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Global Non-Ferrous Metals Market 2016 & Beyond

Industrial metals, particularly base metals, are considered to be the basic units of an economy. Non-ferrous metals like Aluminium, Copper, Zinc, Nickel, Lead and Tin are the most popular ones, used extensively in industrial and domestic applications worldwide. The global non-ferrous metals market is considered to be extremely competitive and consolidated since it is ruled by only a few key suppliers. The market also keeps on facing some persisting issues like imbalance in demand and supply, price fluctuations, environmental concerns, etc.

With several crises hovering around the globe for quite some time, analysts were skeptical about the performance of the non-ferrous metals market in 2016. In spite of the global uncertainty hanging around, base metals emerged one of the biggest winners in 2016. Analysts are much optimistic about the industry, over the long-term. Even 2017 is expected to be good for non-ferrous metals.

This article analyzes the market dynamics for Aluminium, Copper, Zinc, Nickel, Lead and Tin through 2016 and provides the market’s outlook for 2017 and beyond.

Aluminium

Aluminium in 2016

2016 has been a challenging and yet an eventful year for the global aluminium industry. The year, overall, has been a positive one, when aluminium prices on the LME, from its historic lows of 2015 and in the beginning of 2016, showed an upward trend. This price rise of the lightweight metal came as a surprise for the industry leaders, particularly after the supply glut. The price trend, particularly, started following a positive path from the second half of 2016, stabilizing the market scenario.   

China is the biggest market for aluminium, accounting for 44 per cent of the global market. The country is the world’s biggest producer and consumer of aluminium. However, in the last few years, the Chinese aluminium market has been undergoing a slowdown in its growth rate owing to the imposition of import and export duties by partner nations and smelter closedowns. The nation, nevertheless, is focusing right now on its internal market by preventing export of primary aluminium through imposition of higher duties and encouraging, on the other hand, the export of higher value products.     

Total production of primary aluminium globally, from January 2016 to December 2016, was estimated to be 58,167 thousand metric tonnes, according to World Aluminium. Contribution from the countries considered separately, China reported 31,641 thousand metric tonnes; the GCC, 5,194 thousand metric tonnes; North America came up with 4,027 thousand metric tonnes; East & Central Europe, 3,982 thousand metric tonnes; West Europe reported 3,778 thousand metric tonnes; Asia (ex China) came up with 3,442 thousand metric tonnes; Oceania’s contribution has been 1,971 thousand metric tonnes; Africa’s 1,691 thousand metric tonnes; and South America, with 1,361 thousand metric tonnes of primary aluminium. The rest of the world’s (unreported) production was estimated to be 1,080 thousand metric tonnes.                        

Owing to capacity expansions and newly opened smelters in China and in the GCC, demand for bauxite remained robust. Alumina also experienced a sustained demand push all through the year due to the global market deficit and soaring prices.

2016 witnessed major aluminium players make a tactful shift towards value-added applications in order to stay profitable all through the year. The world’s some of the major downstream manufacturers made investments on downstream expansion, signing a number of deals with leading aircraft and automotive companies like Airbus, Audi, JLR and Ford in order to supply automotive and aerospace parts. Aluminium downstream products market, therefore, experienced a buoyant situation. Downstream product manufacturers enjoyed better sales realization.

Substantial growth of end user sectors further gave rise to growth and opportunities for the white metal in 2016. Vehicle lightweighting in the transportation sector is one of the key drivers behind the rising use of aluminium, particularly recycled, in the automotive industry. Companies like Jaguar, Novelis, Ford, etc. are some of the leading automotive companies who have made use of aluminium, extensively. Similarly, use of the lightweight metal in aircrafts, ships and barges have also increased markedly over the past one year. With the growing awareness and preferences in green building & construction, aluminium has gained much importance in the construction sector. Some of the biggest international housing projects have used aluminium component parts in 2016. The next big user industry, packaging, specially foil packaging, also reported a growing use of aluminium. The US has been the biggest consumer of aluminium foils. The beverage can sector over the globe, also made a shift to aluminium.

Chinese oversupply, nevertheless, continued to remain a global concern. This concern manifested in the form of controversies and investigations, creating much stir in the aluminium market, globally. The country worse affected by the surging Chinese imports has been the USA, specially its primary aluminium market. Therefore, the country had to switch over their focus to downstream manufacturing.  

Forecasts

Analysts sound positive about the future of the aluminium market. The Middle East, particularly, is expected to show a strong growth trend in aluminium production in the short to medium term. 2017 is expected to be the year where most of the downstream product manufacturers will be experiencing a double-digit value-added growth in revenue. Chinese demand, as usual, is projected to remain strong and therefore, analysts anticipate a deficit in the global primary market. Cost cutting is going to remain the main focus for the primary aluminium sector. With a view to capitalize on growth opportunities in the end user sectors, aluminium manufacturers all over the globe are projected to continue with their investments for improved efficiency and overall throughput.

