Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report – December 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 December 2021.
Comments on Aluminum
Global primary aluminum production increased by 4% to 56.3 million tons by the end of October 2021. For the full year we expect production of 66.5 million tons of primary aluminum and a good 12.5 million tons of recycled aluminum. The outlook for aluminum use in the customer sectors remains positive: The trend toward lightweight construction is continuing. After the catch-up effect after the Corona year 2020 was weak in many sectors of the economy (especially in the automotive industry) due to supply problems and raw material shortages, we see demand picking up further in the coming years.
Inventories of primary aluminum on the LME decreased to 916,000 tons. On the SHFE, these rose slightly to 328,000 t. By contrast, there are only 32,000 t in Comex warehouses. Inventories correspond to just over 6 days' total consumption (primary and recycled aluminum).
The price of primary aluminum fell in November 2021 for the first time since its rapid rise in mid-2020. The average price in November was US$300/t lower than the previous month.
Trend: By the end of Q1 2022, we therefore expect prices for primary aluminum to move around the US$2,600/t mark in a band of +US$300/t. The price of recycled aluminum on the LME is likely to be no more than US$300/t below these values.
Comments on Zinc
Zinc mine production increased by a good 7.4% by the end of September; a smaller increase of 4.7% to 12.8 million tons is expected for the full year. Refining production rose by 3% by the end of Q3 2021 and is forecast to increase by 2.5% for the full year. Consumption increased by 8.8% in the period under review compared with the previous year: strong growth was seen above all in Europe, particularly Germany, France, the United Kingdom and Italy. Zinc consumption in China is estimated to increase by 2.1%, following a 1.5% increase last year. Zinc is primarily driven by galvanized sheet and zinc chemicals.
Zinc inventories on the LME continued to decline steadily until the end of November and stood at 159,000 t. Stocks on the SHFE rose slightly to 72,000 t, and those on the Comex amounted to 3,000 t - thus the latter is negligible. Stocks are equivalent to 6 days of consumption, which means overall good supply. The year 2021 will show a relatively small supply surplus.
We forecast this to be in the order of 100,000 t.
Trend: We forecast the zinc price to move around US$3,300/t by the end of Q1 2022, with a fluctuation range of +$500.