2022 was a year of disruptions marked by the ongoing Ukraine-Russia geopolitical tension, the EU's energy crisis, the US's monetary policy, and covid lockdowns in China. However, 2023 is a good year for the commodities market as prices are set to decline and soften inflation. So how does the metal market look in 2023? What is the global aluminium industry outlook 2023 for aluminium prices?
Metal Market Overview:
The average industrial raw materials price index will fall in 2023 as supply impediments of raw materials caused due to the staggered economic recovery in 2021 after the global Covid-19 restrictions in 2020, which were then worsened by the war, may ease. Boosted construction and manufacturing in China and increased demand for production in Asia and Europe, held at their capacity, will slash demand for base metals as the world heads towards economic recovery in 2023.
CEO of Eurasian Resource Group, Benedikt Sobotka, opines that although the cobalt supply has increased 20% year-on-year, it is likely to face a slowdown in production, and the supply growth may reach negative. However, gold seems advantageous as it is expected to reclaim its title as a safe-haven asset in 2023. Similarly, ICICI Direct estimates that silver will attract buyers from the industrial sector. They also suggest that other commodities, such as zinc, copper, aluminium, and crude oil prices, are expected to gain traction in 2023.
The World Steel Association forecasts that steel demand will grow by 2.2 per cent in the ferrous sector in 2023 and reach the 1.88 billion tonnes mark. However, the geopolitical crisis is making the claims uncertain. Furthermore, in 2023 steel consumption outside China may outshine its decline in the country with about 35 million tonnes, with significant contributions from India, Southeast Asia and the US. Although the case looks glimmering for Europe and the United Kingdom even in 2023 since they heavily rely on Russian energy, the US metal market is beaming as demand is likely to increase. Additionally, the market is envisioned to benefit from the proliferating renewable energy sector and the soaring demand for electric vehicles.
Aluminium Market in 2023:
The aluminium market was volatile in 2022, and experts believe there will be little to no change in the scenario in Q1 of 2023. The macroeconomic bases, from the energy crisis to geopolitical turmoil, the reasons remain unchanged. Although, some believe that in Q2 of 2023, there will be some improvement.
Last year several places like Europe and China halted aluminium production at their smelters. Production cuts in Europe account for around 1.4 million tonnes of capacity. Experts believe that the smelters are likely to reopen in 2024. Again, China curtailed production in their smelters in response to the rising energy costs and environmental pollution. Such smelters can resume output in Q2 of 2023 once the hydro-reservoir levels have stabilised. However, the shares of aluminium manufacturing companies Hindalco Industries Ltd. and Nalco surged up to 4 per cent on the last Friday of December 2022 after China announced that it would raise export tariffs on aluminium and aluminium alloys from 15 to 30 per cent with effect from January 1, 2023, in an attempt to increase domestic demand.
For the Indian aluminium market, the year 2023 may not be significant. Hindalco share prices dipped on January 4, 2023, by 4 per cent, hitting a low of INR 461.60. However, experts say that the Indian EBITDA per tonne shall improve since the aluminium price seems to have bottomed as Hindalco's production cost dips. They also opine that the company's EBITDA volatility is better than that of other top players like TATA Steel and Jindal Steel.
Wrapping up:
According to a study conducted by CRU International for the International Aluminium Institute (IAI), global aluminium demand is expected to expand by almost 40 per cent by 2030 as transport; construction, packaging, and the electrical sector are set to grow. Despite industry-wide assumptions that the commodity market will settle in 2023, recent events tell otherwise. Inflation and energy crisis are still prevalent in the UK, a new Covid variant is worrying all industries alike, and geopolitical tension does not seem to end. Now the question is, will the much-awaited economic recovery again go into a slump in 2023 or fight all odds and maintain stability?
