Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report - August 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 August 2021.
Comments on Aluminum
Global primary aluminum production increased by 4.6 % up to the end of July 2021. The main driver was the 7 % increase in China. Compared with 2020, we now expect production to increase to around 66.3 million tons and 12.5 million tons of recycled aluminum in 2021 as a whole. The outlook for aluminum use in the customer sectors remains very positive. In passenger car production, an increase of 8 kg per vehicle is seen in the current year compared with 2019.
Inventories of primary aluminum on the LME fell sharply to 1.33 million tons: At the SHFE, these fell to 249,000 t. By contrast, the Comex warehouses hold only just under 40,000 t. However, there still is a good supply. LME stocks of recycled alloys account for just 1,800 t. These stocks correspond to around 7.5 days' total consumption (primary and recycled aluminum).
Primary aluminum prices continued to rise in the course of August 2021: In addition to the success of Covid 19 vaccinations, this was mainly due to rising demand for aluminum, not only from the automotive industry.
Trend: By the end of 2021, we therefore expect the price of primary aluminum to move around the USD2,550/t mark in a band of +USD400/t. We see the price for recycled aluminum 300 USD/t below that.
Comments on Zinc
During the first half of 2021 the global zinc mine production rose by 12.1 % compared to the same period of the last year. 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. Until the end of June the zinc usage increased even more by 10.5 % 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.
On the LME, zinc inventories fell to 237,000 tons at the end of August; stocks on the SHFE rose to 52,000 tons in the same period. Inventories on the Comex are negligible at 3,000 tons. Thus, inventories are equivalent to just over 7 days of consumption. The supply surplus of 530,000 tons from last year will be much lower this year. We see a supply surplus of just under 100,000 tons by the end of the year.
We forecast a zinc price around USD2,900/t with a range of +USD500 until the end of 2021.