Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report - July 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 July 2021.
Comments on Aluminum
During the first half 2021 the worldwide primary aluminum production rose by 4.4 %. The production in China increased by 7.3 %, while the European output stagnated. The production in North America declined by 1.8 %, in the Gulf region we saw a reduction of 1.3 %, while in the rest of Asia the output jumped by 7.8 % . 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.
During July 2021 we saw another sharp decrease of the stocks of primary aluminum on the exchanges. We forecast a further reduction of inventories until the end of 2021. Investment demand increased in July by just under 22 %. 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
The global zinc mine production rose by 13.2 % from the beginning of the year until the end of May. The outputs were a result of higher production in Asia and Latin America. The refinery production increased by 4.6 % in this period. Some of the main zinc producers achieved record production values this year. The zinc usage until the end of May increased even more by 10.6 % in a wide range of countries. For the whole year we see a smaller increase in the zinc usage by 4.5 % to 13.8 mill. tons.
Zinc demand will be influenced by the higher demand for galvanized sheets and higher needs of zinc chemicals. The demand for galvanized components in the automotive sector will also increase due to corrosion protection.
Zinc inventories on the LME decreased to 245,000 t at the end of July 2021, while those on the SHFE slightly rose to 36,000 t. At 3,000 t, the inventories at Comex are negligible. The stocks correspond to the consumption of 7 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 forecast a zinc price around USD2,900/t with a fluctuation range of +USD500 by the end of Q3 2021.