• 3 minutes Will Variants and Ill-Health Continue to Plague Economic Outlooks?
  • 6 minutes Forecasts for Natural Gas
  • 14 minutes NordStream2
  • 8 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 7 hours Communist China Declared War on the US Long Ago Part 1 of the 2-part series: The CCP's War on America
  • 2 hours China's aggression is changing the nature of sovereignty.
  • 10 hours Delta variant in European Union
  • 3 days Ukrainian Maidan after 8 years
  • 16 hours President Biden’s Nuclear Option Against OPEC+ - Waste of Time
  • 4 days OPEC+ Expects Large Oil Glut In Early 2022
  • 4 days Microbes can provide sustainable hydrocarbons for the petrochemical industry
  • 2 days Сryptocurrency predictions
  • 4 days CO2 Electrolysis to CO (Carbon Monoxide) and then to Graphite
  • 4 days Hunter Biden Helped China Gain Control of Cobalt Mines in Africa
The Top Two Commodities To Watch In The Short Term

The Top Two Commodities To Watch In The Short Term

Commodity prices have been on…

Why Many Commodities Are Still Undervalued

Why Many Commodities Are Still Undervalued

Despite their terrific run over…

Ag Metal Miner

Ag Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

More Info

Premium Content

Metals Shortage Likely To Continue Into The New Year

  • Pandemic-related restrictions have resulted in long queues for ships into ports, weighing on metals supply chains.
  • The global energy crisis has also played a role in the supply difficulties.
  • Demand for many key base metals is recovering, though supply is still rebounding.

Several factors are likely to see base metals continue to encounter supply constraints into 2022. Chief among them is demand, said Colin Hamilton, managing director of commodities research at BMO Capital Markets.

“We have never seen this level of demand impulse before,” he said in an Oct. 12 web presentation.

Producers have also had difficulty keeping up with the demand, which Hamilton attributed partly to people working from home and ordering consumer durables online.

“This is bona fide, demand-driven deficit,” he added.

Hamilton’s statements came during LME Week, which took place Oct. 11-15. The event is an annual gathering for metal specialists, ranging from traders to analysts and CEOs, and includes an invite-only dinner hosted by the London Metal Exchange.

Energy crisis impacts metals supply

The global energy crisis has also played a role in the supply difficulties.

“We are struggling to get additional calories into the world,” Hamilton said.

Causes behind the energy crisis are not so much due to the energy transition, which is still in the beginning stages, but because there are substantially higher levels of heating of space, Hamilton noted.

Buildings could help to remedy space heating, however, as they cover about 30% of global energy. There are some metals-intensive wins there. Smart facades of metals on buildings will allow for better temperature control. Meanwhile, improved ventilation in light of COVID will benefit zinc and copper. Furthermore, LED lighting is wiring-intensive.

The amount of data and Cloud IT spending and 5G have also proven energy-intensive.

“All these factors are playing into structurally higher energy demand growth than we were probably ready for,” Hamilton noted.

Chinese power outages

Power outages in China are also impacting industrial activity. The country has now resumed coal shipments from Australia after an informal ban in 2020.

“Chinese power outages are widespread. We are cutting more supply than demand,” Hamilton added.

Coal imports rose in September rose 76% year on year to 32.9 million metric tons, an Oct. 13 report from the Financial Times stated, itself citing official Chinese customs statistics.

Related: Iraq: Oil Could Hit $100 Next Year

The energy intensity prompted Hamilton to forecast that metals supply would be down for the remainder of 2021.

Gas imports rose 23% to 10.6 million metric tons from about 8.61 million tons, the Financial Times report added.

Restarting of national economies after the COVID-19 pandemic, a longer winter season in 2020/2021, plus competition from East Asian companies have also seen gas prices in Europe rise several times year over year, news agency Euronews reported last week.

The European Energy Exchange’s end-of-day, weekend price for natural gas at the Amsterdam TTF hub was €89.31 ($103.59) per MWh for Oct. 16-17. That level is off from the Day Ahead price of €114.29 ($132.57) reported on Oct. 6. Meanwhile, it is more than twice the €50.38 ($58.43) reported Sept. 1.

Logistics shakeup

The distorted manner, in which economies also recovered from the COVID-19 pandemic, ranging from geographic to sectoral factors, also wreaked havoc on logistics, Hamilton indicated.

Pandemic-related restrictions have resulted in long queues for ships into ports, such as at Los Angeles. Furthermore, containers are dispersed across the globe.

In some cases, primary metals have shipped as break bulk, rather than traveling in containers, Hamilton remarked.

The chances of someone being desperate for metals are also pretty high, Hamilton warned, meaning potentially high premiums.

“You will want to hold a little more inventory, if you can, just to be cognizant of the fact that sometimes it might be hard to get that material on a just-in-time basis,” Hamilton warned.

In his outlook for base metals, Hamilton believed that energy shortages and high costs in China would mean 2-3 million metric tons of aluminum supply cuts would be sustained until year’s end until there is more flexibility to negotiate in energy markets.

Aluminum demand in H1 2021 also rose 120% year over year, Hamilton said.

“Short term, this market is extremely tight at this moment,” Hamilton said.

“But for the longer term it is the one industry where we see scrap coming through quicker as it goes through shorter life-cycle demands,” Hamilton added.

A response outside of China, mainly in the United States and Brazil, would at first require idled capacity to undergo upgrade work before it could come on stream.

Copper outlook

For copper, raw material supply is starting to ease. Copper treatment charges could be slightly higher in 2022, Hamilton said.

Hamilton warned of a potential shortage by 2030, noting that much demand growth remains. This growth will come from energy transition and electrifying the world, as well as in construction and consumer goods.

“The market needs to embrace substitution,” to deal with that, he added.

Fiber optics will take away some of that demand, but the energy transition, electrifying the world along with building infrastructure and proliferation of consumer goods will combine to increase demand.

Copper projects are on the way, with a projected nine to start up by 2030. However, Hamilton believed that four of them is more realistic.

Zinc demand

In zinc, China’s demand in the first nine months of 2021 was above copper, aluminium or steel after three years in which we did not see any growth.

“Europe galvanized steel imports have definitely been a key factor and they will be at record levels in 2021,” Hamilton added.

There will be slower demand growth in 2022, even though it was a good year in 2021, he added.

He warned that expectations for Chinese demand against supply are too high and would need to decline. Environmental concerns also make it harder to start new zinc projects and smelters.

European zinc smelters are also susceptible to higher power costs, Hamilton said.

Lead faces competition; nickel demand to remain strong

Lead demand will continue trending flat over time, however, Hamilton warned.

“Lead faces many challenges, especially from lithium-ion batteries.” Furthermore, recyclability is also that metal’s Achilles’ heel, he noted.

“As a result, we just don’t need a lot of primary material,” Hamilton said.

Global nickel demand might be 15% higher year over year in 2021 due to very high stainless steel demand, Hamilton said.

“Nickel pig iron production costs are at the highest levels that we have seen since 2014 because of increased energy costs as well as logistics costs for ore shipments,” Hamilton said.

While the People’s Bank of China have said that they would no longer provide funding for any coal-fired nickel plants, batteries and the stainless sectors kept Hamilton optimistic on that base metal’s outlook.

“Battery recycling will continue to grow later in the decade. That will also be a source of nickel supply units,” he noted.

By AG Metal Miner

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News