Metals capped off a tumultuous year dominated by supply squeezes, China’s property-led economic slowdown and a global energy crisis that hints at more disruptions to come.
Last year saw copper hitting a record as the COVID-19 pandemic roiled supply and demand, but tin was the star performer as base metals marched higher.
Gold bulls were ultimately left disappointed even as inflation raged, while iron ore suffered a boom-to-bust collapse from above US$200 a tonne to below US$100 on China’s waning appetite.
The contours of this year’s other major drivers are already visible. Dangerously low inventories was a theme across metals that are expected to carry into next year — especially if the global economy continues to improve.
Beijing’s stimulus measures might put a floor under China’s steel woes, while US Federal Reserve tightening and stubborn inflation is a headwind elsewhere. Energy and the climate agenda should dominate aluminum in particular.
“Base metals performed outstandingly well this year, which is not surprising, as they effectively made up ground that was lost during 2020,” Mine Life Pty founding director Gavin Wendt said. “Next year should see a continuation of overall positive demand, but with greater price volatility as the supply side recovers.”
Tin does not normally receive much attention, but it was the big winner and perhaps a poster child for metals last yera. Prices nearly doubled from a year earlier, with an electronics boom fueling demand and COVID-19 disruptions crimping supply.
The LMEX index of six London-traded metals is heading for a seventh quarterly gain.
Iron ore was among the big losers last year, with the apparent end to China’s era of frenzied construction dragging on prices, but authorities are expected to implement fiscal stimulus and monetary policies to counter this year’s sharp slowdown. The manufacturing data for last month have already showed that upward momentum is intact.
Gold finishes the year a little below where it started, after a meandering year as investors turned to riskier assets, including energy and industrial commodities.
Fed tightening threatens more headwinds. Investors largely expect the Fed to raise interest rates three times this year, with some market participants expecting a hike as early March.
For now, soaring energy costs in Europe also continue to dominate the supply side for base metals. In its latest impact on production, Alcoa Corp said this week that it would halt a Spanish plant for two years on high energy costs.
Aluminum has risen more than 40 percent this year, and banks forecast a deeper deficit next year as the world’s decarbonization push starts to tighten output worldwide.
On Friday, base metals were mostly lower.
Gold for February delivery rose US$14.50 to US$1,828.60 an ounce, increasing 0.93 percent from a week earlier.
Silver for March delivery rose US$0.29 to US$23.35 an ounce, up 1.79 percent on the week, while March copper rose US0.07 to US$4.46 a pound, posting a weekly gain of 1.59 percent.
Additional reporting by AP
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