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Short Term Commodity Outlook January: 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 January 2023.
Comments on Aluminum
Global primary aluminum production rose by 1.5% year-on-year to 62.47 million tons by the end of November 2022. Production in China was 3.1% higher than a year earlier. For the full year, we forecast an output of 68 million tons of primary aluminum plus 13 million tons of recycled aluminum. In Western Europe, aluminum production decreased by 12.1%; in the former CIS states production was 1.3% lower than a year earlier. North American production was 3.8% lower. The outlook for aluminum consumption in all customer sectors remains positive: The trend toward lightweight construction is continuing, and more aluminum is also being used in renewable energies. Inventories of primary aluminum on the LME fell further to 450,000 t. On the SHFE, inventories fell below the 100,000 t mark in December. There are 19,000 t in Comex warehouses. LME stocks of recycled alloy amount to only 1,920 t. Market supply is therefore tight.
Trend: By the end of Q1 2023, we therefore expect the price of primary aluminum to hover around the US$2,500/t mark with a range of ± US$300/t. The price for recycled aluminum on the LME is expected to be around US$300/t below these levels.
Comments on Zinc
Zinc mine production was down 3.1% year-on-year to the end of October 2022; a smaller decline is expected for the full year. Refinery output was down 3.2% in the first ten months. This was due in particular to lower output by European zinc smelters as a result of the sharp rise in energy prices. European production is expected to decline by 12% for the full year 2022. Refined zinc production also decreased in China, Canada, Mexico and Kazakhstan compared with the prior-year period. Consumption decreased by 3.2% year-on-year in the reporting period, primarily due to significant reductions in China . Global zinc consumption is expected to recover in the coming year. Zinc inventories on the LME fell by 22% to just over 32,000 t in December 2022, down 84% year-on-year. On the SHFE, zinc stocks trended sideways at 20,400 t, while those on the Comex amounted to 3,000 t. Inventories now correspond to just under 1.5 days' consumption; the market is therefore very tightly supplied. After last year's cumulative supply deficit, we see a small deficit for 2022 as well.
Trend: We forecast the zinc price to move around US$3,000/t by the end of the first quarter of 2023, with a fluctuation range of ± US$500.