Short Term Commodity Outlook March 2023: Aluminum and 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 March 2023 are highlighted in the current report.

Diagram showing the development of aluminium stocks

Aluminium developments and forecasts

Global primary aluminium production in January was 3.3 per cent higher than a year earlier. Chinese production exceeded the previous year's level by 5.7 per cent, which was low due to temporary production shutdowns in connection with the 2022 Winter Olympics.

Western European production in January was 12 per cent lower than a year earlier, largely due to high energy prices. Stocks on the LME increased during February and stood at 554,000 tonnes at the end of the month.

On the SHFE, 296,000 tonnes were stored, three times as much as in December 2022. The seasonal effect of the inventory build-up around the Chinese New Year is particularly large this year. There were 17,500 tonnes in Comex warehouses at the end of February.

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The supply situation now looks better again due to the build-up on the SHFE. The number of trading contracts fell by almost 30 per cent. Prices for primary and recycled aluminium moved sideways with a slight downward trend.

Trend: For the primary aluminium price we see a movement of plusminus 500 US dollars around the value of 2,300 US dollars per tonne by the end of the second quarter, aluminium alloy prices are on average around 300 US dollars per tonne lower.

Diagram showing the development of the price of aluminium — Development of aluminium prices since 2017 in US dollar per tonne.

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Diagram showing the development of zinc inventories — Development of zinc inventories since 2017 in thousand tonnes.

Zinc developments and forecasts

Zinc mine production for the full year 2022 was 2.5 per cent lower than the previous year, due to production declines in China, Australia, Peru and Canada. Refined zinc production was down 4.1 per cent, mainly due to a decline in European production as a result of the energy price increase. Chinese refined zinc production was also down.

Zinc consumption decreased by 3.3 per cent in 2022. This was due in particular to a significant decline in Chinese demand. Easing of pandemic control measures in China will result in rising zinc consumption this year.

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Zinc stocks on the LME recovered somewhat in the course of February and stood at 33,350 tonnes at the end of the month, which is, however, only just under a quarter of the stocks of a year ago. On the SHFE, zinc stocks rose sharply in February and most recently stood at a good 12,000 tonnes. On the Comex, there are still 3,000 tonnes. The stocks are now sufficient for just under four days' consumption.

Trend: We see the zinc price at 3,100 US dollars per tonne by the end of the first half of the year in a range of plusminus 500 US dollars.

Diagram showing the development of zinc prices — Development of zinc prices since 2017 in US dollar per tonne.