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In the recent period, the industrial metals market has been going through a period of considerable volatility, affected by significant events affecting various sectors, particularly aluminum, copper and zinc.
These fluctuations have raised concerns about the stability of supply chains and the ability to meet the growing demand for essential metals for various industries.
Aluminum: Impacts and Concerns
The LME aluminum market has seen an increase in prices, mainly due to the suspension of bauxite exports from Guinea Alumina Corporation (GAC), a subsidiary of Emirates Global Aluminium (EGA).
Bauxite is a crucial ingredient for alumina production, and its disruption created a significant blockage in the supply chain, pushing aluminum prices up to a high of $2,716 per ton.
In parallel, the European Union is considering a possible embargo on Russian aluminum, which accounts for about 8-9% of its imports.
This decision could have disruptive effects on the European market, particularly for small and medium-sized companies highly dependent on aluminum supplies. The conflict between Russia and Ukraine has already led to sanctions, but pressure for a ban is growing. An embargo, however, could undermine the EU’s environmental goals, as Russian aluminum is known for its low carbon footprint.
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Copper Rush: Fluctuations and Forecasts
In the context of copper, prices showed a significant rise, crossing the $10,000 per tonne mark (Sept. 30), thanks to renewed investor interest and economic stimulus measures from China.
However, in early October, the market experienced a slight correction, complicated by economic uncertainties and the impact of a strike at U.S. ports that threatened trade flows.
The Chinese government has introduced stimulus measures to support its struggling economy, but analysts warn that these may not be enough to lift demand, particularly in the real estate sector. International Copper Study Group (ICSG) forecasts for 2024 and 2025 indicate a copper supply surplus, leading to pessimistic revisions regarding demand and concerns about the sustainability of the price rally.
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Tension in the Zinc Market
The zinc market has experienced increasing pressure, with spot prices surpassing those of futures contracts on the London Metal Exchange (backwardation), signaling strong short-term demand.
Large buyers are accumulating positions in futures contracts, while disruptions in mining activities further limit supplies. Backwardation, a situation in which short-term prices exceed long-term prices, reflects growing concern about zinc availability.
Mining disruptions, such as the recent one at the Century zinc mine in Australia, have exacerbated the situation, fueling speculation and strategic stockpiling by investors.
Long-term production projections indicate that zinc shortages could persist, further complicating supply and demand dynamics in an already strained global economic environment.Read more
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Outlook for the Lead Market
Turning to lead, global demand for refined metal in 2024 is expected to increase by 0.2 percent to 13.13 million tons. This modest growth is expected to grow further by 1.9 percent in 2025, bringing global demand to 13.39 million tons. However, there are mixed trends at the regional level.
In Europe, after a strong increase of 4.1 percent in 2023, demand is expected to decline by 1.8 percent in 2024. This decline will be particularly evident in countries such as Austria, the Czech Republic, France, Italy and Poland.
Outside Europe, demand is expected to decline in Japan, Mexico, Turkey and the United States, while significant increases are expected in Brazil, India, the Republic of Korea, the United Arab Emirates and Vietnam.
In China, lead-acid demand is expected to grow by 0.9 percent in 2024 and 0.5 percent in 2025, following a 10.5 percent growth in 2023. Lead-acid battery production, a key demand segment, saw a more modest increase of 0.5 percent in the first half of 2024.
Global lead production from mines is expected to grow 1.7 percent in 2024 to 4.54 million tons, with a further 2.1 percent increase in 2025. China, the world’s largest producer, will increase its production by 0.5 percent in 2024 and 1.5 percent in 2025.
Significant developments are also expected in Mexico, where production is about to recover after a strike. However, production is expected to decline in Ireland, Portugal, and South Africa.
2025 will see further increases in global production, driven mainly by increases in China, Ireland, and the Russian Federation. Globally, the supply of refined lead is expected to decline by 0.2 percent in 2024 to 13.20 million tons, and then grow by 2.4 percent in 2025 to 13.51 million tons.
The global supply of refined lead is expected to exceed demand by 63,000 tons in 2024, but this surplus is expected to grow in 2025, reaching 121,000 tons.
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Nickel Prices and Oversupply
Finally, the nickel market continues to be under pressure due to significant oversupply and recent discoveries at the Wedei site in Papua New Guinea. The average nickel price forecast for 2024 has been revised downward from $18,000/ton to $17,000/ton.
Australia’s Chief Economist’s Office confirmed that production cuts were not enough to support prices, and the average nickel price hit a low of $16,200/ton in September, marking a 14 percent drop from the previous quarter.
Although production cuts by Western countries have been significant, refined nickel supply growth in Indonesia and China continues to remain robust, fueling market surplus and price pressure.
The discovery of new nickel reserves at the Wedei project has amplified concerns about possible supply growth. Despite production problems for some operators, Indonesia has improved its ability to convert low-grade nickel to Class I nickel, helping to keep supply high and contain possible price increases.
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Future Outlook
The outlook for metals markets remains complex, characterized by unique challenges. For aluminum, copper, and zinc, geopolitical uncertainties, supply chain disruptions, and conflicting demand dynamics pose questions about the sustainability of current trends.
While the lead market shows moderate growth, nickel is dominated by oversupply, with price stability expected only in the long term.