In 2015, the global aluminium market shipped 70.37 million metric tonnes of product. By 2020, on the words of the analysts from Technavio, 88.97 million metric tonnes of aluminium product is projected to be shipped, rising at a CAGR close to 5 per cent.   

As per analysts, the aluminium foil packaging market has experienced a growth in its revenue over the last few years. Analysts expect the market to witness further growth at a higher pace over the next few years till 2022. Factors like strong economic growth, a rising middle class population, globalization, changed lifestyle and changed food habits, are expected to drive the growth of aluminium foil packaging market globally. Adding to this, a strong demand for aluminium foil packaging in snacks and chocolate industry is further bolstering the growth of the market of foil packaging worldwide. The global foil packaging market has some striking opportunities like technological development for improving the product quality, mitigation in plants losses, preferences for aluminium foils in different forms for some essential usages for the masses, and lastly growth in aluminium foils’ exportability. The aluminium foil packaging market, in fact, is forecast to experience a strong CAGR during the mentioned period. Till 2020, the global foil packaging market is projected to grow at a CAGR of 3.69 per cent by volume.

The automotive and packaging industries are forecast to boost up aluminium consumption, globally. Automakers, even in 2015, were reported to have consumed a record amount of aluminium.

The rising awareness of enhancing fuel efficiency in vehicles, analysts believe, is going to more than double the demand for the lightweight metal by 2025, particularly in the auto industry. The demand for the metal from the growing airline and aerospace industries (for aircraft structures and aero/jet engine components) is also forecast to rise. The wide range and high growth of value-added jet engine components create more opportunities.

Urban lifestyles, increasing demand from the food and beverage industry, particularly in the emerging markets, are some of the main factors responsible for the growth of the global market for aluminium cans. Here, too, opportunities like various initiatives on the part of the manufacturers to produce environment-friendly cans, technological developments and innovations, resaleable cans and smart packaging solutions like self-heating cans, are further broadening the scope of this market.               

The world’s biggest manufacturer of rolled aluminium products, Novelis, foresees that the demand of the lightweight metal, particularly that of downstream rolled aluminium, is set to grow by overall 4-5 per cent in 2017. Sales to carmakers and can manufacturers have led to the growing demand. Asia is expected to witness a faster demand growth in case of both, automobiles and cans, than the rest of the world, owing to population growth and rising environmental awareness. The market for cans is projected to grow by 5-6 per cent in Asia, and 7-8 per cent in South East Asia. Aluminium cans market, globally, is projected to reach a volume of 314 billion cans by 2021 as per a report submitted by Expert Market Research. The market for automotive is expected to grow by 20-25 per cent. In fact, aluminium players, globally, have been increasing their capacities to meet growing demand from automakers.

Challenges

Dignitaries from Novelis foresee “very fierce” competition with Chinese producers in the coming 5-10 years, particularly in high value-added sectors of aluminium like aerospace and automotive. So far, European and the US aluminium players have ruled the market. 

Copper

Copper in 2016 

The price of copper has a special significance in markets – it indicates the state of the economy thus, playing the role of a barometer of economic strength. Therefore, the metal is also known as “Dr. Copper.” The copper market, which is known to be much aggressive once it starts trending, has been seen to go much higher and lower rapidly. However, copper prices, observe analysts, have historically traded above or below $1.60.    

There’s a strong link between copper and China. China is the world’s biggest consumer of copper, accounting for about 45 per cent of the global demand, says International Copper Study Group (ICSG). Therefore, Chinese copper demand is crucial for the global copper market and the global price of copper is highly influenced by changes in China’s domestic market conditions.

Both, production and usage of the red metal, indicates ICSG, have been better than expected in 2016. The copper market has remained more or less balanced in 2016 as per ICSG. The metal, overall, has managed to maintain a steady ground for itself.   

Global copper mine production, as per ICSG, was expected to have reached 19.9 million tonnes in 2016, rising by 4 per cent, due to new and expanded capacities in the last two to three years. As per the International Wrought Copper Council, copper mine production in 2016, might have been at around 18.935 mt. Global copper mine production, as per ICSG’s estimates, increased by around 6 per cent (820,000 mt) during the first nine months of 2016 when compared with the same period in 2015. Similarly, production of copper concentrate rose by 7.5 per cent. Recovery in production levels in Canada, Indonesia and the US along with an expanded capacity in Mexico, contributed to the global growth. Overall growth, nevertheless, was seen to have partially offset by a 4 per cent decline in production in Chile, the world’s biggest copper mine producer and a 7 per cent decline in Democratic Republic of Congo.     

Global refined copper production in 2016 was predicted to have increased by around 2 per cent y-o-y, reaching to 23.4 million tonnes. China, as per ICSG, has been the biggest contributor to the global growth in 2016. China, being a major market of copper, in fact, represents over one third of the world’s refined copper production and half of refined consumption.

