How long will the metal price fever last?

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Moogy’s Investment Services report suggests that the current high prices of metals will gradually decrease, although demand for metals in particular and the mining industry in general remains high. Photo: Market Watch

The just-released Moogy’s Investment Services report has revised its forecast for the metals market from “positive” to “stable”, despite suggesting that most metals prices are consistently surpassing milestones, but that doesn’t mean prices will continue to rise further.

According to Moody’s, the current high prices will gradually decrease, although the demand for metals in particular and the mining industry in general will remain high. The organization thinks prices of most base metals will remain firm through 2022, after hitting record highs this year.

In this report, Moody’s mentions the medium-term price outlook for commodities: iron ore, steel, coal, aluminum, gold, silver, nickel, copper and zinc, with forecasts that most prices will surpass historic highs.

Among the key base metals, aluminum prices are expected to continue rising until at least early 2022, surpassing $2,600/ton, or $1.20/lb, a decade high. then remain steady until mid-2022.

Copper prices are also expected to remain high until at least the end of 2022 above historical averages. In the long run, supply shortages are expected to continue to support the price of this red metal. Efforts by countries to reduce carbon emissions, by switching to clean energy sources, have also benefited copper production, leaving suppliers struggling to meet demand in some regions, including Chile.

Copper price movements.

Copper prices have remained above $4/lb since February due to a significant recovery in demand. In early May, copper prices climbed to nearly 5 USD/lb, before falling again in the context of China being at risk by the Delta variant Covid-19 virus slowing down production in the country, dragging on imports.

Despite a resurgence of Covid-19 in many parts of the world, global industrial activity remains strong overall, with the US and European manufacturing purchasing managers indexes both above 60. , and in China it is above 50 (above 50 indicates growth).

Moody’s expects high nickel prices in the first half of the year to be unsustainable into 2022, but likely to remain high through at least early 2022.

Nickel production has fully recovered to pre-pandemic levels, so nickel supplies are expected to be plentiful. In August, nickel prices were around $19,000/ton, or $8.62/lb, up nearly 40% from the 2020 average of 13,784 tonnes ($6.3/lb) amid economic recovery, the lifting of anti-Covid-19 restrictions and high demand expectations for batteries.

However, analysts say the supply of nickel pig iron (NPI) – a low-grade ferronickel and a cheaper substitute for pure nickel in stainless steel production – will increase. In Indonesia, more mining facilities have come into operation.

An increase in Indonesia’s NPI is expected to offset falling output in China, which faces reduced ore supply and rising ore prices.

While zinc prices have shown “strength” (bullish) in the middle of the year, the metal’s long-term price is forecast to decline as long-term zinc production growth outpaces low demand growth. Even so, zinc prices are forecast to continue to rise in the second half of the year amid strong demand from the steel sector and reduced zinc production in China.

The world zinc market is currently moving from deficit to surplus, with production recovering in the major zinc mines of Peru, Mexico and Bolivia among others.

With that in mind, Fitch Solutions’ Risk and Industry Research has released a report stating that this year’s global zinc mined production is likely to grow at its fastest rate since 2012, 4.3%, when the Covid-19 epidemic gradually decreased and the anti-Covid-19 lockdown/social distancing policies were gradually lifted.

After this year, the recovery in catches – which began in 2019 after five consecutive years of decline – will continue, Fitch said. “However, a gradual decline in zinc prices will limit the scale of expansion of existing projects as well as the development of new projects because the attractiveness of such projects decreases with the price of zinc. “We forecast production. Global zinc mining will grow at an average annual rate of 1.9% between 2021-2030,” Moody’s said.

A series of metals are forecast to return to their previous levels. It is forecasted that iron ore prices after 2022 will gradually move to an average level of 70 to 80 USD/ton as in the period 2016 to 2019.

In the short-term, tight iron ore supply should keep prices high until 2022. However, prices are now sharply down from their peak earlier this year due to increased supply and slowing demand growth.

Coal prices are expected to remain relatively high but will gradually ease as supply issues and geopolitical disputes ease.

Meanwhile, the worldwide supply-demand imbalance for steel will return in 2022, prompting prices to gradually decline towards historical averages, after hitting an unusually high this year.

For the precious metal, Moody’s forecasts market uncertainty, low real interest rates and inflation will keep gold prices above normal in previous years until 2022, but expects prices to fall from around $1,800 an ounce in the third quarter of 2022, as the economy continues to recover, the U.S. dollar strengthens and gold production gradually increases.

“Several economic indicators suggest inflation will rise above central bank expectations, and the US Federal Reserve is unlikely to change its policy stance anytime soon.

Silver prices are forecast to continue to stay high in 2022, reflecting the same factors as for gold, and as demand from the industrial sector continues to grow.

Source: – Translated by