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.

Comment on Aluminium

Global primary aluminum production at the end of May 2022 was still 0.7% below the prior-year level and has recovered around 90% of the decline seen at the beginning of the year. 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. Especially China is building up further capacities for recycled aluminum production. The decisive factor in the current year will be whether Europe succeeds in compensating for Russian shortfalls in deliveries. In the previous year Russia and Eastern Europe produced 6% of the global primary aluminum output.

Inventories of primary aluminum on the LME continue to be in free fall. Investment Demand decreased by around 35% in April. Aluminum prices are primarily determined by concerns of a recession as a consequence of the war.

Trend: Until the end of Q3 2022, we see primary aluminum prices in a band of +US$700 around the US$2,800/t mark, while aluminum alloy prices are up to US$500/t lower.

Graphs of aluminium inventories and and aluminium prices

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Comments on Zinc

In the period from January to April 2022 the global zinc mine production increased by a modest 0.9%. Higher production volumes in Australia, China, India and Mexico were almost offset by a lower production in Brazil, Ireland and Peru. Refining production decreased by 2.2% in the first four months of 2022. The decrease mainly took place in Europe where high electricity prices negatively impacted the output of several smelters. Refining production volumes also decreased in China, Brazil and Canada. The consumption of refinded zinc is marginally lower (- 0.2%) than in the first four months of the previous year. Increased zinc usage in Italy, Korea and Turkey could not compensate for the lower consumption in China, France, India und Ukraine.

Zinc inventories on both LME and SHFE decreased in June. At the LME inventories are at 81,000 t and those at SHFE fell to 138,000 t. The stocks correspond to less than 6 days' consumption, which is lower than in the months before.

Trend: We forecast the zinc price to move around US$3.700/t by the end of Q3 2022, with a fluctuation band of +US$700.

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