India Ratings and Research (Ind-Ra) has published the Metals and Price Deck 2021. The report contains a detailed review of copper, aluminium, zinc and thermal coal, encompassing the supply situation, demand movement, balance between demand and supply, pricing levels, possible disruptions, while also providing an insight on the domestic industry. This is not a price projection; however, it is more of a guidance on the price points that will be applied by Ind-Ra’s in its base case financial projections.

Key Structural Themes: Ind-Ra expects base metals prices in 2021 to be higher year on year (yoy), led by a robust demand recovery amid gradual supply increases. Increasing environmental concerns and emission targets are likely to lift the global cost curves across metals. Geo-political relations and currency movements are also likely to be the key drivers for metal prices.

Demand Growth Momentum to Sustain:
The current strong global commodity demand is stemming from a continued strong Chinese demand while other economies are also making a comeback from the pandemic-related impacts. China which has a lion’s share of global consumption of key commodities is likely to witness a strong demand over 2021 on back of a continued government-led infrastructure spending. 

Tight Demand-Supply Equation:
The global commodity demand improvement will be balanced by gradual capacity additions, although intermittent lockdowns in certain producing nations would cause temporary disruptions. Also, sustainability and decarbonisation efforts are likely to lead to capacity curtailments. Logistical and supply chain management remains an issue and also supports cost inflation. However, the tight demand-supply equation in 1H21 is likely to ease in 2H21.

Copper Market, Marginal Surplus:
The copper price assumption for 2021 is higher yoy due to the tight demand supply equation for concentrates, while supply-side risks persist with labour contract renewals due in Chile and Peru. As such, refined metal could remain marginally in surplus by end-2021. Over the medium to long term, copper prices will be supported by the gradual energy transition which would result in increased usage of copper in cabling, electric vehicles, transformers, charging infrastructure and wind generators. 

Zinc Depends on Global Auto:
Zinc prices for 2021 are projected higher yoy, led by a strong recovery in global demand for galvanised steel. However, the mined zinc concentrate supply will gradually improve and marginally impact the prices over 2H22. Ind-Ra opines the refined metal is likely to be either flat or in a slight surplus situation as the global auto and infrastructure demand improves while supply is also improving commensurately amid high inventory levels. 

China Leads Global Aluminium Demand Recovery:
The aluminium price assumptions for 2021 are higher, on account of the continuance of a strong demand from China while other countries are gradually increasing the usage over 2021 yoy. While China is likely to be in deficit in 2021, the global aluminium market is likely to be in surplus elsewhere. However, metal prices are likely to be supported by a high demand from auto and packaging end-user segments. 

Ex-China Thermal Coal Consumption Improves:
The thermal coal price assumptions for 2021 are higher yoy, on account of the strong Chinese demand amid low domestic inventories, gradual demand recovery ex-China, and supply constraints. Indonesia, the largest exporter of thermal coal, is exporting higher volumes to China, considering the Chinese ban on Australian imports. Increased ex-China demand is now being catered by Australia, the second-largest exporter of thermal coal, having limited supplies and thus leading to a price surge.
 

Figure 1

Metals and Mining Price Deck

Actuals

Price assumptions

Commodity (USD/tonne)

2020

1H21

2021P

2022P

2023P

Long-term

Copper

6,181

8,884

8,200

6,700

6,700

6,700

Zinc

2,376

2,823

2,600

2,200

2,100

2,100

Aluminum

1,701

2,212

2,150

1,850

1,850

1,900

Iron ore fines (62 FE China CFR)

108

200

170

90

80

70

Hard coking coal (Australia Premium, Spot, CNF)

135

155

175

145

145

145

India steel- HRC

542

818

790

580

560

550

Thermal coal (Australia Newcastle 6,000kcal/kg)

60

98

90

70

68

65

Source: Fitch Ratings Ltd, Ind-Ra, LME, Comex
P: Projections


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Analyst Names

  • Siddharth Rego

    Analyst
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051
    +91 22 40356115

    Shradha Saraogi

    Senior Analyst
    +91 33 40302509

    Mahaveer Jain

    Director
    +91 80 46666817

    Rohit Sadaka

    Director
    +91 33 40302503

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121