Base metals shine in the wilderness in 2021 as gold falters, iron ore sinks

Metals is heading for additional drama after the turbulent 2021, which is dominated by reduced offers, China’s economic slowdown caused by assets and the global energy crisis, which hints at new disturbances to come.

This year, copper reached a record as the pandemic rocked supply and demand, but tin was at its best when base metals marched higher. The Golden Bulls ended up disappointed even when inflation raged. And iron ore has collapsed from rise to collapse from above $ 200 per tonne to below $ 100 due to a weakening of China’s appetite.

The contours of the other major drivers of 2022 are already visible. Dangerously low stocks have been a topic for metals to be carried over to next year – especially if the global economy continues to improve. Beijing’s stimulus measures could put it under Chinese steel trouble, while the Fed’s tightening and stubborn inflation are obstacles elsewhere. Pay attention to the energy and climate agenda, which should especially dominate aluminum.

“Base metals have shown remarkably good results this year, which is not surprising as they have effectively made up for the ground lost during 2020,” said Gavin Wendt, founding director of Mine Life Pty. “Next year should be a continuation of overall positive demand, but with higher price volatility as the supply side recovers.

The sheet metal doesn’t attract much attention, but it was a big winner and perhaps a poster for metals in 2021. Prices nearly doubled from a year ago, with an electronics boom boosting demand and Covid-19 disrupting supplies. The LMEX index of six metals traded in London is up for its seventh quarter.

Score card

Iron ore was among the biggest losers in 2021, with the apparent end of the Chinese-era frenzied construction driving prices. However, authorities are expected to implement fiscal stimulus and monetary policy to counter this year’s sharp slowdown. The latest production data for December have already shown an intact upward momentum.

Gold ends the year just below what it started, after a winding 2021, as investors turned to riskier assets, including energy and industrial goods. The tightening of the Fed threatens even greater winds. Investors generally expect the Fed to raise interest rates threefold in 2022, and some market participants expect an increase in early March.

For now, rising energy costs in Europe also continue to dominate the supply base for base metals. In its latest impact on manufacturing, Alcoa Corp. said this week that she would shut down the Spanish factory for two years due to high energy costs. Aluminum has risen more than 40 percent this year, and banks are predicting a deeper deficit next year as global pressure on decarbonization begins to tighten production around the world.

On the last day of 2021, base metals were generally lower, with copper in London down 0.4 percent, up 24 percent this year. Iron ore was hovering around $ 120 a tonne and fell 25% this year. Gold changed slightly on Friday and fell 4% in 2021.

© 2021 Bloomberg

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