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World Commodity Forecasts Industrial Raw Materials

  • ID: 2101443
  • Report
  • November 2021
  • Region: Global
  • 120 Pages
  • The Economist Intelligence Unit
EIU's industrial raw materials (IRM) price index is estimated to jump by 37.2% in 2021-the fastest rate in more than a decade-owing to an increase in prices of base metals and crude oil. (Oil prices are not directly included in the IRM index, but have an effect on the prices of many other industrial commodities.) In the second half of the year prices on the whole have remained elevated owing to the continuing recovery in global demand and the re-emergence of supply-chain disruptions. The latter is partly a result of the spread of the Delta variant of the coronavirus, especially in Asia, which has led to transport bottlenecks that have more than offset a softening of demand in China. Supply constraints created during the staggered economic recovery in 2021 should also ease by the second half of 2022, removing some of the upward pressure on IRM prices. In 2022 we expect the IRM price index to dip by 0.3% year on year as global economic growth and demand for industrial commodities begin to stabilise, especially in China, following the post-pandemic rebound in 2021.

Base metal prices surged in the first three quarters of 2021 owing to the resurgence in industrial activity in China and supply constraints related to the pandemic and heavy stockpiling of industrial raw materials by China. Container shortages and supply-side issues further boosted the prices of several major industrial metals, including copper, aluminium, zinc and tin, and precious metals that are heavily used in the electric vehicle (EV) sector, such as palladium. Overall, policy-led decisions to rein in the supply of some industrial materials and metals in China, together with continued demand from major emerging sectors-including EVs-will keep a floor under base metal prices in 2021-22, despite market volatility. We expect the base metals price sub-index to surge by just over 45% in 2021.

The price of aluminium, which has the highest weighting in the metals index, is expected to surge by 46.5% in 2021, before falling by about 1% in 2022 as the market adjusts to new demand patterns and stock levels. US import tariffs on aluminium products will continue to exacerbate the divergence in prices, with supplies being diverted to markets outside the US in 2022-23. The price of copper, which also carries a significant weight in the metals index, is now estimated to have jumped by just over 48% year on year in 2021, supported by rapid growth in the EV industry (copper is one of the main components in batteries). Competition between the US and China in the EV sector is expected to intensify in the coming years, driving copper prices up by a further 4.1% in 2022 and by 8.4% in 2023 as consumption accelerates and supply-side concerns grow. That said, the copper market is vulnerable to fluctuating demand from China, the world's biggest consumer of the metal. If China's economic growth were to fall below our expectations, for example, this would push copper prices down.
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World Commodity Forecasts Industrial Raw Materials

EIU commodity price index: industrial raw materials
The global economic recovery is driving strong IRM price growth in 2021
Green policies will drive demand for base metals
Copper and aluminium prices will be among the fastest to rise in 2021
Investor optimism has recovered, after softening in March-April 2021
Brent prices remain elevated before easing from 2023

Aluminium
Demand
China records ongoing import strength early in the second quarter
Transport demand will boost US aluminium use in 2021
Supply
Global aluminium output stalls
Coup in Guinea threatens to disrupt raw material supply chains
Chinese power issues will cut aluminium output in the second half
Stocks and prices

Coal
Demand
China's coal consumption will grow by more than 2% in 2022-23
US coal demand rebounds in 2021, before declining modestly in 2022-23
India's coal demand will continue to grow in 2022-23
Supply
China's output will increase in 2022-23
US coal output's 2021 revival is unlikely to last
India's coal output growth will continue in 2022-23
Australian output will continue to grow modestly in 2022-23
Stocks and prices
Average prices will cool off in 2022 and 2023

Copper
Demand
Default by Evergrande Group would affect China's construction sector
Delta variant of the coronavirus poses a major risk to emerging countries
EU27 GDP growth will pick up from the second half of 2021
Supply
Disruptions continue to limit mine production growth in early 2021
Peru's new government plans to rewrite mine industry framework
Blueprint outlines long-term growth targets for mining activity in Chile
Afghanistan's vast mineral reserves likely to remain out of reach for now
Copper production from the Grasberg mine will rebound in 2021-22
Chinese smelters agree to reduce concentrate purchases
China to add a further 1m tonnes of smelting capacity in 2021-23
Stocks and prices
Stock flows between LME and SHFE are likely to rise

Cotton
Demand
US-China trade tensions are here to last
India remains limited by constraints on its domestic textile sector
Pakistan's uncertain policy environment constrains demand
Poor safety standards pose a downside risk
Supply
Pressure on prices and poor weather will push down US output in 2020/21
Cotton production growth will decrease in India in 2020-22
Production will rebound strongly in 2020/21
Stocks and prices