The global apparent refined copper usage has most likely experienced a growth by 1.5 per cent in 2016, mainly driven by China. ICSG analysts analyze that the first nine months of 2016 experienced a 3 per cent (565,000 mt) increase in the world apparent refined copper usage when compared to the same period in 2015. This increase has been mainly because of Chinese apparent demand since global usage, excluding China, remained unchanged. Chinese apparent demand increased by around 7 per cent during the first nine months of 2016, which is based on a 2 per cent increase in net imports of refined copper and 7 per cent growth in refined copper production. Nevertheless, ICSG reports that net refined copper imports followed a declining trend in 2016. The Chinese apparent demand in the third quarter of 2016 was also seen to be low from the year’s first half.    

Global copper consumption has registered a steady increase every year with its current figure standing at 23.6 million metric tonnes and what’s more, analysts foresee the same trend in the metal’s demand. ICSG data reveals that the United States accounted for only 7.7 per cent of global copper demand in 2016. The year 2016, however, witnessed a drop in China’s demand due to the metal’s oversupply within the market. Excess copper was found transported from China to other Asian countries.

Aggregated copper usage for the first nine months of 2016 fell by 0.6 per cent in the EU, Japan and the US although, usage on a regional basis, was estimated to increase by 1 per cent in Europe and 5 per cent in Asia (when excluding China, Asia usage increased by 2%), and declining by 11.5 per cent and 4 per cent in Africa and in the Americas, respectively, and remaining essentially unchanged in Oceania, according to the ICSG.        

The recent revival in industrial activity has mainly led Goldman analysts to give a more bullish outlook for copper’s supply, demand and cost structure in 2017. As per the analysts, producer prices in China, the world’s biggest metals consumer, were seen to have risen at the fastest pace in more than five years in November 2016, with the surge in prices of coal, steel and other building materials.

The last few months of 2016 witnessed a rise in supply of copper along with a fall in demand thus, influencing the price level of the red metal considerably. Copper prices, after following a downtrend for five years, topped (briefly) $6,000 per metric tonne, finally breaking the $5,000 per metric tonne level.

A spike in copper mine supply coupled with a slowdown in demand, particularly from China, mainly characterized the global copper market in 2016. As a consequence, the metal traded between $4,500 and $5,000 a tonne in the first nine months of the year. 

Copper stocks, as per ICSG, during end-November 2016, amounted to 451,780 tonnes at major metal exchanges like LME, COMEX, SHFE. This was reported to be 30,088 tonnes drop from the same period in 2015. Average LME cash price for the month of November 2016 was estimated to be $5,440/t, growing from October 2016’s average of $4,730/t. The metal’s price from January to 24th December 2016 averaged at $4,793/t. This indicates that copper prices are moving ahead towards a stronger price performance. The metal’s excess supply has primarily been in concentrate. Further expected supply constraints should lead to a recovery in copper prices. Taking into consideration the arising supply-demand scenario, analysts expect copper’s annual LME cash price to average $5,300/t in 2017 and $6,200/t in 2018, further moving up to $6,800/t in 2019.

A stellar performance by the red metal in 2016 has acted as a great source of hope for the metal’s rosy days in 2017. Analysts foresee copper to be the best performing commodity of 2017.

Forecasts

While the copper market has remained balanced in 2016 as per ICSG, 2017, forecasts ICSG, is going to go through a surplus of around 160,000 metric tonnes. Earlier, in 2016, the organization had predicted a surplus of 20,000 metric tonnes for 2017. Some analysts, other than ICSG, also foresee a surplus beyond 2017. This, further, poses a risk for supplies to be ‘under-delivered’ and consumption growth to ‘marginally outperform’. This, further, would lead to an interesting price performance by the metal.

Analysts from BMI Research, however, have a different outlook on the global copper market which, they predict, is going to move into a slight deficit by 2019 since steady growth in the metal’s demand will be outdoing a slowing production growth. Factors such as production cuts in the world’s top copper consumer, China and falling ore grades in the world’s largest copper producer, Chile have primarily led to BMI’s outlook of decelerating supply growth.

In 2017, global mine production is going to remain unchanged, foresees ICSG. However, output from the current operating mines is projected to improve. A 6 per cent decline in SX-EW production along with a lack of new mine projects will be primarily responsible for a stagnant mine production in 2017.

As per the International Wrought Copper Council, copper mine production, however, is expected to grow by 3.4 per cent in 2017 to 19.572 mt. 2016, according to the them, might have witnessed an estimated 18.935 mt of copper mine production.

Copper mine production, on the words of the Freedonia analysts, is going to witness 3.7 per cent rise per year, reaching to 22.6 million metric tonnes in 2019. Besides, fast annual increases are expected to be seen in countries like Canada, Mexico and Zambia where, the continuous development in copper projects will drive gains. Central and South American nations such as Peru and Chile are expected to come up with strong gains in copper mine output and a humble pace in copper ore and concentrates production, respectively.     

