Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report Short Term Commodity Outlook: Aluminum & Zinc
The market in the metals industry is constantly on the move - and so are raw material prices. This report, which is published monthly by IKB Deutsche Industriebank, focuses on aluminum and zinc and highlights the most important developments in April.
Comments on Aluminum
Inventories of primary aluminum decreased in the course of April on both the LME and the SHFE; investment demand also fell by almost 10 % in April. LME stocks of recycled alloys account for only 2,000 t. In the medium term, further capacities for recycled aluminum will come onto the market, particularly in China, to ensure long-term supply security. We expect lower inventories of primary aluminum until mid-2021. This will then also favor continued firm price trends in the second quarter of 2021.
Global primary aluminum production increased by 3.4 % in the year to March 2021. For the current year, we expect total output of 65.4 million tons. We see the production of recycled aluminum at around 12.5 million tons, with aluminum consumption rising more strongly.
Due to increasing production of recycled aluminum, a price difference of just under USD350 to primary aluminum was again seen in April.
Trend: By the end of the second quarter, primary aluminum prices are moving in a band of USD+300 around a mark of USD/t 2,300, while aluminum alloy prices are up to USD/t 300 lower.
Comments on Zinc
During the first two months of 2021 the global zinc mine production rose by 9.5 %. The refinery production grew by only 2.7 % while the global usage of zinc jumped up by 9.7 %. In the whole year 2021 the zinc refinery production will grew by 3 %. The worldwide supply of zinc exceed the global demand with around 83,000 tons until the end of February 2021. During the same period of 2020 the oversupply of zinc equaled around 220,000 tons. We forecast an oversupply of below 400,000 tons for 2021 in total. Impulses for the global demand of zinc will come from the steel industry (galvanized sheets) and the chemical industry. The global infrastructure programs will stimulate the demand of the construction sector.
At the end of April 2021 the inventories of zinc rose at the LME to around 292,000 tons. Another 94,000 tons are held in the warehouses of the SHFE, a decrease of more than 20 % since the end of March 2021. The 3,000 tons at the Comex are of minor importance. Therefore, the market supply is very good.
Trend: Until the end of June 2021 we forecast a zinc price of 2,800 US-$/ton fluctuating in a band of USD+400. During the second half of 2021 the price for zinc will exceed the threshold of USD3,000 per metric ton.