2020 was a complex year for the commodity market, especially for ferrous and non-ferrous metals. In these two sectors, China has played and still has a decisive role as a leader in the sector, significantly influencing the market trend in Europe as well.

The 2020 crisis: industrial goods have been hit hard

In fact, if we go back a year to the beginning of 2020, we find ourselves at the beginning of the epidemic from Covid-19, which first hit China. Compared to 2019, the decline in January is marginal, because as usual the Chinese New Year celebrations result in a halt in production activities.

The real setback with a dramatic drop in prices is revealed in the following quarter and also affects Europe. The old continent begins to deal with the Coronavirus, and then introduces measures to contain the pandemic with serious economic consequences and the related crisis.

Thus Europe faces the health emergency situation with negative implications on all fronts of the economy, especially in the industrial sector. Meanwhile, China subverts its negative trend with the first signs of recovery, starting from May 2020, a month characterized by a significant positive change in the Chinese price index for Industrial Goods* (+ 3.1%).

 

The recovery of 2021 and the ferrous and non-ferrous metals market

To see an improvement in Europe as well, it is necessary to wait for the achievement of a situation of relative stability during the summer, and then see a slight increase (+ 1.2%) in the price index of Industrial Goods in September *. The second winter wave with the new anti-Covid restrictive measures marks a turnaround, only to return to growth again at the beginning of 2021.

In particular, non-ferrous and ferrous products are characterized by a positive variation, respectively of + 4.5% and + 10%, subject however to continuous fluctuations also in February. The causes are the news related to the pandemic, such as the uncertain situation of vaccines, and sales for profit-taking after the multi-year highs reached during the first part of January.

At this juncture, the role of pressing Chinese demand is also proving to be fundamental for the general recovery of the ferrous and non-ferrous metals market, including the European one. Furthermore, the progressive weakening of the dollar and the low level of interest also contributed to the increase in the price of metals. After this general picture, let’s go into the specifics of the prices of individual ferrous and non-ferrous metals, their trends and forecasts.

 

2020 ferrous metals market and 2021 forecasts

Unlike most commodities, including non-ferrous metals, iron ore has experienced a very significant increase, reaching the peaks recorded more than a decade ago. The reduction in Brazilian supply and the high growth of Chinese demand have, in fact, contained the consequences of the pandemic and the contraction in steel production.

However, future scenarios call into question the stability of prices, assuming a progressive fall. A slight decline has already occurred in February despite the forecast that prices will continue to be above average. Whether it is a speculative bubble ready to gradually deflate or a correction of the previous situation, too unbalanced to the downside, we can only evaluate it later.

Beyond these considerations, this trend certainly surprised the operators of the Italian and international sector, who divided themselves into opposite views. There are those who positively judge the growth in prices as an increase in demand, an appreciation of stocks and a recovery in margins. Those who, on the other hand, fear a difficulty in adapting to price increases in a timely manner, a shortage of raw materials, the risk of outstanding payments and lack of continuity in deliveries.

 

2020 non-ferrous metals market and 2021 forecasts

Regarding non-ferrous metals, let’s analyze together the situation of nickel, aluminum, copper and zinc with an overview of 2020 and future scenarios.

As for nickel, during the first quarter of 2020 a sharp decline hit the non-ferrous metal, reaching an all-time low in March. After that, nickel prices rose with a consequent recovery that allowed nickel prices to settle at the highest levels of the last year. Thanks to the increase in Chinese demand and the incentives of international governments, nickel will continue this positive trend in the next few years, even if financial institutions have not reached agreement on the extent of its growth.

With regard to aluminum, the two possible scenarios identified envisage on the one hand a situation of stability, similar to that of 2020. On the other, an increase is assumed.

The trend of copper is clearer, which after reaching a steep decline in March 2020, was then affected by a significant increase, the maximum of the last 18 months. During 2021 and the following year, prices will probably rise again thanks to an increase in the consumption of this metal in the world.

Finally, zinc saw a drop in prices in the first half of 2020, and then climbed back to the levels of spring 2019. With regard to its trend, the scenarios are still divergent: who foreshadows a certain stability, who a gradual decline and who a timid rise.
To follow the details of the prices of ferrous and non-ferrous metals month by month, consult our News section: we will publish the monthly update of the prices of aluminum, copper, nickel and zinc. Keep following us.

 

* The Industrial Goods Index is taken from PricePedia and is the result of the aggregation of the indices relating to the following product categories: Ferrous, Non-Ferrous, Wood & Paper, Chemicals for Industry, Organic Chemicals, Inorganic Chemicals, Plastics & Elastomers and Textile Fibers.

 

 

Infographics source: Siderweb