Refined copper production in 2017, is forecast to go on with the same 2 per cent growth, mainly with an expected decline in SX-EW output. China, predicts ICSG, is going to be the biggest contributor to the global growth in 2017, just like 2016. Chile, on the other hand, will be going through a limited growth. Analysts, other than ICSG, who see the world refined copper market to have stood at 25-million-tonnes-per-year in 2016, is most likely to end up with a small surplus in 2017 and 2018, ranging between 1,00,000 and 150,000 tonnes. However, this surplus, project analysts, will be small, compared to the total market size. This, in turn, is going to make the market, balanced.

Refined copper consumption in ASEAN and India will be rising by 4.3 mt by 2025, as per CRU forecasts. The growth in world apparent refined copper usage in 2017, forecasts ICSG, is going to be at around 1 per cent, compared to 1.5 per cent in 2016.

Demand growth from China in 2017 is foreseen to at least stabilize, if not improve. Chinese refined copper consumption, in 2017, is expected to be over 12 million tonnes. The country has plans for a good number of power grid development, which is supposed to consume copper for transmission and distribution.

According to analysts from Freedonia, the global demand for copper (produced from refined copper and recycled scrap) will be rising 4.2 per cent per year through 2019, reaching to 36 million metric tonnes, and valued at $261 billion. The growing usage of copper wire, tube, and other mill products due to vigorous gains in building construction expenditures will mainly be leading to strong demand in copper. Besides, growing investments made in infrastructure in the developing countries, will further lead to the production of copper wire and cables. Freedonia analysts further project that an improvement in global manufacturing output will be increasing copper usage in products like transportation equipment, industrial machinery, domestic appliances, and other goods which are durable.     

Although China drives the world copper market, however, they predict, India is ‘forecast to register the fastest gains of any major copper metal market through 2019.’ A strong growth in the nation’s building construction, due to an increasing urban population coupled with government investment, is going to lay a strong foundation for gains in copper consumption, locally. Similarly, demand for the red metal in North America, and in the US particularly, is going to witness a rapid surge due to growing expenditures in building construction. After America, a more or less moderate growth in the demand for copper will be seen in Western Europe. Here, construction and manufacturing output is set to grow at rates below the global average. 

As far as the question of prices of the red metal is concerned, financial institutions have a neutral to bearish view. Goldman Sachs is of the view that copper prices will slightly fall to $1.80 in 2017. Similarly, Bank of Merrill Lynch foresees lower copper prices in 2017. Morningstar forecasts copper prices to be around $2. Beyond 2017, the global copper market is forecast to experience a combined scenario of rebound in demand, low stocks, a pick-up in supply disruption, leading to supply stresses and therefore, further affecting pricing. BMI expects copper price to be at $5,150 per tonne in 2017, a figure higher than its previous forecasts of $4,900 per tonne, since it foresees a rapid tightening of the copper market due to strong growth in Chinese demand. 

Goldman Sachs’ analysts are more bullish than bearish on the outlook of the red metal, at least till mid-2017. Improvement in copper’s demand growth, is forecast to be a robust one. On the words of the bank’s analysts, “The improvement in demand growth was much stronger than we had anticipated and appears likely to absorb much of the ‘wall of supply’ that we had expected would drive prices lower during 2H16 and early 2017.”

The recent revival in industrial activity has mainly led Goldman analysts to give a more bullish outlook for copper’s supply, demand and cost structure in 2017. As per the analysts, producer prices in China, the world’s biggest metals consumer, were seen to have risen at the fastest pace in more than five years in November 2016, with the surge in prices of coal, steel and other building materials.

Goldman Sachs, however, forecasts a moderate copper deficit of around 180,000 tonnes in 2017, reversing from its earlier estimates of a supply surplus of 360,000-tonne. Prices of the red metal, Goldman expects, is going to rise to $6,200 per tonne over the next four to five months.   

Copper, which did not quite perform well for the past two years, however, enjoyed a sudden buoyancy at the end of 2016. The metal’s future, particularly its demand, pins much hope on President Trump’s $500 billion infrastructure plans. Moreover, Goldman Sachs is of the opinion that an increased demand of the red metal from China is going to make the market tighter than earlier predictions, and this, in turn, is going to support a more bullish environment for the metal till mid-2017.

The world’s second largest copper miner BHP Billiton and the largest heavy equipment maker Caterpillar strongly expects copper recovery. However, in the short-term, BHP Billiton does not seem to sound much optimistic and apprehends a deficit. “Grade declines, a rise in costs and a scarcity of high-quality future development opportunities are likely to constrain the industry’s ability to cheaply meet this demand growth,” it said in its annual report. The world’s biggest heavy machinery manufacturer Caterpillar expects copper miners heading the way on the back of a rising equipment demand in the next three to five years. 

Rio Tinto, however, expected a deficit in the copper market by 2020. The company foresees copper to face falling supplies along with an increasing demand from the sectors such as infrastructure, electric vehicles and other renewable technologies.

Factors like demand-supply dynamics, President Trump’s economic policies, Federal Reserve’s actions, energy prices, etc. would be the key drivers of copper’s performance in 2017.

