Saturday, September 23, 2023

Metal prices will fall on improving supply

The World Bank’s Metals and Minerals Price Index rose 10 percent in the first quarter of 2023. The rise in prices reflected positive sentiment regarding strong demand amid supply constraints in some of the base metals.

The metal is expected to decline this year due to increased supply amid weak demand in advanced economies and China. A stronger-than-expected recovery in China’s real estate sector and supply disruptions are key upside risks to the price forecast.

The supply outlook for 2023 is more favorable due to lower energy prices and resolution of temporary production and supply constraints. Coal prices fell 52% from their peak from August 2022 to April 2023, while natural gas prices in Europe and the US fell 81% and 75%, respectively, over the same period.

On the supply side, most aluminum and zinc smelters in Europe have resumed operations, with new supply capacity expected to come online this year for various metals including aluminum in China, copper in South America and nickel in China and Indonesia. The current improving environment follows several supply constraints due to logistics issues, plant maintenance, power outages, social unrest, adverse weather conditions and higher energy prices for various metals last year.

Metal prices are forecast to decline by 8% in 2023 and 3% in 2024. The biggest declines in prices are forecast for tin and zinc, with declines of 23% and 20%, respectively, in 2023. Aluminum and nickel prices are expected to decline. 11% and 15% respectively, while copper, lead and nickel are expected to decline by less than 5%. Most metal prices are expected to decline further in 2024, with price declines ranging from 3% for zinc to 9% for nickel.

The value approach faces several upside risks. A stronger-than-expected recovery in China’s real estate sector could push up prices of construction metals such as aluminium, copper, iron ore and zinc. Mine disruptions due to weather, technical operational issues, labor disputes and power/water limitations can adversely affect the supply of metal raw materials. Trade restrictions can restrict supply, including export taxes or outright export bans. Other political interference, such as more sanctions on Russia and China’s rapidly rising aluminum production cap, could also limit supply. However, in the longer term, the energy transition could significantly increase demand for certain metals, particularly lithium, copper and nickel.

F: World Bank.

World Nation News Desk
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