Natixis, a French corporate and investment bank, said the Dow Jones-UBS industrial metals index lost 13.6% in 2013, and precious metals had a negative return of almost 31%.
At the same time equity markets in the US, Japan and Europe rallied strongly, with the S&P500 up 30% and Japan’s Nikkei gaining over 50%.
Natixis said despite the broader economic recovery the wake of the financial crisis and weakness in some parts of Europe and the developing world had continued to support a surplus of industrial commodities.
But despite the weakness analysts said some markets were beginning to gain momentum.
“Among the base metals, some are already making a transition from surplus to deficit, with zinc and lead top of this list,” Natixis said.
“Aluminium and nickel, two metals that have suffered from substantial excess supply in recent years, face the prospect of a potential shift from surplus to deficit if Indonesia persists with its current ban on exports of unprocessed raw materials.
“Copper, in contrast, is swimming against this tide, with a solid increase in new mine supply being delivered between 2013-15, taking the market from deficit to surplus.”
For gold and silver Natixis said the near-term peak had most likely passed, with a period of consolidation seeing production costs have more of an impact on prices than demand.
Platinum and palladium were forecast to lie somewhere between both ends of the market, with increased demand and investor interest paving a positive path forward.
Taking a closer look at aluminium, Natixis said years of “chronic surplus” had seen unprofitable capacity move offline, but a further slowdown was still expected.
Analysts said underlying demand was still strong however, and could push the market into a deficit sometime in the coming years.
For copper Natixis said the market’s perception was likely to shift toward a surplus following perceived physical scarcity at the end of last year and early this year.
“By 2015, the copper market is likely to be faced by a new dilemma,” it said.
“In the near term, supply is likely to expand more rapidly than demand, but at the same time the market will need to face up to the prospect of a potential supply shortfall in Chile over the coming 5-10 years.
“Against this backdrop, we would expect spot copper prices to remain under pressure for much of the 2014-15 period, with the forward curve progressively steepening.”
Analysts said zinc had entered 2014 with some of the best fundamentals among the base metals and prices were expected to rise, while lead would see increased volatility as the market moved further into deficit.
Nickel is also expected to perform well but uncertainty over Indonesia’s ban remains a risk.
Gold is expected to move even lower after a 15.5% year-on-year loss in 2013.
“Gold prices may receive some support from Asian physical demand, but ultimately we would expect the rising cash costs of production to provide a floor under which gold prices will stop falling,” analysts said.
Natixis forecast an average gold price of $1240 an ounce for the current year and $1250/oz for 2015.
For silver it said increased industrial demand was unlikely to offset decreased investor interest, forecasting a $18.60/oz price this year and $15/oz in 2015.