Challenges

The major challenge for copper, according to ICSG, is ‘potential supply disruption’ and ‘market-related cutbacks’. The supply situation, in December, was fragile and adding to this, analysts do not foresee any smooth supply growth in the future, therefore, expecting a deceleration in the metal’s supply, at least for the next two years. The current projects generation, although stands as a hope for the red metal, pipeline projects to come, however, do not look much buoyant, to drive demand.

Zinc

Zinc in 2016

Zinc outperformed other non-ferrous base metals in 2016, being one of the top gainers of the year.  The metal was reported to have shot up 65.7 per cent amidst major zinc mines closures and falling supply stockpiles. Prices of the metal were seen to have risen by about 45 per cent or even almost double on the LME since its January 2016 lows.

Among the non-ferrous metals, zinc is the most widely used metal after aluminium and copper. 49 per cent of zinc produced globally is used for galvanizing. The use of galvanized steel is on the rise in a wide range of industries. Zinc alloys like brass and bronze are also being increasingly used in machine bearings, die-casting and stamping dies. Besides, zinc is widely used in electrical fittings, medical equipment, rubber goods, paint pigments and ceramics.

The zinc market in 2016 was defined by zinc concentrate supply squeeze to a considerable extent coupled with production cuts. As per the report submitted by World Bureau of Metal Statistics (WBMS), the zinc market, the world over, recorded deficit of 190 kt during January to November in 2016, after been in surplus (101 kt) in the entire 2015. WBMS data report that the global zinc market recorded a marginal surplus of 101 kt during the first ten months of 2016.  

Analysts at Edelweiss are optimistic about their outlook for zinc, backed by the metal’s limited supplies. Zinc’s mined production in 2016, as per analysts from Edelweiss, has been down by 11 per cent from 2015, reaching to 7.95 million tonnes.

In 2016, China experienced a growth in zinc demand, of around 5 per cent, due to a boost in construction and infrastructure activities in the nation. Besides, the growing automotive sector accounted for a robust usage of zinc and galvanized steel. Apparent demand in China, according to WBMS, amounted to 6,137 kt, accounting for over 48 per cent of the world total. However, zinc demand outside China, witnessed a decline of about 3 per cent. As per WBMS, the global demand for zinc also went through a decline of 4 kt during January-November in 2016, when compared to the same period of the previous year. Demand totaled to 447 kt. The metal’s limited supply in 2016, have led smelters of leading companies like Glencore to cut their charges on zinc by about 80 per cent.     

The metal’s supply-demand balance in world outside China, was seen to be well maintained in 2016, due to lower exports from China.         

The global market for refined zinc, as per the International Lead and Zinc Study Group (ILZSG), was in deficit by 277 kilo tonnes from January to October in 2016. Total reported inventories fell by 53 kt during the same period. According to WBMS data, the January-November period in 2016 witnessed a 2.5 per cent decline of global refined zinc production. Zinc mine production fell by 1.8 per cent globally as against the corresponding months of 2015, the key reason being decline in Australia, India, Ireland and Peru. This fall, it is to be noted, was observed in spite of an increase in mine production in Bolivia, China and the Russian Federation.

The global usage of refined zinc metal was seen rising by 3.7 per cent led by a growth in apparent demand from China, by 9.3 per cent that more than counterbalanced a 14 per cent decline in the United States. In Europe, usage was seen to have risen by 0.9 per cent.

Stock of zinc metal, reports WBMS, declined by 74,000 tonnes during the first eleven months in 2016. LME zinc stocks, during the month of November was also seen to have dropped by 8,800 tonnes, accounting for 44 per cent of the global stock of the metal. The LME stock levels at the end of November were 21.0 kt lower when compared to end-2015 levels.

Zinc (special high grade) imports by China were seen to have fallen by 48 kt during the January-November period in 2016 to 401 kt as against the imports during the same period last year. In November, zinc imports by China more or less remained flat, amounting to 25 kt, when compared to October 2016. The Chinese zinc metal imports, mostly special high grade zinc, dropped by 48 kt during January-November’16 to 401 kt when compared with the imports during the same period last year.

Forecasts

The outlook for zinc in 2017 appears bright to many analysts. They foresee massive addition of hot-dip galvanizing production coming on stream the world over. Zinc demand, as a result, is much expected to rebound. Based on the application of zinc, the segment of galvanizing, at present, accounts for approximately 49 per cent of the total market share. However, during the forecast period, analysts expect the construction segment to take the largest market share, around 47 per cent. This would further keep on increasing to rule the market by 2020. The growing use of galvanized steel in buildings will be the main driver. The ILZSG, in November 2016, forecast that demand for refined zinc metal is set to increase by 2.1 per cent in 2017. In the United States, after an anticipated fall in apparent consumption in 2016, ILZSG researchers expect a rebound in demand of zinc by 11.8 per cent. As per the organization, zinc usage in Europe, however, was seen to be flat over the last four to five years, a trend projected to continue in 2017, with a limited growth of 0.5 per cent. China, who has been the main reason behind zinc demand over the past decade, may witness domestic consumption stabilize at lower rates with government making efforts to get rid of excess capacity. Stimulus packages in the country, however, are expected to bring about some buoyancy.

