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China energy transition to keep base metals high in 2022

By Fitri Wulandari

00:16, 14 December 2021

Electric vehicles charging at the station in Chongqing, China
Electric vehicles charging at the station in Chongqing, China – Photo: Shutterstock

Demand for base metals – copper, nickel, aluminium, tin, lead, and zinc – is expected to be strong in 2022, partly boosted by demand for energy transition, such as for electric vehicle batteries and China. 

China’s metals demand had dropped in the second half of 2021 because of energy shortages.

“We therefore see some of the demand being pushed back into 2022, as the outlook for autos manufacturing, machinery and appliances, and consumer electronics sectors remains positive,” according to Fitch Solutions.

Fitch Solutions commodities price forecasts, 2022 (% change year-on-year)Fitch Solutions commodities price forecasts, 2022 (% change year-on-year) – Credit: Fitch Solutions

However, most analysts estimated that debt woes in China’s property sector could put a lid on price gains.

  • Aluminium: Supply will remain a challenge for the metal in 2022 as high energy price and tight environmental policy may put pressure on China’s output. ANZ Research expects China’s aluminium production growth to slow from 4.5% to 2.5% next year if production restriction continues. The firm forecasts aluminium prices at $2,780 per tonne in 2022, up from $2,380/tonne as the market is expected to fall into further deficit. ING Group says aluminium will average at $2,900/tonne in 2022. Fitch Solutions is less optimistic and instead thinks aluminium will trade at $2,300/tonne next year, down from $2,450/tonne in 2021.

  • Copper: ING Group expects copper price to slip moderately in 2022, from average $9,300/tonne in 2021. Copper, the indicator of economic health, hit a record high of $10,460 in May, the Dutch bank said. ANZ Research forecast copper to average at $9.770/tonne in 2022, compared with $8,740/tonne this year.

Copper price chart Copper price chart – Credit: Capital.com
  • Nickel: Nickel price briefly broke the $20,000/tonne mark in the last quarter of 2021 as supply growth was unable to match robust demand as some major producers faced production problems. However, supply is expected to recover with ING Group estimated supply to grow by 15% year-on-year in 2022, compared with an estimated 5.6% growth in 2021. The supply growth next year is driven by Indonesian nickel pig iron production. Demand from stainless steel makers is expected to remain firm while consumption from electric vehicles and renewables will further lift nickel consumption. ING forecasts nickel price to average at $19,000/tonne in 2022. Fitch Solutions sees the price eases to $16,500 next year versus $17,000/tonne this year; while ANZ Research expects nickel to trade at $21,180/tonne, compared with $17,300 in 2021.

Read more: Evergrande (3333) default still a possibility?

Markets in this article

Aluminum
Aluminium Spot
2165.7 USD
-2.5 -0.120%
Aluminum
Aluminium Spot
2165.7 USD
-2.5 -0.120%
Aluminum
Aluminium Spot
2165.7 USD
-2.5 -0.120%
Aluminum
Aluminium Spot
2165.7 USD
-2.5 -0.120%
Copper
Copper
3.81520 USD
0.02611 +0.690%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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