Key industrial metal themes 2023 – prices have further to fall

Metal prices ended 2022 lower than they started the year, despite the Russian invasion of Ukraine initially causing prices to spike. We forecast prices to fall further in early 2023 before picking up towards the end of the year. We have identified six key themes to explain this.

What you will learn:

1. Metal demand will weaken in the first half of 2023 as the global economy enters recession. Developed countries will lead growth lower, particularly the eurozone and the US, as both regions struggle with high inflation, rising interest rates, and weaker spending. Industrial production will be worse affected than the service side of the economy, hitting metal demand.
2. China’s initial reopening will not support commodity demand as much as hoped. We expect the recovery to be slow and bumpy as Covid-19 cases have surged and economic growth will weaken in Q1 before picking up in the second half of the year.
3. Metal refining will struggle in 2023 as energy prices remain high. While new LNG facilities are slowly coming online, it won’t be enough to replace the fall in Russian supplies to Europe in 2023. We therefore predict the most energy-intensive producers to struggle, especially those in Europe.
4. Global steel production will contract in 2023. Steel demand is expected to fall in early 2023 as the global economy weakens, driving prices lower. But as steel production contracts, prices will likely stabilise by the middle of the year and pick up as the global economy slowly recovers in H2.
5. Copper and nickel concentrate supplies are expected to ramp up in 2023 as new mines and expansion are completed. Furthermore, copper production in Chile should improve after output underwhelmed in 2022.
6. Nickel prices are expected to remain volatile in 2023. The Russian invasion of Ukraine caused supply shortage fears, and a short squeeze on the LME created further volatility. Confidence in the LME has waned, and liquidity has dropped, which will exacerbate price swings in 2023.