Industrial metals: Supply surpluses everywhere

by David Fleschen

The World Bureau of Metal Statistics (WBMS) yesterday reported high supply surpluses for many metal markets in the first two months of the year. These range from 20 thousand tons (nickel) to a good 680 thousand tons (aluminum). All were larger than in the comparable period of the previous year or a year ago, the markets were still in deficit. In January and February, the corona virus was predominant only in China. Nevertheless, the surpluses piled up in this timeframe. From March on, the rest of the world was gradually affected. However, since metal production has also been curtailed in the meantime and the decline in metal demand has been somewhat offset, we do not think that the surpluses need to increase significantly. However, they are not dismantled either.
According to the WBMS data, the zinc surplus was over 120 thousand tons. In contrast, a moderate deficit of 25 thousand tons was reported for lead. According to data from the International Lead and Zinc Study Group (ILZSG), the zinc and lead markets were even better supplied in the first two months of the year. The ILZSG estimates the supply surplus for zinc at 188 thousand tons and gives a small surplus of 16 thousand tons for lead. The day before yesterday, a large industrial and precious metal producer revised its market estimates for nickel and copper, for example: this year, it now expects even higher supply surpluses than before (149 thousand tons for nickel, 80 thousand tons for copper). In our opinion, this speaks against a sustainable recovery in metal prices. Analysts see the price increases observed since yesterday only as a short breath, after the situation on the oil market has apparently calmed down for the time being.
Source: Commerzbank Research, Photo: Fotolia

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