Base metals prices forecast to rise sharply in 2021, less so in 2022

Flotation recovery cells processing material from Trevali Mining's Santander zinc mine. Credit: Trevali MiningFlotation recovery cells processing material from Trevali Mining's Santander zinc mine. Credit: Trevali Mining.

As the world’s economies start to pick up following the impacts from the Covid-19 pandemic, CPM Group’s director of commodities and asset management Carlos Sanchez expects base metals markets to return to normality in 2021, supporting increases in prices.

“We’re already seeing normal supply and demand dynamics returning to pre-pandemic levels for the base metal markets,” he said in an interview. “Although going into 2021, the demand-side will be aided by increased spending by governments around the world, primarily through investment in infrastructure projects, driving increases in base metal prices.”

He also predicts prices to rise again in 2022, albeit at “more moderate levels.”

Trade disputes, particularly between the U.S. and China, will continue into 2021, Sanchez said, but are “very unlikely” to cause friction between the two countries over base metals, such as copper, nickel and zinc, he said.

The U.S., Sanchez noted, is becoming increasingly self-sufficient in several commodities, including copper. And with much of the world’s nickel produced in Indonesia and the Philippines, he doesn’t envisage any major trade issues to arise between the U.S. and China over sourcing these critical metals.

According to S&P Global Market Intelligence, primary nickel production in Indonesia, the world’s largest nickel producer, is expected to be around 550,000 tonnes in 2020. 

Although China produces around a third of the world’s zinc, Sanchez said, many other countries, including Canada, Australia, China, Peru, and the U.S., also produce significant quantities. Allaying possible tensions between the U.S. and China over the bluish-white metal, he said. 

“We expect zinc and nickel prices to rise sharply, followed by more modest increases in nickel and aluminium prices, with lead prices lagging,” he said.

In 2021, Sanchez forecasts zinc to trade at US$2,628 per tonne, up 17% from an average of US$2,246 per tonne in 2020, with nickel rising to US$15,557 per tonne, an increase of 14.5% from an average of US$13,582 per tonne in 2020.   

Aluminium prices will increase to US$1,912 per tonne in 2021, up 12.8% from US$1,695 per tonne in 2020, copper to US$6,654 per tonne, an increase of 9.2% from US$6,095 per tonne, and lead to US$1,845 per tonne, up 1.7% from US$1,814 per tonne.

Sanchez estimates that zinc prices will rise to US$2,857 per tonne in 2022, up 8.7% from 2021 prices, copper to US$7,070 per tonne, an increase of 6.3%, aluminium to US$2,013 per tonne, a rise of 5.3%, lead to US$1,925 per tonne, an increase of 4.3%, and nickel to US$16,190 per tonne, up 4.1%.

“The price projections incorporate the potential for further disruptions from Covid-19,” Sanchez said. “Even though vaccines are being now being rolled out, there is still uncertainty over their efficacy, and we could still see further outbreaks next year or the virus returning in 2022 if the protection provided by the vaccines only last six months or a year.”

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