As we enter 2021, many mined commodity prices are riding high after recovering from a dramatic pandemic-induced slump in the first half of 2020. The new year, however, raises new questions. How will Chinese policy affect supply and demand in 2021? Will the growing rhetoric around decarbonisation be followed up with concerted global action? And will fiscal stimulus tied to green investment herald the dawn of a new global supercycle?
Aluminium – the rise of green metal?
The pandemic-driven collapse in demand left the aluminium market with a sizable surplus in 2020. This could be another year of rising stocks and the dominance of Chinese ‘green’ aluminium. But how far will US policy decisions impact both domestic and international industry?
Battery raw materials – EV sales could accelerate demand
Electric vehicle sales grew 38% in 2020, despite the pandemic. A strong growth is expected again in 2021, as governments around the world are supporting the ‘greener’ automobiles. Battery raw materials should see a surge in demand as a result. But with a wider choice of vehicles using a greater range of chemistries, which metals will be the big winners and which will fall back is literally a billion dollar question?
Copper – can purchasing levels be sustained?
In the second half of last year, the manufacturing sector registered a rapid recovery due to demand for consumer durables as the world adapted to home working. It remains to be seen if purchasing levels can be sustained through 2021. And will the world’s focus on an accelerating energy transition add further price support to copper?
Gold – replenishing reserves will be vital
Prices and sentiment are high for gold. But with a fall in mine supply around the corner, reserve replacement is a must. But with average emissions per tonne of gold around 25 kilo tonnes will this be the year we start to see a market bifurcating based on green credentials?
Lead – limited stocks could further dwindle
Lithium-ion may be the favoured battery technology for EVs but almost all models still also use lead batteries (albeit with 35-60% less lead intensity than in an Internal Combustion Engine). But with scrap supply at risk due to the weather and coronavirus lockdowns, and with smelters struggling to keep up with demand from battery makers, can the lead industry keep the lights on?
Nickel – Indonesia is shaping the market
The nickel story is really all about Indonesia: its export ban on nickel ore is expected to reduce Chinese nickel pig iron (NPI) production by almost 40% in 2021. But this should be more than offset by domestic supply coming online. At the same time Indonesia is also embarking on a journey to become a major hub in the battery supply chain. All eyes are on Indonesia’s next move.
Zinc – Chinese smelter production is the key variable
Given that just under half of the world’s zinc capacity is in China, how the country’s smelters perform and their appetite for imported concentrate will have a large impact on prices through 2021. Meanwhile, with electricity typically accounting for 40-50% of smelting costs will we see zinc smelters seeking to reduce carbon emissions through increased use of renewables? Who will take the lead on ‘greener’ zinc?
Steel – post-pandemic stimulus could drive demand up
Chinese demand is the biggest risk, but growth in China shows no signs of slowing. If global demand is boosted by post-pandemic stimulus and the new US administration pursues investment in steel-intensive infrastructure, steel’s future remains healthy. However, with steel industry responsible for around 10% of global emissions, will this be the year we see some concrete action on decarbonisation?
Coal – Chinese ban on imports
2020 brought enormous changes to the metallurgical coal markets, not the least demand erosion from the pandemic and the Chinese ban on Australian imports. A prolonged cold weather in the northern hemisphere coupled with easing Chinese imported coal restrictions has seen demand and prices soar in early 2021. Will China’s Australian coal ban continue to distort traditional seaborne trade flows? And how will coal be affected in the longer term as carbon reduction policies spread?
Iron ore – Chinese demand remains the key driver 2020 was full of surprises for iron ore. Despite a global recession, prices doubled, and the miners enjoyed highest margins since the boom of 2010-2012. However, with prices riding high, will China-Australia trade tensions and overseas mining projects reduce China’s reliance on foreign-owned imports?