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Short Term Commodity Outlook July: 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 July 2023 are highlighted in the current report.
Development of aluminium inventories since 2017 in million tonnes.
Aluminium developments and forecasts
By the end of May 2023, global primary aluminium production was 1.8 per cent higher than in the same period last year. For the year as a whole, we continue to expect primary aluminium production to be around 68.6 million tonnes, only slightly above the previous year's level.The background to this is the weakness in demand associated with the economic slowdown. The recovery was also weaker in China in the first five months: The increase in production here was 2.9 per cent by the end of May. The 9.4 per cent decline in production in Europe is still due to the high energy price level.
The global expansion of renewable energies and e-mobility as well as the trend towards lightweight construction are providing impetus for aluminium demand. On the LME, inventories declined in the course of June and stood at 543,000 tonnes at the end of the month.
On the SHFE, the reduction in stocks continued: there, aluminium inventories are below 100,000 tonnes. Approximately 19,000 tonnes continue to be stored in COMEX warehouses. The number of trading contracts fell by around 36 per cent in May 2023. During June, the price of primary aluminium fell by 8 per cent compared to the beginning of the month.
Trend: For the primary aluminium price, we see a movement of plusminus 200 US dollars around the value of 2,200 US dollars per tonne by the end of the third quarter, with aluminium alloy prices averaging around 300 US dollars per tonne lower.
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. Refining production in the same period 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.
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. Demand trends from the renewable energy, automotive and construction sectors ensure rising demand in the medium to long term.
Stocks on the LME fell again somewhat in the course of June 2023. At the end of the month, inventories were just below the previous year's level.
Zinc stocks on the SHFE increased in June and stood at a good 59,500 tonnes at the end of the month. Only 3,000 tonnes are still stored on the COMEX. Stocks on the exchange are at a historically low level despite a small build-up in inventories.
Trend: We see the zinc price at 2,500 US dollars per tonne in a range of plus or minus 500 US dollars until the end of the third quarter of 2023.
