If you thought markets were largely a function of supply and demand, the non-ferrous metals market has been a surprise this year.

According to analysis from Moody’s affiliate ICRA, while the market for aluminium, copper, and zinc have gone down over the past year, the market has actually been tighter.

In a note released yesterday, it said consumption of aluminium and copper in the first quarter of this year was down 1.4 percent to 0.8 percent, while consumption of zinc was down 1.3 percent.

Despite the muted consumption levels, the market for all three markets actually got tighter as production didn’t keep up with the meagre consumption.

The global aluminium market was at a 0.07-1.01 million tonne deficit, largely as a result of cutbacks from China, ICRA said.

What’s more, while consumption rebounded in the second half of next year, ICRA said that “no meaningful improvement in the supply scenario is envisaged in the near term”. 

Meanwhile, copper remains in deficit while the zinc market has been in deficit for the last four quarters.

READ: Why the copper market remains tight

ICRA said while a correction based on fundamentals seems unlikely, the supply deficit will continue — at least for copper and aluminium.

“For the calendar year 2019, while deficits in the aluminium and copper markets are likely to expand, the zinc market is expected to be balanced,” senior vice-president and group head of sector ratings at ICRA, Jaynata Roy, said.

The analysis suggests that other factors, such as geopolitical uncertainty, are at the core of the metals’ price performance over the past year.

Should the market be eased on the geopolitical front, one could reasonably expect the focus to switch to more fundamental drivers of price — such as supply imbalances.


This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.