India Ratings and Research (Ind-Ra) released the Metals and Price Deck 2021 report. It expects base metal prices in 2021 to be higher year over year (year on year) , driven by a robust recovery in demand in a context of a gradual increase in supply. Growing environmental concerns and emission targets are likely to raise global cost curves for metals. Geopolitical relationships and currency movements are also likely to be the main drivers of metal prices.
The current strong global demand for commodities stems from continued strong demand from China, while other economies are also making a comeback due to the impacts of the pandemic. China, which holds the lion’s share of global consumption of key commodities, is expected to experience strong demand in 2021 thanks to continued government-led infrastructure spending, the rating agency said.
Improving global demand for raw materials will be offset by incremental capacity additions, although intermittent blockages in some producing countries would cause temporary disruptions. In addition, sustainability and decarbonisation efforts are likely to lead to capacity reductions. Logistics and supply chain management remains an issue and also supports cost inflation. However, the tight supply and demand equation in 1H21 should ease in 2H21.
The copper price assumption for 2021 is higher year-on-year due to the tight supply-demand equation for concentrates, while supply-side risks persist with contract renewals for concentrates. work due to Chile and Peru. Thus, the refined metal could remain marginally in surplus by the end of 2021. In the medium and long term, copper prices will be supported by the gradual energy transition which would lead to increased use of copper in cables, electric vehicles, transformers, etc. recharging infrastructure and wind turbines, he said.
Zinc prices for 2021 are forecast to increase year on year, driven by a strong recovery in global demand for galvanized steel. However, the supply of mined zinc concentrate will gradually improve and have a marginal impact on prices during 2H22. Ind-Ra believes that the refined metal is expected to be either stable or in a slightly surplus position as global demand for automobiles and infrastructure improves while supply also improves proportionately amid mid-market levels. high stocks.
Aluminum price assumptions for 2021 are higher, due to continued strong demand from China as other countries gradually increase usage over the course of 2021. While China will probably be in deficit in 2021, the global aluminum market will probably be in surplus elsewhere. However, metal prices are expected to be supported by strong demand from the automotive and packaging end user segments.
Thermal coal price assumptions for 2021 are higher year-on-year, due to strong Chinese demand in a context of low domestic stocks, a gradual recovery in demand outside China and supply constraints. Indonesia, the largest exporter of thermal coal, exports larger volumes to China, given China’s ban on Australian imports. Increasing demand outside China is now being met by Australia, the second largest exporter of thermal coal, with limited supplies and thus causing prices to skyrocket, the rating agency added.