Commodities

Bearish trend likely in base metals in 2022

BL Ahmedabad Bureau | | Updated on: Dec 17, 2021
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Inflation worries and slowing down of industrial activities may exert pressure on prices

After remaining hot for most of the year, base metals — copper, zinc, aluminium, and lead — are likely to stabilise over the next 1-2 quarters before heading south in the later part of 2022, experts noted, indicating a bearish price sentiment for the metals for the next year.

Citing factors such as global and US inflation worries, a rate-hike cycle being adopted by central banks world over and the slowing down of the industrial activities from the 2020 peak on account of sustained higher prices, experts believe that the metal prices would face a downward pressure globally.

Addressing a webinar on Base Metals Market Outlook 2022, organised by BusinessLine , Sandeep Daga, Founder and Director, Regsus Consulting, said: “The high prices of metals have been killing the demand in India, China and parts of Asia, besides South-East Asia. Next year, we could have a surplus in most of the metals, which looks very natural, because demand is going to moderate while supply is likely to gradually recover. This would mean that the heavy prices are going to gradually moderate from now over the next six months. Prices would become more acceptable to the consumers when a fair equilibrium is reached between demand and supply.” .

Technical outlook

Gurumurthy K, Chief Research Analyst, Business Line , said the Bloomberg Base Metal spot price index on a monthly basis had peaked at 300 points in October this year, but indicated the possibility of a correction from the peak and the outlook appeared bearish. The index, he said, may touch 200 points towards the end of 2022 or early 2023.

“And we will see copper prices falling from the second quarter of next year to $7,500Since we see copper prices coming down, it could mean global slowdown is on the way,” said Gurumurthy, pointing at sharply lower prices for aluminium at $2,000 by early 2023, from the current levels of $2,600. For zinc and lead, he said there would be a temporary upside.

Mayur Karmarkar, Managing Director, International Copper Alliance India, highlighted the demand drivers for base metals such as faster economic growth, increasing urbanisation, rising disposable income, industrialisation and increasing electrification.

Outlining the demand for copper in the coming decade, Karmarkar said: “ As India grows, its metal usage is also likely to grow faster. Demand scenario for the decade is estimated at an average growth rate of 8-9 per cent. And we see copper demand to cross 2.2 million tonnes by 2030.”

Subramani Ra Mancombu, Commodities Editor, BusinessLine , moderated the webinar, while G Chandrashekhar, policy commentator and commodity markets specialist, presented the closing remarks.

Published on December 17, 2021

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