Dr. Heinz-Jürgen Büchner
Director Industrials & Automotive, IKB Deutsche Industriebank AG
Monthly Report – February 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 February 2022.
Comments on Aluminum
Global primary aluminum production increased by 3% in 2021. The main driver was the 4.2% increase in China. As a result, a new production record of around 67.3 million t was achieved in 2021 as a whole. In addition, 12.5 million t of recycled aluminum were produced. The strong increase in China is expected to slow significantly in 2022. We expect output of 67.8 million t in 2022. Added to this will be approx. 13 million t of recycled aluminum. The trend toward lightweighting and e-mobility will keep demand high in the current year as well. On the LME, primary aluminum inventories fell to 0.8 million t, on the SHFE they fell further to only 0.27 million t. At 28,000 t, the volumes on Comex are not of very great relevance. Aluminum Alloy stocks are only 2,100 t. Overall, therefore, market supplies have become tighter. Investment demand remained at a high level during January 2022: Although the number of trading contracts fell by over 2% to just under 173,000 contracts.
Trend: By mid-2022, primary aluminum prices are expected to move in a band of +US$400 around US$3,000/t. The price differential with the quotation for recycled aluminum on the LME has widened recently. However, the minimal stock exchange inventory and high demand continue to require higher European recycled aluminum production.
Comments on Zinc
By the end of November 2021, zinc mine production had increased by almost 6%. This compensates for the previous year's declines due to production interruptions in Asia and Latin America, among others. The production increase mainly took place in Bolivia, Mexico, India, Peru, South Africa and Turkey. An increase by 1.7% in 2022 is seen for refining production at the same time.
Consumption expanded by 6.8% by the end of November 2021 and is expected to increase again by 3% in 2022.
After the supply surplus of 530,000 t in 2020, a supply deficit of just over 100,000 t is likely to have emerged in 2021. Inventories at the LME fell to 155,000 t, those at the SHFE rose to 92,000 t. The warehouse stocks at the CONEX are neglectable.
Stocks on the exchanges correspond to a good 6 days' consumption, which means that overall supply is still satisfactory.
Trend: We forecast the zinc price to move around US$3,500/t by mid-2022, with a fluctuation band of +US$500.