage a price recovery, albeit a pretty anemic one, over the next two years is indicative of the general mood.
The clear take-away from this poll is that, with some noteworthy exceptions, most analysts feel we are at or close to the price lows.
The only way from here, it seems, is up. But it's going to be a long haul for many of the base metals and a very long haul indeed for aluminum.
(The opinions expressed here are those of the author, a columnist for Reuters.)
(Editing by David Evans)