Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Zinc prices will be hurt the most in 2020 with a 25pc fall, followed by lead, down by 14pc, copper by 13pc and aluminium by 10.8pc as an effect of the COVID-19 pandemic, according to a recent World Bank (WB) report. 



Aluminium prices were impacted by COVID-19’s effect on the auto sector with exacerbated global car demand across China, Europe, and the US. Temporarily shutdowns of production resulted in a fall in aluminium prices. From January to March, aluminium prices fell by 3.8pc, marking the seventh quarterly consecutive decline. Towards the end of March, aluminium prices fell to a four-year low below $1,500/mt. Car production fell by more than 30pc in the first quarter ending March 2020, the steepest decline since the 2008 financial crisis. China accounts for more than 50pc of global aluminium production and despite demand cuts, production rose by 2.4pc in Jan-Feb from the year prior in China. 



Copper prices recovered in December ending quarter 2019 in expectation of phase one deal between China and the US and the resolution of Brexit. Prices, however, fell by 4.5pc in March ending the quarter with prices lowering in January on pandemic-induced concerns which dampened the global industrial demand for copper. Price mid-March fell below $4,700/mt, lowest since Q42016. Chinese manufacturers account for more than half of global consumption which declined severely in January and February owing to lockdowns. Demand in Europe and the US contracted in March resulting in a prolonged decline for copper. Weak demand resulted in lower production. Mines in Chile and Peru that account for 40pc of global copper supply were shut for 15 days or more due to lockdowns. Mexico, Zambia, Democratic Republic of Congo also suffered lockdown blues which resulted in a shortage of copper supply.



Shrinking demand for auto resulted in severely weak global auto sales. Auto sector consumes more than 80pc of lead output through automotive batteries and weak auto sales offset the effects of supply disruptions, including the suspensions of mining activities in China. Chinese smelters produce more than 50pc of global lead supply and these smelters found it difficult to secure raw materials to produce lead ingots from scrap lead batteries. 



Zinc demand depends on end-use sectors like auto and construction. Prices declined by 10pc in Q1 after a moderate rise in Q42019. Prices in late March touched four-year lows and dipped below $1,800/mt. Demand for zinc fell due to low demand from the auto, real estate and construction sectors. Supply disruptions had little effect on prices. Chinese mines and smelting operations were postponed which resulted in slower production. Mines in Peru, which account for 11pc of global supply, were also temporarily shut and could affect the supply of zinc in 2020.

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