Zinc mine production, globally, is projected to recover by 5.9 per cent in 2017, after an expected fall by 5.6 per cent in 2016, says ILZSG. Mine output is forecast to boost up in China, Mexico, Kazakhstan and the Russian Federation in 2017.  

The bullish outlook for zinc, some analysts foresee, is going to be there in 2017, too, with more tightening demand-supply balances, albeit the ongoing restarts and production expansion. ILZSG’s outlook for global refined zinc metal in 2017 shows an expected rise by 2.9 per cent after an anticipated drop of 3.2 per cent in 2016.

Analysts at Research Beam forecast the global zinc market to grow at a CAGR of 3.96 per cent during 2016-2020 period. Technavio’s market research analysts foresee the global zinc market to grow at a CAGR of nearly 4 per cent by 2020. A speedy infrastructure development in developing countries like India, Brazil and Indonesia is one of the key reasons behind the expected market growth rate. Besides, the growing demand for galvanized steel (its benefits in various industrial applications) is yet another reason to boost zinc market till 2020. Another reason is the increased demand for zinc fertilizers by the farmers to boost cereal production.

Analysts at Morgan Stanley strongly believe that Glencore would restart production this year, not before the middle of this year. Dignitaries from Glencore expect prices of zinc to rebound to a peak of $2,950 per metric tonne in the second quarter of 2017, after having traded down to $2,528.50 per metric tonne at the end of December 2016.

Challenges

The greatest challenge facing the zinc market is the exhaustion of zinc mines around the world and analysts apprehend the market running out of metal after some years. Although CRU analysts are of the view that zinc stocks are enough to fill up current shortfalls for at least a while, however they doubt how long they are going to last. Established producers and potential new comers in the zinc industry have no plans for any large scale mine development or any major investment in the industry. According to Wood Mackenzie, the key issue is whether the zinc mining industry, in the medium to long term, will be able to develop adequate new mine capacity to counterbalance mined closures and rising global demand.  

Analysts apprehend significant deficits in zinc concentrate and refined markets in the coming 2-3 years. CRU analysts apprehend zinc concentrate stocks to be exhausted in the first quarter of 2017 and predict further market deficits this year.  China faces a growing pressure to deal with the glut in the steel market. The benefits of stimulus package for the nation’s construction industry may start fading away and Chinese steel, apprehend analysts, may continue facing trade barriers all over the globe. The deficit of the global zinc concentrate market has urged industry leaders to work hard towards maximizing output, ensuring early development of projects, restarting previously idled mines, etc.

Now the question arises as to whether the best-performing commodity of 2016 will be able to keep up with its performance in 2017, too. It has been rated as the best performer in the Bloomberg Commodity Index in 2016.  

Nickel

Nickel in 2016

Nickel usage is associated with a country’s economic development. Usage of the metal has increased over time. Moreover, the robust growth by the Chinese economy has further speeded up the increase in nickel demand worldwide. From 2010 to 2015, nickel demand was seen to increase at an annual growth rate of 5 per cent. At present, Asia is the largest regional market for nickel, accounting for 71 per cent of the total global demand. In Asia, China alone accounts for nearly 52 per cent of global nickel demand, compared to 18 per cent a decade back. 

Nickel is highly used for the production of stainless steels. Almost two-thirds of newly produced nickel is used up in stainless steel production. Moreover, with the market of stainless steel registering a growth at a rate of 5 per cent per annum, the use of nickel is rising simultaneously. Beside stainless steel, sectors such as alloyed steels, high nickel alloys, castings, electro-plating, catalysts, chemicals and batteries also make use of newly produced nickel.  

The nickel market, which was seen to have gone through an oversupply from 2009 to 2015, witnessed significant deficits in 2016. The nickel supply chain went tightening in 2016, leading to a rise in nickel prices. With Philippines, the world’s largest nickel miner having shuttered several mines, the supply of the metal was seen to have affected. The country, which had already ceased operation of 10 mines in 2016, expects another 20 to be shuttered. If Global Ferronickel Holdings’ Ipilan nickel mine, Philippines is shuttered, it is going to lead to a considerable decrease in the country’s nickel output. This, further, is going to disrupt the demand-supply balance. According to the World Bureau of Metal Statistics, the global nickel market was found to be in a deficit of 84,600 tonnes during January-November period in 2016, with apparent demand exceeding production. World nickel mine production was 1,784.8 kt, down 166.0 kt y-o-y during the same period. The ban on exports by Indonesian administration has been the key reason behind the reduced mine output from the country. Besides, the local mine production from the country has been extremely weak ever since the beginning of 2014.

