Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report - May 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 May 2021.
Comments on Aluminum
Inventories of primary aluminum on the LME decreased to 1.72 million tons: At the SHFE, these rose slightly to 330,000 t. LME stocks of recycled alloys account for only 2,100 t. Inventories correspond to just over 9 days' total consumption (primary and recycled aluminum). At present, China in particular is building up further capacities for recycled aluminum to ensure long-term supply security for the market. This also makes sense from a sustainability perspective, especially as a further 24 kg of aluminum per passenger car is to be used by 2027 in addition to the quantity used in the current year. The destocking of primary aluminum will continue.
Primary aluminum prices continued to move upwards during May 2021: Initial successes of Covid 19 vaccinations and rising aluminum demand combined with a significant easing of the trade war between the USA and its partners stimulated.
Trend: By the end of Q3 2021, we therefore expect a price movement for the primary aluminum price around the USD2,350/t mark in a band of + USD400/t. The price differential with the recycled aluminum quotation on the LME has recently returned to normal. In the further course of 2021, we see a price gap of around USD250/t.
Comments on Zinc
Until the end of March 2021, the global zinc mine production rose by 6.2 %, mainly as a result of higher outputs in Asia and Latin America. The refinery production increased by 3.7 % during the same period, while the usage of zinc sky-rocketed by 10.3 %. But for the whole year we forecast an increase of 4.5 % to 13.8 mill. tons. Impulses for the demand will come from the higher production of galvanized sheets and higher needs of the zinc chemicals.
Zinc inventories on the LME amounted to around 284,000 t at the end of May 2021, while those on the SHFE fell sharply to 75,000 t. This was due to the revival of construction activity after the Chinese New Year. At 3,000 t, the inventory at Comex is negligible. The stocks correspond to a good 9 days' consumption. After the supply surplus of 530,000 t in 2020, this is expected to reduce to around 350,000 t in 2021.
Trend: We therefore expect the zinc price to move around USD2,900/t with a fluctuation range of +USD500 by the end of Q3 2021.