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The outlook for metals: resilience and cautious optimism

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Metal prices have recovered from the nadir in April and have surpassed pre-pandemic levels, driven by a swift rebound in economic activity, particularly in China, and supply disruptions in Latin America. Metal prices are projected to gain momentum in 2021, following an expected marginal decline in 2020, according to the October 2020 edition of the World Bank’s Commodity Markets Outlook. Risks to the outlook emanate from the path of global manufacturing activity and the strength of the U.S. dollar.

Swift rebound in metals demand in China. Metals demand in China—the world’s largest consumer—remained robust in the second half of 2020, following a strong recovery in the second quarter. In November, the outlook for manufacturing in China was the highest in ten years , as measured by the Purchasing Managers’ Index. Fixed asset investment has risen for eight consecutive months through October and auto sales jumped 12.5% month-on-month in October, the seventh straight monthly increase. China’s metal demand is expected to remain strong, as investment in “new” energy sectors (including renewable energy) accelerates. For example, wind power installations grew almost 140% over the first nine months of 2020; new electric vehicles sales in October more than doubled from a year earlier; and charging infrastructure investment continues to expand.

China’s manufacturing sector has expanded for seven consecutive months

China?s manufacturing sector has expanded for seven consecutive months

Recovery in metals demand outside China. Although metals demand outside China remains weak, it is more resilient compared to the recovery following the global financial crisis during 2008-09. Demand has picked up despite surging COVID-19 cases in Europe and the United States  as most construction and manufacturing industries remained open even during lockdowns. A gradual recovery in global auto sales, as well as robust demand from brewers (who shifted from kegs to cans to accommodate consumption at home during lockdowns), has supported aluminum demand.  Similarly, strong demand for home electronics as people transitioned to working from home has boosted consumption of tin.

Metals demand during COVID-19 is more resilient than the GFC

Metals demand during COVID-19 is more resilient than the GFC

Persistent supply disruptions in Latin America. Iron ore demand have been supported, in part, by supply disruptions in Brazil (iron ore prices gained 47% from April to November 2020).  Production from Vale—the world’s largest iron ore producer—has been derailed by transport and labor disruptions due to the COVID-19 outbreak as well as tougher regulatory requirements following the Brumadinho tailings dam accident in early 2019. Temporary suspension of operations in Chile and Peru due to rising COVID-19 cases boosted copper prices. Similarly, mine production curtailments in Bolivia and Peru supported tin and zinc prices.

Top metal ore producers in 2019

Top metal ore producers in 2019


Wee Chian Koh

Researcher, Centre for Strategic and Policy Studies, Brunei Darussalam

John Baffes

Senior Agriculture Economist, Development Economics Prospects Group

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