Every Tuesday afternoon we publish a collection of topics and give our expert opinion about the Equity Markets.
Industrial metals, often referred to as Base metals and include Copper which we covered in detail last week. Base metals are any nonferrous (they contain no iron) metals that are neither precious metals nor noble metals. The most common base metals are copper, lead, nickel, tin, aluminium, and zinc.
Aluminium
Aluminium is lightweight with a high strength-to-weight ratio, making it ideal for transportation and construction. It is corrosion-resistant and can be recycled. Aluminium is used in packaging, transportation, and construction. Cons include it being less strong than some metals and being energy-intensive to produce. End products include cans, foils, and aeroplane parts.
- Bauxite is the principal ore for aluminium production (about 90%); Australia is the largest bauxite producer in the global market with a 35% share.
- China is the primary consumer of aluminium; Europe and North America are also key consuming regions.
- Aluminium demand depends on the state of numerous downstream industries, including aerospace, construction, automotive, etc.
- As downstream markets are foreseen to increase usage of aluminium, there are expectations about world aluminium demand healthy growth and prices to rebound.
Supply and Demand
The copper market has witnessed both kinds over the last 25 years, with prices rising to a record high of $11,104 per metric ton last year from $2,000 in 2000. Often, the factors were so intertwined that it was difficult to discern which was more important. Right now, however, it’s very clear: It’s a supply issue.
Aluminium prices have generally been quite stable at circa US$2,700 and the only main exception was a surge from Dec 2021 – Feb 2022 due to supply tightness caused by production cuts and closures in Europe due to high energy costs, as well as issues in China and uncertainty over possible sanctions on Russia.
Zinc
Zinc is well-renowned for its capacity to galvanise other metals, giving them protection from corrosion. It is utilised in the production of alloys, including brass, die-casting, and galvanising steel. For human health, zinc is also necessary. It is not as strong as some metals, though, and it can corrode in some situations. Coins and zinc-plated steel are examples of final products.
Grasberg isn’t just any copper mine, but the world’s second largest, contributing about 4% of global production. For now, output has halted and is unlikely to return to its pre-accident level until 2027 at the earliest. In scale and duration, this is a very large shock, well beyond the annual disruption that analysts anticipate.
Supply and Demand
- Iron and steel protection and zinc alloys production account for most of the zinc (Zn) demand.
- China is the leading producing country, followed by Australia and Peru; they together account for about 60% of the global supply.
- Zn market has been growing at a slow rate recently; China is the main consumer of metal in the global market.
- The situation in the global Zn market is not foreseen to change significantly; slow growth is anticipated.
The zinc price enjoyed its biggest one-day gain in August 2022 since October 2021 after Nyrstar announced its Budel zinc smelter in the Netherlands would be placed on care and maintenance. Benchmark zinc on the London Metal Exchange (LME) rose as much as 7.2 per cent to $US3819 ($5457) per tonne on Tuesday before pulling back to $US3620 ($5173) per tonne (t) just before 6.00 pm UK time. However, prices have fallen well back since then and are hovering around US$3,000 per ton.
Nickel
Nickel is tough, malleable, and resistant to corrosion, often used to strengthen alloys like stainless steel. It’s used in batteries, electronics, and as a catalyst. Nickel is recyclable, but can be expensive and difficult to machine. End products include stainless steel and rechargeable batteries.
Supply and Demand
- Nickel is sourced from two primary ores: laterite and sulphide; laterite deposits are concentrated in Indonesia, New Caledonia, the Philippines, and Australia, while sulphide ores are found mainly in Australia, Canada, Russia, and China
- Indonesia leads the world in nickel output (mined ore and refined primary nickel products), accounting for a significant portion of global output; in turn, China dominates nickel sulphate supply.
- Despite the increases in Indonesian mined supply, the country is actively implementing a nickel processing policy with the aim of transforming Indonesia from a raw material exporter into a significant player in the global nickel value chain by requiring companies to build smelters and processing plants within the country.
- Asia now leads the world in primary nickel usage, driven by continuous growth in China and emerging demand from Indonesia.
- China is the world's dominant nickel consumer, accounting for 60% of global demand, primarily for its stainless steel sector, but China’s battery-related nickel consumption is also rising substantially.
It would be very remiss not to mention the almost catastrophic event that occurred on the London Metal Exchange (LME) in early March 2022. The following link is well worth reading.
Nickel price tops $US100,000 as big short tests the London Metals Exchange
Apart from the extraordinary blip in early 2022, pricing has been on the weak side and is currently US$15,000 per tonne.
Tin
Much more interesting than the others in terms of future supply and price, having almost doubled in price in three years. From an absolute high of US$47,540 per ton in late 2021 to a low of US$17,725 in mid-2022 and now just shy of US$40,000 per ton.
The International Tin Association (ITA) has sounded a clear alarm about the future of tin supply. According to their comprehensive analysis, the world faces a projected 40,000-tonne annual tin deficit by 2030. This shortfall represents approximately 9.5% of anticipated global demand—a significant gap with far-reaching implications.
By the end of this decade, global tin demand is projected to reach approximately 420,000 tonnes annually, driven primarily by electronics manufacturing, renewable energy technologies, and emerging applications. However, the combined supply from all sources—existing mines, recycling operations, and new mining projects currently in development—is estimated to reach only 380,000 tonnes.
ASX Listed Base Metals Mining Companies
This link is excellent with tabs to information, news, and listed stocks prices + other mining information.
Next week, we will look at the US, Australian, European and Japanese Bond markets. Whether short-term or long-term, interest rate setting and volatility have a significant impact on pretty much everything we buy, own, or invest in.
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