Monthly Report – April 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, published monthly by IKB Deutsche Industriebank, focuses on aluminum and zinc and highlights key developments in April 2022.
Comments on Aluminum
Global primary aluminum production at the end of February 2022 was 2.8% lower than a year earlier but has recovered half of the January decline. The production decline was mainly due to a 3.2 % lower output in China. For 2022 we expect output of 67.8 million tons. Added to this will be around 13 million t of recycled aluminum.
The decisive factor in the current year will be whether Europe succeeds in compensating for Russian shortfalls in deliveries. Russia and some other eastern European countries produced 6 % of the global primary aluminum output in 2021. The reduction in inventories of primary aluminum on the LME continued and therefore market supplies have become even tighter. Primary aluminum stocks at the LME are now at 0.65 million t and those at SHFE are at 0.3 million t.
Investment demand decreased by 57 % in March. Aluminum quotations were strongly influenced by the war and sanctions against Russia. Demand will remain high because of the trend towards lightweight production and e-mobility.
Trend: By the end of Q2 2022, we see primary aluminum prices in a band of +US$400 around the US$3,500/t mark, with those of aluminum alloys up to US$500/t lower.
Comments on Zinc
In 2021 zinc mine production increased by 4.5 % to 12.8 million tons. Chinese production held a share of 32 % of this figure but was only 1.9 % higher than the output in 2020.
The highest production increase was seen in Peru (+ 14.8 %). The increase of refining production was 0.6 % in 2021 also with China as the largest producer (46 %). China is also the largest user of zinc with a usage slightly above the inland production.
Globally the zinc usage increased by 5.8 % with an increase of 10.3 % for the world ex China, where zinc usage only increased by 1.5 %. Inventories at the LME fell to 142,000 t, those at SHFE rose slightly to 178,000 tons. The warehouse stocks at the COMEX are neglectable. Stocks on the exchanges correspond to 8 days' consumption, which means that overall supply is satisfactory. Last year’s supply deficit was 192,000 t. With a continued stable demand, we expect an increasing supply deficit for the current year.
Trend: We forecast the zinc price to move around US$4,100/t by mid-2022, with a fluctuation band of +US$600