8/10/2023 Markets & Industries Report

Short Term Commodity Outlook August: Aluminum & Zinc

The market in the metals industry is constantly on the move - and so are commodity prices. IKB Deutsche Industriebank publishes a monthly report that focuses on the inventory and prices of aluminium and zinc. The most important developments in August 2023 are highlighted in the current report.

Development of aluminium inventories since 2017 in million tonnes.

Aluminium developments and forecasts

At the end of the first half of 2023, global primary aluminium production was 1.8 per cent above the previous year's level. For the year as a whole, we continue to expect aluminium production to increase slightly to 68.6 million tonnes. The reasons for the moderate increase in production are the overall economic slowdown and continued relatively high energy prices.

Chinese primary aluminium production up to the end of June was 2.8 per cent above that of the previous year. In Europe, production declines continue to be observed due to energy costs. The weakening construction industry is currently not providing any impetus for aluminium demand. In the long term, the trend towards lightweight construction in electromobility and the expansion of renewable energies will ensure rising demand.

Development of aluminium prices since 2017 in US dollar per tonne.

On the exchanges, aluminium stocks continued to fall in the course of July: 507,000 tonnes were stored on the LME and 111,000 tonnes on the SHFE at the end of the month. Stocks on the COMEX remained at 19,000 tonnes.

Investment aluminium demand fell by 35 per cent. The price of primary aluminium is moving sideways on average with a slight downward trend. Alloy prices fell more sharply.

Trend: By the end of the third quarter of 2023, we see primary aluminium prices in a band of plusminus 200 US dollars around the 2,100 US dollar per tonne mark, with aluminium alloy prices averaging around 300 US dollars per tonne lower.

Development of zinc inventories since 2017 in thousand tonnes.

Zinc developments and forecasts

Zinc mine production in the first four months was only slightly above the previous year's level. An increase is expected here for the year as a whole. Flooding in Australian and Peruvian mines, the closure of the largest zinc mine in Europe and possible closures of other mines due to lack of profitability at a low zinc price could slow down the increase in production this year.

In the same period, refining production was 1.15 per cent higher than in the previous year and will increase especially in the second half of the year. China is expected to achieve the largest increase with 4 per cent, but a slight recovery is also expected for Europe. However, the increase in China could be significantly lower due to electricity rationing.

Development of zinc prices since 2017 in US dollar per tonne.

Zinc consumption increased by 1.6 per cent. Increases in consumption in China, the USA and India were offset by declines in Europe, Brazil and Turkey. With an expected increase in consumption for the year as a whole, a supply deficit is also expected for 2023.

Stocks on the LME recovered somewhat in July and were just below 100,000 tonnes at the end of the month. An increase was also recorded on the SHFE: Stocks there are at 61,300 tonnes. Only 3,000 tonnes are still in storage on the COMEX.

Trend: We see the zinc price at 2,400 US dollars per tonne in a range of plus or minus 500 US dollars until the end of the third quarter of 2023.