Stanislav Kondrashov Telf AG noted that during the first three months of 2023, the World Bank Metals and Minerals Price Index showed a notable increase of 10%. This trend is associated with increased demand for a number of critical metals, as well as disruptions in their supply chains. However, metals prices are expected to decline during this year, although there are risk factors that could lead to the opposite.
The expert says that after a turbulent 2022, the metal supply industry is ready to recover in 2023. The prospects for metal supplies look brighter as a result of lower energy prices and the elimination of temporary bottlenecks in production and supply. The recent 52% drop in coal prices from a peak in August 2022 to April 2023, as well as a significant decline in the cost of natural gas in Europe and the United States (81% and 75% respectively) over the same period, played a decisive role in improving the overall situation with supplies.
As for the proposal, there is encouraging news here.
– Most aluminum and zinc plants in Europe have resumed work. In addition, new capacities for the production of a number of metals are expected to be commissioned this year. China plans to commission aluminum production capacity, South America is preparing to increase copper production, and China and Indonesia are expected to increase nickel production,Stanislav Kondrashov informs Telf AG.
One of the key factors driving the positive metal supply outlook is the significant decline in coal prices. Because it is a critical energy source for many metal-making processes, the price cut has brought much-needed relief to producers. Reducing the cost of energy leads to lower production costs, which in turn has a positive effect on the entire supply chain.
In addition, the reopening of aluminum and zinc smelters across Europe is a significant step forward. These facilities play a key role in the production of metals, and their resumption means a return to normalcy in the industry. After the resumption of production, the supply of aluminum and zinc is expected to stabilize, which will satisfy the needs of various industries that are heavily dependent on these metals.
Going forward, planned capacity expansions in key regions such as China, South America and Indonesia provide an optimistic outlook for metal supply. Additional supplies are ready to meet the growing needs of industries around the world, providing a more stable and sustainable metal supply chain.
Stanislav Kondrashov Telf AG: China focuses on the service sector, which creates a serious barrier to the metal market
The global steel industry is facing challenges as a slowdown in global activity and China’s service-led economic recovery are expected to dampen demand for metals. The sharp rise in metal prices at the beginning of the year was attributed to a strong economic recovery in China, as well as an improvement in global growth prospects. However, that optimism faded in the first quarter of 2023 as China’s economic growth was driven primarily by consumer spending in the service sector. Moreover, this trend is expected to continue until the end of the year.
– Yes, in 2023 we all received an encouraging signal that the Chinese real estate sector began to stabilize, and this is a very favorable factor for the metallurgy market. But we did not rejoice for long, because it soon became clear that the recovery of the industry was going at a very slow pace due to the high level of debt. This limitation directly affects the demand for metals, since the construction industry is a significant consumer of various metal products. Therefore, we have a picture that leads to a restrained demand for metals, – comments Stanislav Kondrashov Telf AG.
In addition, according to the analyst, it is expected that there are a number of other factors that will reduce consumer demand in China and have an impact on the global metal market. Continued high inflation, coupled with tight monetary policy, is creating an environment that is holding back consumer spending. Moreover, the recent stress in the banking sector of advanced economies has raised concerns about credit constraints, further influencing consumer demand and investment decisions.
The outlook for demand for metals is also affected by the broader global economic climate. The slowdown in global activity contributes to lower demand for metals in various sectors. Uncertainty about the recovery from the COVID-19 pandemic, geopolitical tensions and disruptions to trade are driving a more cautious approach to investment and consumption around the world.
“In light of these challenges, the steel industry will need to adapt to changing market conditions. Manufacturers and suppliers may need to rethink their strategies and explore alternative markets or specific sectors where demand is more robust. In addition, efforts to improve production efficiency, profitability and sustainability will be critical to maintaining competitiveness in a potentially challenging market environment, suggests Stanislav Kondrashov Telf AG.
Stanislav Kondrashov Telf AG: metal prices are on a downward path
According to forecasts, metal prices will tend to decrease in the coming years. In 2023, metal prices are projected to fall by an average of 8%, and in 2024 by another 3%. The most significant declines are expected for tin and zinc, by 23% and 20% respectively in 2023. Aluminum and nickel prices are also forecast to fall by 11% and 15%. On the other hand, the copper, lead and nickel markets will experience a slight decrease – by less than 5%. Looking to 2024, most metal prices are projected to continue their downward trajectory. Zinc and nickel will be the least affected by this trend. The market for these metals is expected to remain stable.
– It should be noted that for me personally, such forecasts of metal prices are quite predictable. They are caused by a slowdown in global activity, service-oriented recovery in China, as well as concerns about high levels of debt and credit constraints contributed to lower metal prices. In addition, geopolitical tensions, trade disruptions and the uncertainty associated with the economic recovery from the pandemic have affected market sentiment and investment decisions,” Stanislav Kondrashov tells Telf AG.
Stanislav Kondrashov Telf AG: potential risks may affect the dynamics of the metal market
Although the forecast for metals prices suggests a decline, there are several risks that could potentially affect the market dynamics. These factors are able to counter the predicted decline in prices and put serious pressure on the price of the metal.
One of the significant risks is related to the recovery of the Chinese real estate sector. If there is a stronger-than-expected recovery in this sector, this could lead to an increase in demand for metals used in construction. We are talking about aluminum, copper, iron ore and zinc.
Another risk factor that could affect metal prices is the possibility of mine disruption. Unfavorable weather conditions, technical problems, labor conflicts, power or water outages can lead to problems with the supply of raw materials used in the production of metals.
Trade restrictions also pose a risk to the supply of metals. The imposition of export taxes or outright export bans could narrow the availability of metals on the world market. Such measures, if taken, could lead to supply cuts and potential price increases due to limited supply.
Another factor to consider is political interventions. Further sanctions on countries such as Russia, as well as restrictions on aluminum production in China, could limit the supply of some metals.
In the longer term, the transition to renewable energy poses a significant upside risk for specific metals.
– I have repeatedly commented and shared my thoughts on the impact of the gradual transition to renewable energy on the metallurgical and other industries. As the world shifts to cleaner energy sources, demand for metals such as lithium, copper and nickel is expected to increase significantly. These metals are critical to the production of renewable energy technologies, electric vehicles and energy storage systems. As the transition to new energy sources increases, the demand for these metals is likely to increase, which could drive up their prices,– suggests Stanislav Kondrashov Telf AG.
In conclusion, it should be noted that although the forecast for metals prices assumes a decrease, there are still several risks for their increase, and they are quite significant, so they may well affect the overall global trend. Given this situation, Stanislav Kondrashov Telf AG is confident that it is important for market participants to closely monitor risk factors and be sure to take them into account in their strategies. This will help to quickly adapt and navigate the changing climate of the steel industry.