Introduction to LME Week

During the week of October 9, the metals industry gathered in bustling London for the annual LME Week. Brokers, traders, recyclers, logistics service providers, producers, and various other stakeholders came together here—not only to discuss the latest price trends, but also global laws and regulations. On Monday morning, various market specialists shared insights on current prices and their predictions for the future of these critical metals.

Aluminum

The event kicked off with Jorge Vasquez, founder and Managing Director of Horbor Aluminium. He is an authority on market information and data analysis in the aluminum market. All eyes were on him, filled with hope following recent price declines on the LME. Unfortunately, those in attendance were confronted with the harsh reality. 

During the COVID-19 pandemic and following the invasion of Ukraine, there was a massive surge in aluminum purchases. Producers and traders wanted to anticipate a return to normal market conditions. This drove prices up. Jorge put it aptly: “We’re borrowing demand from the future.”

But so far, that demand has not materialized. As a result, global inventories have been declining for a year now. Still, there seems to be light at the end of the tunnel. After all, aluminum is indispensable for the transition to a more sustainable world. Consumers, manufacturers, and traders all want sustainably produced aluminum. This means using fewer natural resources and more aluminum scrap as the base material for new aluminum. 

All over the world, we are seeing more and more so-called secondary smelters emerge. So the demand for aluminum scrap will have to remain steady, or even increase. But the market remains unpredictable. Jorge warned those present to remain cautious and make well-considered decisions.

Copper

The next speaker was Max Layton, Commodities Researcher at the Citi Bank Group. He reminded his audience of the impact of current market conditions on the price of copper. A recession in Europe, interest rates at their highest level in twenty years, persistently high inflation, and sluggish economic growth in China—a superpower and major consumer of copper.

The copper price is therefore expected to fall further this year to $7,500. It will continue to fluctuate around this level in 2024 as well. That may sound a bit bleak. Still, the situation here isn’t as serious as it seems. Copper will continue to play a key role in the climate transition, with growing demand. Think of the construction of cable networks, the production of electric cars, and renewable energy sources. Analysts at Citi Bank predict that the copper price will easily reach levels of $12,500–$15,000 by 2025. This is because demand for copper is expected to peak starting in 2025. That means sustained high demand for copper scrap. This has an added benefit: lower CO2 emissions compared to extraction from copper ore.

Zinc & Lead

Compared to other metals, there is less zinc and lead in circulation. Nevertheless, they play an important role in the world of construction and renovation, especially in emerging economies such as India. Thanks to rising prosperity, that country is investing heavily in the production and recycling of these metals, which will consequently increasingly shift toward India.

Globally, the short-term outlook for zinc and lead does not look very promising due to the current economic slowdown. However, a recovery is predicted to begin around 2025, thanks to an improvement in the global economy and growth forecasts for copper and aluminum, among other metals.

Steel

Laura Varriale of S&P Commodities Insight outlined current and future price trends for steel. Of particular note is the growing market for low-carbon steel, despite its higher costs. Consumers and automakers are actively contributing to the demand for sustainably produced metals. Automakers are increasingly using material passports. This allows consumers to see how cars are produced and whether this was done in a sustainable manner. Demand for low-carbon steel is expected to continue to rise. This is reflected in the number of factories that are adapting their production methods to use scrap metal as a base raw material. This replaces traditional iron ore and coal, which are considered highly polluting.

In the Turkish rebar and billet steel industry, we are seeing mainly uncertainty and a wait-and-see attitude. Due to reduced demand from Europe, steel mills are trying to tap into new markets. This is no easy task, as they face competition from major producers in Asia and India. However, due to this declining European demand, several German mills are planning to scale back their capacity. This could drive up prices.

A positive development for the industry is that steel prices in China are expected to recover somewhat, returning to previous levels. This could happen as early as the fourth quarter of this year, but if not, then certainly in the first quarter of 2024.

Nickel

Jim Lennong of Macquire Bank discussed the outlook for nickel prices in the coming years. Currently, there is an oversupply, including lower-grade nickel such as ferronickel and nickel-chromium ores. These are being offered at significant discounts on the London Metal Exchange.

Global production is dominated by two countries, which together account for 70% of the world’s nickel demand: Indonesia (55%) and China (15%). Indonesia continues to expand its production capacity.

This metal is used, among other things, in nickel batteries for electric vehicles. With the rapid global adoption of EVs and the expected growth, demand will remain high. However, battery manufacturers are currently reducing their nickel inventories due to falling prices. Most of these inventories are located in China, which is expected to maintain high demand for nickel. In Europe, there is virtually no battery production, and prices will remain low.

Tin

Dr. Jeremy Pearce of the International Tin Association spoke enthusiastically about the price of tin, the “forgotten metal.” Why forgotten? The usefulness and importance of tin for the metals sector often seem to be underestimated. There are many applications, such as printed circuit boards, steel can packaging, and as a coating on copper conductors to improve performance. But tin can also be found in hydrogen technology, electric vehicles, and carbon catalysts.

Compared to other metals, the global market is remarkably small. As a result, external market conditions can easily influence the price of tin. Consequently, the market fluctuates relatively sharply in response to changes in demand.

Nevertheless, we also see rising demand for tin in the medium term. This is partly due to ongoing digitization and the push toward a more sustainable environment. But the growing global middle class is also contributing to this trend, with India leading the way. It is primarily within this group that people buy soft drink cans and use electrical appliances.