Caution despite price boost

The trend for higher metal prices is encouraging traders but sentiment suggests they need longer assess the likely strength of any longer-term economic growth.

Metal prices have been trending upwards in recent weeks. The reasons for this have been varied. Speculative investment funds, after a long period of little interest in the metal markets are once again increasingly involved and have been a major source of inspiration.

Reports of production cuts, especially for copper, and a predicted increase in metal demand also contributed to this development. A third reason is the growing concern that the many global conflicts could make the supply of metallic raw materials more difficult – especially regarding functioning supply chains.

WARINESS PERSISTS

The situation on the metal scrap market remains difficult overall. Higher metal prices partly brought about a revival in the market but, conversely, traders have reported sales problems. Some plants are now well supplied and are ordering cautiously. On the London Metal Exchange (LME), prices for high-grade aluminium rose again. By mid-April, it was around US$ 2 443 per tonne.

Aluminium alloy contracts remained lifeless, trading around US$ 1 815. Lead has also increased and recently improved to US$ 2 175. The copper market has now clearly exceeded the long-targeted level of US$ 9 000 per tonne. Most recently, Grade A was at US$ 9 530. Nickel followed the strong market and rose significantly. Three-month prices were most recently at US$ 18 020.

CAUTIOUS SENTIMENT

Despite the higher LME prices, mar- ket participants continue to assess the prospects cautiously, as shown by

the latest VDM business clinic index of sentiment among metal traders. According to the responses, the situa- tion in the metal trade improved slightly at the beginning of the new quarter compared to the previous one but remains negative overall: 28% of those surveyed are reporting an improvement in the business situation; 38% report a deterioration in the economic situation; and 34% say the situation is unchanged.

Metal traders remain generally gloomy about the likelihood of economic development in the next three months: 37% of companies surveyed are now pessimistic about the course of the new quarter; 15% expect an improvement in their situation; and almost half assume that economic development will stagnate at the current level.

CHINESE GROWTH

China’s production of 10 of the most used non-ferrous metals in 2023 increased 7.1% to 74.698 million tonnes – the first time the yearly fig- ure has exceeded 70 million. Preliminary statistics show that the 2023 total included 12.99 million tonnes of refined copper (up 13.5% year-on-year) and 41.59 million tonnes of electrolytic aluminium (up 3.7%).

The numbers were reported by BIR’s Chinese recycling expert, Ma Hongchang, in the organisation’s lat- est quarterly non-ferrous Mirror. China’s import and export trade in non-ferrous metals amounted last year to US$ 331.54 billion (EUR 303.54 billion) for a year-on-year increase of 1.5%, with import values rising 4.3% and export values falling 9.8%.

Physical import volumes included 27.536 million tonnes of copper concentrate (9.1% higher than in 2022); 5.48 million tonnes of unwrought copper and copper materials (6.2% lower); and 141.38 million tonnes of bauxite (up 12.9%). Exports of aluminium materials fell 13.9%, whereas rare earth exports climbed 7.3%.

INDIA’S FAST PACE

A contributor to the BIR Mirror, Anirudha Agrawal of Manaksia Aluminium in India, pointed out that India had maintained its position as the world’s fastest-growing major economy, achieving 8.4% uplift when comparing the final quarter of 2023 to that of 2022. ‘Projections indicate that India is poised to overtake Japan and Germany to become the world’s third-largest economy,’ he wrote.

Availability of copper scrap in India was said to be good and India had exported scrap as an arbitrage win- dow opened. ‘Availability remains good in the current quarter but tight- ness is expected to emerge from the next quarter,’ Agrawal said.

Non-ferrous board member from the US, Rick Dobkin of Shapiro Metals, reported that primary aluminium’s terminal markets remain range-bound, as they have been since the summer of 2023. Domestically, some items had been ‘very tight’ and secondary scrap prices substantially higher. ‘The biggest movements have been in secondary aluminium. Ingot prices have improved slightly, with scrap pricing having risen further on dwindling supplies.’

INTO AFRICA

Meanwhile, China is pressing ahead with partnerships to raise lithium ore production in Africa in 2024 as it seeks to diversify its supply value chain and bolster its domestic indus- try and, especially, electric vehicle (EV) exports. According to S&P Global, the focus is shifting as China seeks lithium in more markets than its traditional reliance on Australia and others.

In 2023, it reports, Australia accounted for 79% of China’s imports of spodumene, from which lithium chemicals are extracted. Lithium sup- ply from Africa is expected to soar 253.7% year-on-year in 2024 to 145 000 tonnes of lithium carbonate equivalent, taking up 11% of the global total supply, according to China’s top producer, Ganfeng Lithium.

Read the full market report in our latest issue >>