Base Metals Dashboard - Week Ending June 17, 2022

LME Copper prices have slumped this week, due in part to Shanghai reinstating COVID lockdowns late last week. Over the weekend, authorities conducted COVID screenings in 15 out of 16 of Shanghai’s districts, and six of these districts were on lockdown during the tests. These new lockdowns come less than a week after Shanghai and Beijing reopened in early June.  Copper prices jumped early last week; however, the optimism quickly faded after Beijing restarted some lockdowns on Thursday. LME copper finished nearly unchanged last week, but pessimism reined this week.

Notable Metals News 

Chinese stimulus measures and Russian supply issues will support nickel prices in 3Q 2022, according to Fitch Solutions. “Chinese stimulus measures improve the demand outlook and the Russia-Ukraine war continues to disrupt supply,” Fitch said this week. Russia’s top nickel producer Nornickel has not been sanctioned, but supply chain issues have led to lower supply forecasts, Fitch notes. However, they believe that refineries, specifically in Indonesia, will increase production beginning in late 2022. This could weigh on prices, as Fitch predicts 2023 prices to be $24,000/mt, down from its estimate of $27,500/mt for 2022 prices. Nickel prices have been volatile in 2022, as the 3M contract traded to $55,000/mt in early March. Prices are down nearly 53% since then, closing at $25,669/mt today, down over 9% in June alone. The forward curve in 2022 and throughout 2023 currently hovers near $26,000/mt.

As for global steel production, South Korea’s top steel producer POSCO briefly curbed production this week due to a trucker strike, according to Bloomberg. On Sunday, the company told Bloomberg that cold-rolled steel production will be curbed by 4,500 mt, as the trucker strike has exhausted the company’s warehouse space. However, the strike quickly ended, late Tuesday afternoon, and POSCO announced that shipments would resume the following afternoon. The company also stated that they would increase production to make up for the 13,000 mt of cold-rolled steel that couldn’t be manufactured due to the strike. POSCO produced 13.645 million mt of cold-rolled plated sheets in 2021, of which 7.6 million mt was exported, according to steelmint.com. POSCO was the world’s sixth-largest raw steel producer in 2021, according to the World Steel Association.

The global lead market will be balanced in 2022, as supply deficits of lead in Europe and the US will offset a surplus in China, according to Reuters. On Monday, Wood Mackenzie’s Farid Ahmed said, "Demand has been super-hot in North America and Europe for almost two years and is only now starting to show indications of easing. But it remains tight with supply struggling to keep up with demand." Ahmed also added, "Globally, the refined lead market is quite well balanced." Wood Mackenzie is predicting a global supply surplus of 78,000 mt in 2022.

Finally, regarding tin production, the recent drop in global tin prices might force Chinese tin smelters to cut their capacity utilization to 40% or less, according to the International Tin Association (ITA). Capacity utilization is a measurement of how much available production capacity the industry is using. The ITA also stated on Tuesday that high import volumes have suppressed domestic prices, leading to operational risks and “huge price fluctuations” for tin smelters. Chinese refined tin production was 165,200 tons in 2021, according to Shanghai Metal Market. Based on ITA data, China produced nearly 44% of the world’s refined tin in 2021.