Sustained rebound in metal prices amid the global economic recovery

Metal prices continued to climb in early 2021, driven by strong demand in China, the ongoing global economic recovery, and supply disruptions. Metal prices are projected to average 30% higher in 2021 than last year, before easing in 2022.  Risks to this outlook include a prolonged pandemic, the availability of stimulus measures, and, in the longer term, the pace of decarbonization efforts.

Metal prices and global manufacturing PMI

Strengthening global demand. Global metals demand has picked up since the second half of 2020, particularly in China, the world’s largest metal consumer.  Chinese metals demand has been boosted by investment in infrastructure and construction, augmented by a strong global uptake in autos, appliances, and machinery. The global manufacturing PMI rose to 55.8 in April, the highest level in 11 years.

Persistent supply disruptions. Metal ore exports from Chile and Peru have struggled to recover due to COVID-19-related disruptions, while China has unofficially banned Australian copper ore imports.  Meanwhile, tin supply has been disrupted by production curtailments in Bolivia, Indonesia, Malaysia, and Peru, as well as political turmoil in Myanmar.

Top metal producers

Shrinking refining costs. Refining costs (also known as treatment charges, i.e., fees paid to smelters to process concentrate ore into refined metal) have fallen since mid-2020, as smelters had to accept lower terms to secure feedstock. Shrinking refining costs have prompted many suppliers to cut output. Refining costs for copper have reached decade-low levels while capacity constraints at zinc and lead smelters, which had led to a surge in treatment charges before the pandemic, have also eased considerably. 

Regional shift in infrastructure stimulus. Chinese metals demand is anticipated to taper off in 2021 as infrastructure stimulus is gradually scaled back.  Meanwhile, the United States recently introduced a $2 trillion plan to overhaul and upgrade the nation’s infrastructure, including improving transport infrastructure, reviving U.S. manufacturing, upgrading electricity and water infrastructure, building affordable housing and public schools, and investing in digital infrastructure.

Global transition towards green growth. Demand for metals is likely to benefit from an acceleration of decarbonization efforts. Low-carbon technology is typically more metals-intensive , which will support demand for aluminum and copper (e.g., electric vehicles and infrastructure), nickel, cobalt, and lithium (e.g., batteries), and rare-earth metals (e.g., magnets for green technologies). For instance, electric vehicles (EVs) require more than four times as much copper as traditional internal combustion engine cars.