Short Term Commodity Outlook September: 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 September 2022.
Comments on Aluminum
Global primary aluminum production increased by 0.3% by the end of July 2022. The slump in the first quarter has therefore been fully offset. The main drivers were the increase in China by a good 1% and in the Gulf region by 4%. We now expect production in 2022 as a whole to increase to around 67.8 million tons and 13 million tons of recycled aluminum. The increase in China is expected to be somewhat stronger. Aluminum use in the main customer sectors continues to develop positively. Despite weaker car production, a further increase is expected in the current year compared with 2021. Inventories of primary aluminum on the LME decreased slightly to 0.27 million tons. On the SHFE, there was a minimal increase to 205,000 tons. In contrast, the Comex warehouses hold only just under 24,000 t. However, this means that there is still only a very tight supply. There are also growing concerns about possible shortages and market bottlenecks if there are partial shutdowns of primary production in Western Europe. The number of trading contracts rose by more than a third to 252,000 in August 2022. We therefore expect aluminum prices to recover further in the coming months.
Trend: By the end of 2022, we see a price movement for the primary aluminum price around the US$2,600/t mark in a band of ±$500/t. The price difference compared with recycled aluminum is around US$500.
Comments on Zinc
In the first half of 2022, zinc mine production was 1.9% lower than a year earlier. Declines were recorded in Australia, Brazil, Canada, Greece and Peru, among others. Refining production decreased by 2.6%. This was due to reduced activity by European producers as a result of the enormous rise in energy prices. Refinery production also decreased in China, Brazil and the USA. Zinc consumption decreased in the first half of the year. The decline was 3% and was due to lower consumption volumes in Germany, Brazil, China and France. For the full year, zinc consumption is expected to be slightly lower than a year earlier. Stimulus will come mainly from China and the Asian region. The zinc market will show a small surplus this year after closing 2021 with a deficit of 213,000 t. Zinc inventories on the LME increased slightly to 77,000 t; those on the SHFE decreased further to 53,300 t. The volumes of 3,000 t on the Comex are negligible. Stocks now correspond to only 3.5 days' consumption. Zinc supply slightly exceeded consumption in the first six months of this year.
Trend: For the zinc price, we see a movement of ±US$700 at a level of 3,600 US $/t.