SEB Metals price forecast update

Softer economic growth in 2024 calls for somewhat softer metals prices in 2024. Industrial metals prices as well as other commodity prices exploded during Covid-19 as governments around the world unleashed stimuli in the magnitude of 10x of what was done during the global financial crisis in 2008/09. Consumers shifting spending from services to consumer goods added to the boom. Bloomberg’s industrial metals price index was up 91% in March 2022 versus January 2020 because of this. Global manufacturing PMI peaked in May 2021 and has been fading since and below the 50-line from September 2022 with latest reading at 48.8. Industrial metals prices have faded since their peak in March 2022 but are still 30% higher than they were in January 2020. Even zinc, the worst performing metal, is still 9% above where it was in January 2020. As such one could possibly argue that industrial metals have not yet fully faded from their Covid-19 stimulus boom. One possible explanation could be inflation where US inflation is up 19% over the period. But this still leaves industrial metals up 11% in real terms. Another possible explanation is the big jump in energy prices over the period. While coal and gas prices have fallen back a lot, they are still quite high. The coal price in western Europe is 110% above where it was at the start 2020 and 50% above its 2010-2019 average. Most industrial metals are highly energy intensive to produce with digging and crushing of rocks, smelting, and refining of ore. The current aluminium price of USD 2215/ton is for example well aligned with coal prices. In addition to this there has also been significant closures of zinc and aluminium smelting capacity in Europe which probably have supported prices for these metals.

Global economic growth is forecasted to slow from 3.5% in 2022, to 3.0% in 2023 and then again to 2.9% in 2024 as the big jump in interest rates induce economic pain with a lag. Aligned with this we expect lower industrial metals prices in 2024 than in 2023 though only marginally lower for most of the metals. But the field of metals is wide, and the price action is thus adverse. Copper is likely the metal with the most strained supply and with huge needs in the global energy transition. 

Aluminium: Prices will likely be depressed versus marginal costs in 2024. Aluminium from Russia is flowing unhindered to the market. Most is going to China for reprocessing and potentially re-exported while some is going to Turkey and Italy. It is all flowing into the global pool of aluminium and as such impacting the global market balance. The LME 3mth aluminium price is currently well aligned with coal prices and both have traded mostly sideways since June this year. Aluminium premiums in the EU have however fallen 30-40% since mid-June in a sign of weakness there. The global market will likely run a surplus in 2024 with depressed prices versus the marginal cost of production.

Copper: Softer fundamentals in 2024 but with accelerating tightness on the horizon. Copper is currently trading at USD 8470/ton and close to 37% above its early Jan 2020 level. The market is expected to run a slight surplus in 2024 followed by accelerating tightness the following years. Downside price risk for 2024 is thus warranted along with softer global growth. The power of Unions is however getting stronger in Latin America with demands for higher salaries. Strikes have broken out in Peru with production at the Las Bambas copper mine at only 20%. Further strikes and disruptions could quickly put the market into deficit also in 2024.

Nickel: Indonesia pursuing market share over price pushing the price down the cost curve. Indonesia’s nickel production is growing rapidly. Its production reached 1.6 million ton in 2022 (+54% YoY) and accounted for close to 50% of total global supply in 2022. Its share looks set to reach 70% by 2030. Lower prices will stimulate demand and will also force higher cost producers to shut down thus making room for the wave of new supply from Indonesia. Prices will be sluggis the nearest years as Indonesia aims for market share over price.

Zinc: Price has stabilized around USD 2500/t. Weakness in global construction will drive prices lower at times in 2024. The 3mth LME zinc price has fallen from a peak of USD 4499/ton in April 2022 to only USD 2248/ton in May 2023. Since then, it has recovered steadily to USD 2500/ton.  Demand could struggle in 2024 as construction globally will likely struggle with high interest rates. But mine closures is a natural counter effect of low prices and will put a floor under prices.

Price outlook

Source: Historical values from Bloomberg, Price forecast by SEB

Bjarne Schieldrop
Cheif Commodities Analyst
SEB Commodity Research

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