Demand soared by 49 kt during the eleven-month period, in comparison with the previous year, mainly due to rise in imports of Nickel Pig Iron from Indonesia and increased imports of the metal from Russia. 

Refined nickel production during January-November, 2016 stood at 1,648.6 kt. Total smelter/refinery production of nickel was reported to be 154.4 kt in November 2016. Refined nickel consumption during the period climbed higher by 122.0 kt, compared to the previous year. Nickel smelter consumption was 156.0 kt in November, 2016. Refined nickel demand in January-November’16 stood at 1,733.2 kt.

Reported stockpiles maintained by LME were 74.3 kt lower at the end of November 2016 from the closing levels of 2015.   

Forecasts

Analysts foresee further deficit in the nickel market due to demand growth exceeding supply, mainly led by Chinese outperformance coupled with the arrival of the battery sector as a key nickel demand driver. Nickel supply is set to go through a decline despite commissioning, expansions and ramp ups in Indonesia.

INSG predicts that the global nickel market is going to be in a deficit of 66,000 tonnes this year, on the back of rising demand from the stainless steel sector. Nickel demand is projected to increase to 2.11 million tonnes in 2017, globally from 2 million tonnes in 2016. Global output of nickel is forecast to rise to 2.05 million tonnes this year, from 1.93 million tonnes in 2016. Apart from stainless steel, demand for nickel will also be coming from the aerospace industry and battery sectors, says INSG.   

Wood Mackenzie’s long-term outlook for nickel reveals that nickel will be enjoying an increase in demand owing to ongoing ramp up of new stainless melting capacity in China. Nickel market, analysts of Wood Mackenzie foresee, will further remain undersupplied through to 2020. Although much of this shortfall can be met by stocks, however, they apprehend that by 2020, there might be a need for new project development to do away with the shortage. Around 665 kt of new finished nickel supply will be needed by 2035 in order to retain a sensible market balance. 

Nickel prices, some commodity consultants foresee, is going to average $11,200 per tonne this year and trade in the range of $9,000 to $13,000 per tonne.

Challenges

Now, how nickel performs on the demand side in 2017, depends much on the demand from its two biggest consumer nations – China and USA. Here again, the metal’s fate pins high hopes on President Trump’s plans of mammoth infrastructure development and spending. However, in case of China, the picture does not seem to be so clear to the analysts. Demand in China rose in 2016 on the back of increased spending on infrastructure. This demand, analysts expect, will remain in the first part of 2017. However, 2017’s end might witness a demand slowdown as the nation’s stimulus package gradually slows down. What’s more, analysts do not foresee any further stimulus. Nickel’s fate in 2017 and beyond, is much dependent on the Philippine government’s enforcement on further mine suspensions through 2017. This will further decide the price of the metal. 

Lead

Lead in 2016

As per the World Bureau of Metal Statistics (WBMS), the global lead market, in the first eleven months, i.e. during January-November of 2016, recorded marginal deficit of 66,000 tonnes. World refined lead output (including production from primary and secondary sources) during the said period was seen to have increased by 5.6 per cent, reaching 9,886.2 kt. Refined lead production in November 2016 alone summed up to 916.7 kt while consumption stood at 925.5 kt. Lead demand during January-November 2016 rose by 580 kt, globally. Strong demand from automotive and industrial sectors has resulted in a rise in lead consumption by 3.1 per cent YoY in 2016, as compared with 0.45 per cent in 2015. This growing trend in the metal’s consumption is also expected in 2017. The Chinese apparent consumption during the period amounted to 3,940.3 kt (40 per cent of the global total), higher by 434.0 kt when compared with the same period in 2015. Apparent demand, however, witnessed a drop, by 24 kt, in the US. Stocks of the metal were reported to have fallen by 3.2 kt at the end of November 2016, when compared to the stock levels during 2015-end.

Forecasts

Global lead market, in terms of volume, is projected to reach 15 million tonnes by 2020, growing at a CAGR of more than 5 per cent. The market, on the back of a forecast rise in lead consumption in China, is expected to see a significant growth. ILZSG projects the global demand for lead to rise by 1.3 per cent to 11.34 million tonnes in 2017. China’s demand for lead is forecast to increase by 1.1 per cent in 2017, according to ILZSG. China is predicted to experience a rise in automotive and electric bike production. Resurgence in automotive sector will also drive lead usage in Europe. In fact, in the developed nations like the US and Europe, stringent regulations over vehicle emissions have resulted in vehicles adopting start-stop technology. In the US, lead enjoys a growing demand due to the country’s increasing use of lead-acid batteries for vehicles. The nation is also making every effort to recycle lead-acid batteries. This, further, has led to a rising use of batteries using lead. Demand in the US is forecast to rise by 1.9 per cent in 2017. Even non-automotive applications for lead are experiencing a vigorous demand all over. For instance, the growing access of information technology and the telecommunications industry has led to an increasing demand for batteries which use lead. However, as per ILZSG’s forecasts, demand for lead, overall, will remain flat in 2017.

