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Short Term Commodity Outlook December: 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 December 2022.
This figure shows the aluminum inventories and prices from 2016-2022.Comments on Aluminum
Global primary aluminum production increased by 1.3% up to the end of October 2022. For the full year we expect production of 68.1 million tons of primary aluminum and a good 13 million tons of recycled aluminum. Chinese aluminum production is currently 3% higher than a year earlier, after falling 8% short of the prior-year figure in January. Western European production decreased by 11.7%, and production in the former CIS fell by 1.3%. Production in North America decreased by around 4%.
The outlook for aluminum consumption in all customer sectors remains positive: The trend towards lightweight construction is continuing, and more aluminum is also being used in renewables. We expect global primary aluminum output to increase to 71.5 million tons by 2027.
Inventories of primary aluminum on the LME fell back to 501,000 t following an increase in the summer. On the SHFE, these fell significantly to 110,000 t. By contrast, Comex warehouses now hold only 18,000 t. LME inventories of the recycled alloy amount to only 2,020 t. Market supply is therefore tight.
Trend: By the end of Q1 2023, we therefore expect the price of primary aluminum to move around the US$2,600/t mark with a band of ± US$500/t. The price of recycled aluminum on the LME is likely to be around US$500/t below these values.
This figure shows the zinc inventories and prices from 2016-2022.Comments on Zinc
Zinc mine production decreased by 2.8% by the end of September; a smaller decline is expected for the full year. Refining production decreased by 2.4% by the end of Q3 2022 and is forecast to decrease by 2.7% for the full year. For 2022, production at European zinc smelters is expected to decline by 12%. Due to the enormous energy price increases in Europe, production sites were shut down. Consumption decreased by 2.9% year-on-year in the period under review. In China, consumption is expected to fall by 3.3% this year due to declining business activity in user industries as a result of the zero-covide strategy. A recovery in global zinc consumption is expected in the coming year.
Zinc inventories on the LME continued to decline slightly until the end of November 2022, standing at a good 41,300 t. Zinc inventories on the SHFE also fell to 20,400 t, those on the Comex amounted to 3,000 t - thus the latter is negligible. Inventories are now only equivalent to less than 2 days' consumption; the market is thus very tightly supplied. After the accumulated supply deficit last year, we see a small deficit or at best a balanced market for 2022.
Trend: We forecast the zinc price to move around US$3,000/t by the end of Q1 2023, with a fluctuation range of ±$500.
