Monthly Report – May 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 May 2022.
Comments on Aluminum
At the end of March 2022 global primary aluminum production was 1.9% lower than a year earlier, but has already recovered two thirds of the January decline. For 2022 we expect an output of 67.8 million tons. Added to this will be around 13 million tons of recycled aluminum. The decisive factor in the current year will be whether Europe succeeds in compensating for Russian shortfalls in deliveries. This difficult supply situation meets an ongoing high demand for primary aluminum because of the need for lightweight products especially in the automotive sector.
The reduction in stocks of primary aluminum on the LME and the SHFE is continuing. Investment demand decreased by around 30% in April 2022. Aluminum prices are largely determined by the war and sanctions against Russia.
Trend: Until the end of Q2 2022, we see primary aluminum prices in a band of +/-US$600 around the US$3,100/t mark, while aluminum alloy prices are up to US$500/t lower.
Comments on Zinc
In 2021 zinc mine production increased by 4.5 % to 12.8 million tons and will improve to 13.3 million tons in the current year. We forecast a higher mine production in Australia, India, the USA and some other countries. The increase of refining production will equal around 1 % in 2022. The Chinese output will expand by around 2.5 %. European smelters are negatively affected by the sharp rise in energy costs. Globally we expect, that the zinc usage will be 1.5 % higher than in 2021. China will show only a moderate growth of 1 %, while we forecast a negative impact in Europe mainly coming from Russia and Ukraine.
Inventories at the LME fell sharply to 95,000 t, those at SHFE slightly to 170,000 tons. The warehouse stocks at the COMEX are neglectable. Stocks on the exchanges correspond to around 7 days' consumption, which means that overall supply is sufficient. Last year’s supply deficit was 193,000 t. With a continued stable demand we expect an supply deficit of nearly 300,000 tons for the current year.
Trend: We forecast the zinc price to move around US$4,000/t by mid-2022, with a fluctuation band of +/-US$600