Price of non ferrous metals: Scenari & Tendenze, data and forecasts

We have been taking part to “Scenari & Tendenze”, (lit. Scenarios &Trends), for years; it is a circumstances observatory held by Confindustria Brescia which we sum up on our website. What are the reasons behind this? We really believe it is important to know the main economic and financial trends both nationally and internationally speaking. More in detail, we want to understand, thanks to the reliable analysis of the cycles and the directions in the metal market, the trends of the main non ferrous metals and their potential short-term evolution. These data are essential for anyone working in the production of copper based alloys. So let’s see some sparks from the 34th appointment of “Scenari & Tendenze”.

What is the situation behind the 34^th appointment of the observatory?

Before carrying out a market analysis it is necessary to have a look at the current pandemic situation. Despite the hopeful forecasts, the beginning of 2021 hasn’t brought us to our normal life. We are facing a prolongation of the pandemic which concerns both healthily, socially and economically-wise.

Metal market

Let’s dig deeper into the market in which RMG operates. Therefore, what are the cycles and trends of the metals at the base of our production?

Trends of non ferrous metals

Looking at the graphics of the mean of all non ferrous metals quoted on LME based on weekly averages (US$/MT), it is possible to see a decrease of -19.2% in the first few months of 2020, which is followed by an immediate jump which reaches +85.8%, thus exceeding the maximum levels of 2018. After this increasing trend a correction of -8.7% can be seen, with a subsequent increase of +2.9% which we are still experiencing. With regards to the stock situation, a rise in volumes could be observed in a first phase where there was an actual demand. Currently, after a physical pick-up a slight decrease could be observed. The trend of non ferrous metals in US$ is also influenced by the strengthening of the dollar which partly reduces the demand.

Let’s start with the trends of the single metals which are at the base of our copper based alloy ingots.

Aluminium

The trend of aluminium is consistent with what has been said above. The high request for this metal by China for use in the infrastructure industry, the potential increased request by the US according to their development plans and the recovery of the automotive industry will influence the aluminium market. Moreover, it is important to bear in mind that the transportation issues may help rise the costs. As a matter of fact, after a fall in prices which ended in May 2020 (-19.5%) with China consistently buying aluminium, we can see a rapid increasing trend ending in February 2021 with a +52%. The volumes, after a rise, are now plummeting. This situation suggests that we will see temporarily contractions.

The forecasts are mainly two:

1. Should this raw material shortage go on, along with transportation issues and stock decrease, maximum levels of 2018 could be reached
2. Should we go back to a normal situation, with mines and aluminium suppliers work at full pace, we could expect the prices to decrease in average for the entire 2021, even below the current levels

Copper

Also copper has shown some significant movements: after a fall at the beginning of 2020 of -23.3%, an important increasing trend has started reaching in March 2021 +95.2%, exceeding the maximum levels of 2018. Currently there is a slight decrease of -2.9%, probably due to a fall in physical stocks.

Forecasts? Also for copper, an increase in demand is expected, mainly due to an “energetic transition”, which will probably require a greater use of copper for electric cars and infrastructures. The correction we are facing might be connected to a stronger dollar which will stop this increasing trend, but the forecasts are for an alternating increasing trend with some corrections in between, as the current one

Nickel

This is an essential metal for the stainless metal. The scenario for nickel is the same: after a decrease of -20.4%, the price trend significantly increasing, reaching a peak of +73%. A nickel shortage is expected as a consequence of the production of electric cars and the restart of the stainless market which has led to significant financial bets bringing nickel to this level. A forecast which was then turned down by the actual material presence and its increase. This situation, along with a strengthening of the dollar, influenced the price trend leading to a sudden decrease of -16.3% in two weeks only.

This correction will go on, but the expectations are for a new increase in prices in the next few years since nickel will take a strategic role both in the automotive and stainless market. As explained by Achille Fornasini, from the University of Brescia, there is a perspective of structural offer deficit which will support the prices.

Zinc

This is an important metal since it is frequently used in the alloys produced in the province of Brescia. The zinc price trend is consistent with the one of the other metals: following a decrease of -20.7% in the first quarter of 2020, we can see a change in the direction of the price up to +57.2%. This movement could explained by the significant purchase made by China for its infrastructure industry. Therefore, we can see the availability of the material and a decrease of -3.3% in the price. The forecast is that there won’t be an increase in price, but a slowdown phase with a slight decrease. These expectations could be turned upside down financially, but this seems more likely for other metals.

As a general principle, the data provided confirm the fact that we are facing important fluctuations of prices of non ferrous metals we purchase. Will these expectations be confirmed in the next few months? Time will tell.

Source: Confindustria Brescia - "Scenari & Tendenze", 16^th March 2021.