5/9/2023 Markets & Industries Report

Short Term Commodity Outlook May 2023: Aluminium 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 May 2023 are highlighted in the current report.

Development of aluminium inventories since 2017 in million tonnes.

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

Aluminium developments and forecasts

By the end of March 2023, production of primary aluminium was 2.2 per cent above the previous year's level. While the recovery in China weakened somewhat with an increase of 3.8 per cent compared to the previous month, European production remains significantly below the previous year's level at over 10 per cent.

Overall weak demand and high electricity prices are weighing on production in continental Europe. On the LME, inventories rose by 9.1 per cent to 568,500 tonnes during April, while stocks on the SHFE fell by over 17 per cent to around 235,800 tonnes during the same period.

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

In COMEX warehouses, stocks fell to just under 24,000 tonnes. The number of trading contracts increased by around 25 percent in April 2023. The prices for primary and recycled aluminium were on average slightly above or below the average values of the previous month, but at the end of the month they were almost unchanged from their comparable values.

Currently, the economic development is a burden, but in the medium term the trends of lightweight construction and the expansion of renewable energies as well as the demand from the packaging industry are supporting aluminum demand.

Trend: For the primary aluminium price we see a movement of plus/minus 200 US dollars around the value of 2,400 US dollars per tonne by the end of the second quarter, the prices for aluminium alloys are on average around 300 US dollars per tonne lower.

Development of zinc inventories since 2017 in thousand tonnes.

Zinc developments and forecasts

Following the 2.5 per cent decline in zinc mine production in 2022, a 3 per cent increase to around 12.86 million tonnes is expected for the full year after the positive start to 2023. The drivers are increases in Australia, India, Brazil, Kazakhstan, Mexico, South Africa and the USA. Growth of 1.5 per cent is expected for China.

Refinery production is also expected to increase by 3.1 per cent to 13.76 million tonnes, with the strongest growth in the above-mentioned countries. For Europe, a slight recovery is expected in 2023 after the sharp drop of over 11 per cent due to extremely high energy prices in the previous year.

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

With consumption forecast to increase by 2.1 per cent to 13.8 million tonnes, 2023 could close with a moderate supply deficit. In April 2023, zinc inventories on the LME rose by almost 18 per cent to around 53,000 tonnes at the end of the month, while stocks on the SHFE fell by almost 40 per cent to around 60,000 tonnes. Only 3,000 tonnes are still stored on the COMEX.

Stimuli for zinc consumption are coming from China in particular, while weak industrial demand in Europe and North America is currently having a negative impact. However, the demand trends in the renewable energy, automotive and construction sectors are generally causing demand to rise.

Trend: We see the zinc price at 2,800 US dollars per tonne in a range of plus or minus 300 US dollars by the end of the first half of 2023.