Global lead mine production, projects ILZSG, will rise 3.3 per cent in 2017. Production of global refined lead metal is set to rise by 1.2 per cent in 2017, reaching to 11.36 million tonnes. Countries like Belgium, China, Mexico and the US are likely to come up with much improvement in their output. The market for refined lead metal, as per ILZSG, is set to be in surplus of 23,000 tonnes. 

Challenges

Wood Mackenzie foresees the global lead market to face the issue of availability of concentrates in the near to medium term. What’s more, the secondary lead sector has a limited ability to further offset this shortfall in supply. Consequently, higher lead prices will lead to developing sufficient new mine capacity, to counterbalance scheduled mine shutdowns and the rise in global demand for lead.  

Tin

Tin in 2016

The World Bureau of Metal Statistics (WBMS) reports that the tin market, worldwide, has recorded a marginal deficit of 35.0 kt during January to November in 2016. Production in Asia was steady during this period, compared to the production during the same period last year.

The tin market, which was seen to be in surplus from 2013, although managed to narrow down the surplus considerably in 2016 (BMI forecasts a surplus of 3.1 kt), as compared to 2015 (surplus of 5.3 kt), the metal’s price rally ‘has run ahead of the fundamentals.’ 

The global demand for the metal experienced a growth by 5.10 per cent during January-November 2016, from the corresponding period in 2015, totaling to 355 kt.  The Chinese apparent demand witnessed a substantial rise of 8.5 per cent over the previous year. Japanese consumption was however, almost flat, totaling to 24.5 kt, when compared with the demand recorded during January-November in 2015.

Global refined tin production, as per WBMS, was seen remaining more or less flat during this eleven-month period.  Global refined tin production, in November’16, alone, totaled 30.5 kt, as against the demand of 34.7 kt.   

Stock of the metal fell during the initial eleven-month period of 2016. Stock, at the end of November was found to be lower by 4.9 kt when compared with Dec’15 closing levels. The reported stocks increased marginally by nearly 0.3 kt during the month of November 2016.

Forecasts

Industry leaders are optimistic about the demand for tin in the coming years. The electronics assembly sector will be the main demand driver of tin. Demand will be primarily observed in three key applications – power semiconductors, photovoltaic (PV) cells and LED lighting. Global tin use in these three segments could even total to some 10,000 tpy by 2020, compared to less than 2,000 tpy in 2011.

Tin’s wide range of applications from electronics and chemicals to construction and many others, speaks about the metal’s demand. Therefore, a robust growth in the demand for consumer electronics, particularly in China, Taiwan, South Korea and the United States is expected to keep the global tin market tight. This, further, is going to support the metal’s prices. Apart from being leading global producers of consumer electronics, these nations are also top global consumers. Therefore, with tin being used in the manufacturing of electronics, producers will remain ensured to continue stocking up on the metal. From 2016-2020, total consumer spending on electronics in South Korea is forecast to increase at a CAGR of 2.0 per cent. This is seen to be an improvement from the recent years. Application of tin in Li-ion batteries is also set to stimulate demand growth. This industry is seen to grow actively.    

BMI Research foresees tin prices to be at US$ 19,500/t in 2017 – up from its previous estimate, $17,500/t. BMI raises its tin price forecast to an average of $20,500/t in 2018, on the back of the tin market falling into a deficit due to stronger growth in global demand for the metal compared to its production growth. This deficit, predicts BMI, will further deepen to 9.4 Mt by 2020 from 0.9 Mt in 2016.

Challenges

BMI foresees Indonesia to remain a major risk to the metal’s outlook. Stringent environmental restrictions on tin mining and smelting in Indonesia resulted in the metal’s limited production. What’s more, BMI currently forecasts the country to register declining growth rates over the years to 2020. Roskill forecasts Myanmar to be a new emerging player in the global tin market, which is able to provide up to 10 per cent of global output.   

Conclusive remarks

Market research analysts from Technavio predict that global non-ferrous metals market is set to experience a steady growth, posting a CAGR of around 5 per cent by 2020. Geographically, the APAC (Asia-Pacific) region will lead the global non-ferrous metals market, reaching 107 million metric tonnes by 2020. Rising demand from the electronics, automobile, and construction sectors along with speedy technological advancements will be resulting in the growth of this market segment in the coming years.  

Prices of base metals fell dramatically in 2015, further hitting multi-year lows in the beginning of 2016. Base metal prices, however, experienced a significant rise in the later part of the year, despite a slowdown in China’s GDP growth rate. Many analysts foresee the prices of non-ferrous metals to keep surging through 2017, mainly driven by the Chinese and US economies. Copper and aluminium prices are surging because of high hopes for huge investments in infrastructure in the USA. The industrial metals industry, in fact, has been analyzed to have gained from the victory of Donald Trump. Trump’s huge $500 billion infrastructure plan and his pledge to revive the US infrastructure has created opportunities for the industrial metal space. Metal Bulletin analysts and researchers are hopeful that ‘investors