Global metal prices are projected to increase 16 percent in 2022 and ease somewhat in 2023, but risks to the outlook are skewed to the upside, emanating from further disruptions of commodity flows into and out of Russia, the World Bank said in its latest Commodity Markets Outlook.
It said key downside risks include prolonged lockdowns in China and weaker global growth. In the longer term, the energy transition could significantly lift the prices of some metals, notably aluminium, copper, and nickel.
The World Bank’s Metals and Minerals Price Index rose 13 percent in the first quarter of 2022 (q/q) with some metal prices reaching all-time highs in March amid historically low inventories. The war in Ukraine has been a key driving force behind aluminium and nickel price movements, while high energy prices have affected most metals, especially aluminium and zinc, the report said.
Iron ore prices surged 27 percent in 2022Q1 (q/q), reversing the declines in the second half of 2021.
“Acute pandemic-related labor shortages in Australia have disrupted production, while heavy rains and flooding significantly curbed output and exports from Brazil; the two countries account for more than 70 percent of the seaborne iron ore market. Supply losses are also expected due to damaged export infrastructure in Ukraine and the difficulty in rerouting exports from Russia, the two countries together account for 4 percent of global exports,” the report said.
On the demand side, Chinese steel production is recovering and is expected to be propelled by government infrastructure spending and policy support. Brazil’s key iron ore company, Vale, is increasing production after a tailings dam collapse in 2019 and is adding new capacity, while new supplies are coming online in Australia, Canada, and Liberia.
Iron ore prices are projected to fall by 13 percent in 2022 and 25 percent in 2023. Risks to the forecast include further disruptions to supply as a result of the war (on the upside) and slowing global growth (on the downside).
Aluminium prices jumped 18 percent in the first quarter of 2022 (q/q), the seventh straight quarterly gain, reaching nearly $4,000/mt in early March. The market has been affected by production curtailments (especially European smelters) due to high energy costs, depleted global inventories, and disruptions to alumina supplies— a key input to aluminium.
Amid supply disruptions and high energy costs, aluminium prices are projected to increase 38 percent in 2022 before easing in 2023. Downside risks include further weakness in China’s property sector and concerns about global economic growth. On the upside, production could be further reduced if disruptions to alumina supplies persist, and energy prices are higher than expected.
Copper prices reached an all-time nominal high of $10,845/mt in early March. Prices have been buoyed by low inventories and solid demand in China and advanced economies stemming from robust durable goods consumption. The copper market has been affected by water shortages in Chile and labour disputes in Peru.
Copper prices are projected to increase by 8 percent in 2022 as constraints in Chile and Peru persist, and as one of China’s major smelters is facing credit issues. Prices are expected to ease in 2023, however, as new projects come online, including in Chile, the Democratic Republic of Congo, Mongolia, and Peru, the World Bank said.