Monthly Report – June 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 June 2022.
Comments on Aluminum
Global primary aluminum production in the first four months of 2022 was 1% lower than a year earlier, compared with a decline of 4.5% at the beginning of the year. At the end of May the prior-year level is expected to be reached, so we are sticking to our forecast of a 0.7% increase in annual production to 67.8 million tons. Added to this will be around 13 million tons of recycled aluminum. China in particular is currently building up further capacities for recycled aluminum to ensure long-term security of supply. On the demand side aluminum use in the main customer sectors will continue to develop very positively. In passenger car production, the shift toward e-mobility requires increased use of aluminum.
Inventories of primary aluminum on the LME decreased further to just under 0.46 million tons: At the SHFE, they decreased slightly to 286,000 t. By contrast, the Comex warehouses hold only 23,000 tons. This means that supply has tightened significantly in the current year.
Trend: Until the end of Q3 2022, we see primary aluminum prices in a band of ±US$700 around the US$3,200/t mark, while aluminum alloy prices are up to US$600/t lower.
Comments on Zinc
In the first quarter of 2022, zinc mine production increased by 2%. This was mainly due to production increases at some mines, including in Asia and America. A significant increase in mine production of around 4°% is seen for 2021. In contrast, refining production decreased by 1.5% in Q1 2022. Consumption expanded by 1.4% year-on-year by the end of March 2022 and is expected to increase by around 1.6% to just over 14.3 million tons for the full year. The increase in consumption is mainly taking place in Asia and the Americas, while this is expected to fall in Europe as a result of the war. Zinc will continue to receive impetus from galvanized sheet and zinc chemicals.
Zinc inventories on the LME at the end of May 2022 were just under 85,000 t, while those on the SHFE increased slightly to 171,000 t: This was due to the partial lockdown as a result of the Corona pandemic, which also impacted construction activity. The stocks correspond to around 6.5 days' consumption. However, these could fall further in 2022.
Trend: We forecast the zinc price to move around US$4,100/t by the end of Q3 2022, with a fluctuation band of ±US$700