Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report – January 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 January 2022.
Comments on Aluminum
Global primary aluminum production rose by 3.6 % year-on-year to 61.8 million tons by the end of November 2021. For 2021 we expect an output of 66.5 million tons. Added to this will be around 12.5 million tons of recycled aluminum. Aluminum consumption is expected to rise due to industry trends (lightweight construction) and to catch-up effects after the slowdown of the pandemic and the improvement of raw material availability. Following a brief recovery in the first half of December, the reduction in inventories of primary aluminum on the LME continued towards the end of the month. At the end of December they were at 939,200 t on the LME. On the SHFE the inventories slightly decreased to 323,569. At Comex warehouses there are only 30.500 tons. Inventories correspond to just over 6 days' total consumption (primary and recycled aluminum). Investment demand fell sharply by around 26 % in December. Prices for primary and recycled aluminum showed a mixed trend at the end of the month. While the price for primary aluminum slightly rose, the alloy price decreased in December.
Trend: By the end of Q1 2022 we see primary aluminum prices in a band of +US$300 around the US$2,700/t mark, while prices for aluminum alloys are on average up to US$300/t lower.
Comments on Zinc
By the End of October zinc mine production increased by 6 % in comparison to the same period last year. For the full year we expect the production to rise to 12.8 million tons. The increase is a result of rising production volumes in Bolivia, India, Mexico and Peru. Refining production increased by 2,2 % until the end of October; for the full year we see an increase of 2,5 %. The increase is mainly due to a higher refining production in China, India, Japan, Peru and the US. Zinc usage increased by 7,5 %: growth in zinc consumption was seen in Europe, Brazil, China, India Japan, Turkey and the US. The demand comes mostly from galvanized sheets and zinc chemicals. After the zinc inventories on the LME declined, they started to go up again in the second half of December and now stand at 199,600 tons. Warehouse stocks at the SHFE declined to 58,000 tons and the ones at the Comex remain at 3,000 tons, which is negligible. Stocks are equivalent to 6.5 days of consumption, which means a good supply.
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.