Trampolining commodity prices have seen analysts rip up and tear their forecasts to shreds more than once this year.

While they were left catching up on iron ore prices on the way up, for instance, they’ve also been chasing them on the way back down amid China’s pause on steel output.

As that’s been happening coal prices have stunned to the upside and copper, tin and aluminium have gotten kicks at various points across 2021’s pandemic affected mining cycle.

RBC Capital Markets is one of the major investment banks wading back into tempestuous waters with its new forecasts today for the fourth quarter of 2021.

The big headline is iron ore, which RBC’s Kaan Peker sees dropping to US$75/t in the fourth quarter and across all of 2022 (a 31% reduction in its forecast price for the next calendar year).

They are not the first major investment bank to tip a cooling in the iron ore market, which has dipped from over US$230/t in May to around US$112/t this morning.

“We now forecast flat growth in 2021 Chinese steel production, but mid-single digit decline in 2022,” Peker wrote. “We forecast a surplus emerging in 2022 and set prices at marginal cost.”

But other commodities are looking brighter, with RBC lifting its forecasts 7% for the fourth quarter on average and 4% for 2022.


Outside the ironverse

A fire under Aluminium prices has been stoked by smelter shutdowns in China, where RBC expects around 2Mt of capacity to be impacted by power restrictions, with aluminium projections up 15 and 16% respectively in 2021 and 2022 to US$1.10.

RBC has also lifted its forecasts on lithium spodumene to above US$1000/t through 2023 as demand from the EV market spikes.

Its coking coal projections have lifted 29% behind record prices to US$200/t in the fourth quarter before falling to US$150/t in 2022, while thermal coal, which has beaten RBC’s estimates by 83% to average US$165/t in the third quarter, is expected to average US$170/t and US$150/t in the fourth quarter and 2022, respectively.

Those prices are expected to come off record highs as curbs on metal refining in China progress, but remain historically high.

Copper and gold are both expected to fall in the short term, with RBC maintaining its US$3.75/lb price target on copper and US$1700/oz target on gold on the back of central bank tapering and the prospect of interest rate rises late next year.

However, its medium-term expectation on copper out to 2025/2026 has been increased by around 10% on the back of expected supply shortages and the electrification narrative around the red metal.


Who is in the good books?

Among the notable stocks in Peker and RBC’s top picks is gold miner Northern Star Resources (ASX:NST), which is down around 36% year to date alongside other gold stocks.

At $8.50 RBC is factoring in plenty of upside for the Super Pit owner, with a $13 per share target.

While gold stocks are heavily impacted by sentiment around the gold price, Peker expects Northern Star to double its free cash flow and earnings over the next two years on a 30% boost in gold production and 5-7% drop in costs.

RBC is also bullish on top picks South32 (ASX:S32) ($4 target), BHP (ASX:BHP) ($42) and Silver Lake Resources (ASX:S32) ($2), while Peker recently lifted copper miner Sandfire Resources (ASX:SFR) to a buy after eliminating output concerns with its transformational acquisition of the 100,000tpa MATSA copper complex in Spain.


What happened on the markets?

Gold producers were the best performers among the large cap miners while stocks in commodities focused on China such as iron ore, lithium (sans Ioneer and Liontown) and rare earths took a beating and the materials sector sunk 1.03% to pace the ASX 200 to a 1.08% loss.

$1.5 billion capped Regis Resources (ASX:RRL) is off almost 60% over the past 12 months but was at the top of the leaderboard today, adding 6.32% to rise to $2.02 per share.

While it enjoyed a 0.84% boost in the market today the news was less rosy for Gold Road Resources (ASX:GOR) and South Africa’s Gold Fields at the Gruyere gold mine in WA, where an issue with the ball mill at their processing plant could impact production this quarter.

Mt Gibson Iron (ASX:MGX) meanwhile has stirred speculation it could suspend mining at its Shine iron ore project in WA’s Mid West.

Shine made its first shipment only last month as Mt Gibson reported a $64 million profit, but its low grade iron ore suffers discounts to the benchmark price, meaning it is exposed to volatility in iron ore markets.

Mt Gibson entered a trading halt today “in connection with an update regarding mining operations at its Shine project in the Mid-West of Western Australia following recent iron ore price volatility.”