Industrial Metals Update

Slower growth in China to drag on prices in 2022

While high power prices and low stocks will support prices in the near term, we think that prices will pull back in the second half of 2022 as Chinese economic activity slows further and supply improves. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

13 January 2022

Metals Data Response

Global Steel Production (Nov.)

Global steel production contracted in y/y terms in November, mainly owing to depressed output in China. Although China’s power rationing came to an end last month, there are no signs of an upturn in steel supply. Given our expectation that construction-related steel demand will remain subdued, a sustained rebound in China’s steel production appears unlikely in the coming months.

22 December 2021

Industrial Metals Update

Drawdown in stocks to reverse in 2022

Exchange stocks of base metals have fallen this year, as supply was interrupted by power rationing in China as well as the ongoing effects of COVID-19. However, now that power restrictions have been lifted, and with Chinese construction activity continuing to weaken, we expect stocks to start to build which should weigh on prices in the coming year.

21 December 2021

Our view

We expect slower economic growth in China to drive a decline in industrial metal prices as we move into 2022. On the supply side, the power shortage and subsequent power rationing in China appears to be over the worst. In turn, this has weighed on some metals prices such as aluminium as producers are now set to ramp up utilization rates, adding more refined metal to the market. There remains a risk that a colder winter in China could disrupt power availability but coal output in the country has been surging which should help to mitigate this. Meanwhile, we expect the prices of most precious metals to fall in 2022-23 as rising real yields in the US weigh on investment demand.

Latest Outlook

Metals Outlook

Metals can’t escape China slowdown

Industrial metals prices have risen recently on the back of supply concerns related to higher energy costs and power rationing in China. Both factors will continue to support prices in the near term. However, we expect these supply issues to be broadly resolved by spring 2022, and that weaker demand in top consumer China will drag on prices thereafter. We also forecast falls in precious metals prices, but that has more to do with our expectation that US real yields will be gradually rising over the course of next year.

3 November 2021