Crude oil
Demand
Oil demand in the OECD has recovered less than half of lost consumption
US demand recovery slows with the spread of the Delta variant and rising petrol prices
China has an outsized impact on global oil consumption trends
Supply
OPEC+ has agreed to maintain production restraint until end-2022
Russia is keen to ramp up oil production after an 8.4% drop in 2020
Lack of investment will hinder the recovery of the US shale sector
Stocks and prices
OPEC+ tensions have eased, but prices are being driven upwards nonetheless
Oil prices to remain above US$80/barrel during the northern hemisphere winter
Brent prices remain elevated, before easing from 2023

Gold
Demand
Jewellery purchases will increase steadily in 2022-23
Gold bar purchases will moderate in 2022-23, but will remain firm
Inflows into gold ETFs fell in 2021, with net outflows likely in 2022-23
Central bank gold purchases will remain firm in 2022-23
Industrial gold use will accelerate in 2022-23
Supply
Overseas focus hampers investment in China-based mines
Australia will remain the world's largest gold mining producer in 2022-23
Russian output will moderate but remain high by historical comparison
Gold production in Canada is forecast to rise in 2022-23
Gold output will continue to decline in South Africa
Recycling activity will fall and net producer de-hedging will rise
Stocks and prices
Average gold prices will remain high in 2021, before moderating in 2022

Lead
Demand
Energy storage infrastructure will support lead usage in the long term
Asian lead demand will remain volatile in 2021-22
Demand for replacement batteries will remain high
Recent weather events will boost lead demand from replacement batteries
Supply
Tolling activity is boosting China's refined lead production in 2021
Flooding disrupts smelters in Germany and China
Stocks and prices
Tight availability outside China continues to boost lead prices

Liquefied natural gas
Demand
Nuclear restarts dampen LNG demand in Japan
Growth in South Korea's LNG imports will slow in 2022-23
EU demand will continue its recovery in 2022-23
FSRUs are helping to create new markets for LNG
Supply
Qatar is investing to retain future market share
Prices

Natural gas
Demand
US demand will recover in 2022-23
European demand boosted by increased residential use
Increased economic activity leads to a rise in Russian demand
Chinese demand driven by strong GDP growth in 2021
Nuclear restarts and coal-fired plants in Japan will hit demand
Supply
US output will recover in 2022-23, following a contraction in 2020
Australian supply hit by slow LNG demand
Saudi output to rise in 2021-22
Stocks and prices
Prices are expected to ease in 2022-23

Natural rubber
Demand
Growth in China's NR consumption will slow in the coming years
India's NR use should grow steadily in 2022-23
Strong growth in Japan's tyre production is boosting NR use
NR usage in other Asian countries will fall back in the third quarter
Malaysia will continue to benefit from strong rubber glove demand
US vehicle output is constrained by the microchip shortage
EU demand should revive in 2022
Supply
Thai output will return to pre-pandemic levels in 2023
Higher prices should encourage tapping in Indonesia in 2021-22
India's NR production has bounced back strongly in 2021
Côte d'Ivoire's production will continue to expand in 2022
Malaysia will struggle to raise output in 2022-23
Output for smaller South-east Asian producers should grow this year
Stocks and prices
A large market surplus and high stocks will put a lid on prices

Nickel
Demand
US infrastructure bill will bolster the EV charging-station network
Covid-19 infections and supply-chain disruptions create headwinds
China's push for carbon neutrality by 2060 will support nickel demand
Supply
Indonesian policy changes to support downstream domestic value chain
Chinese companies continue to invest in nickel-processing capacity in Indonesia
Stocks and prices

Steel
Demand
China is still adding significant tonnage to its steel demand
Steel demand is recovering in Asia ex-China in 2021
US steel consumption looks set for a strong recovery in 2021-22
European consumption recovery set to be slower among major markets
Supply
China's steel output got off to a strong start in the first half of 2021
Chinese output levels will have a knock-on effect on other producers
Ex-China crude steel production dropped to a ten-year low in 2020
India and the US are adding new steelmaking capacity
Steel production will stay below pre-pandemic levels in some regions
Iron ore prices roughly doubled in 2020 but are now at or near a peak
Stocks and prices

Tin
Demand
Tin's main market is solder for use in electronics manufacturing
Growth in electronics markets will add to demand
The chemicals sector should increase demand for tin, but not tinplate
The US-China trade war could hurt Chinese demand for tin
Supply
China is ramping up its domestic mining operations
Myanmar's tin mine output is likely to have peaked
Regulations and resource depletion are undermining Indonesia's tin sector
New mines and expansions continue to boost global tin output in 2021
Stocks and prices

Zinc
Demand
Power and environmental restrictions will slow steel production
Emerging markets could lag owing to slow vaccine rollouts
The EU's green policies could drive zinc demand in 2022-23
EU and US officials are close to settling dispute over steel imports
Rising inflation could dampen boost to US zinc demand
Supply
Smelters face increasing pressure from restrictions and rising power costs
Global mine production will rebound in 2021
Mine production will plateau in late 2023
Stocks and prices
Further price gains expected in 2021-23

Statistical appendix: industrial raw materials
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