Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report - June 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 June 2021.
Comments on Aluminum
Global primary aluminum production increased by 4.4 % in the year to May 2021. The production in China jumped by more than 7 %, while the European output stagnated. In North American we saw a decline of 1.4 %, similar to the reduction in the Gulf region and the rest of Asia. For the current year, we expect a total output of 65.4 million tons. In addition, we see a production of recycled aluminum at around 12.5 million tons.
The stocks of primary aluminum on the exchanges decreased sharply by the end of June. We forecast another decline of inventories until the end of 2021. Investment demand increased again in June by just under 6 %. Due to increasing production of recycled aluminum, a price differential of around USD300 to primary aluminum was again visible at the end of June.
Trend: By the end of the third quarter, primary aluminum prices had moved in a band of +USD300 around the USD2,400/t mark, while prices for aluminum alloys were around USD300/t lower.
Comments on Zinc
Until the end of April 2021, the global zinc mine production rose by 11.3 %, mainly as a result of higher outputs in Asia and Latin America. The refinery production increased by 4.5 % during the same period, mainly coming from higher outputs in Asia, Italy and the US. The usage of zinc rose by 10.1 % in a broad range of countries. 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. The market in total showed an oversupply of around 30,000 tons, a strong reduction in relation to the previous year.
Zinc inventories on the LME amounted to around 254,000 t at the end of June 2021, while those on the SHFE fell sharply to 35,000 t. This was due to the rising construction activities in China. At 3,000 t, the inventories at Comex are negligible. The stocks correspond to the consumption of 7 up to 8 days. After the supply surplus of 530,000 t in 2020, this is expected to reduce to around 200,000 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.