Aluminium, copper, nickel, lithium: highlights of 2022 and forecasts for 2023
Forecasts for 2023 - full infographics available here.
Aluminium:
For the aluminium sector, 2022 was a year defined by pessimism. The price of natural gas, coal and electricity in Europe, North America and Asia was relatively high and refused to come down. The European Union in particular suffered as a result, so it was no surprise when in January the Eurometaux association sent a complaint to the European Commission, asking it to undertake measures to curb energy tariffs.
At the time the complaint was submitted, 30% of the European Union’s production was standing idle – the equivalent of 650,000 tons of primary aluminium. On top of this came the news that the Indonesian authorities planned to ban the export of bauxites, something that hardly instilled Europe’s aluminium companies with optimism, given that they are completely dependent on the import of raw materials.
Energy tariffs nevertheless continued to grow and enterprises began to suspend production one after another, including Romania’s Alro, Slovakia’s Slovalco and Montenegro’s KAP. By autumn, Europe’s aluminium sector was facing arguably its biggest crisis since 2008.
In the midst of these shocks the LME announced that it was holding consultations with market players on whether to stop accepting Russian non-ferrous metals, including aluminium, into its warehouses. The US corporation Alcoa went as far as to call on the LME to shut Russian aluminium out of the system, but it ultimately decided against imposing any bans.
As it happened, RUSAL came under sanctions all the same, though not in Europe. In March, Australia banned the supply of bauxite and alumina to the Russian company. RUSAL found a way around the situation, but in the very same month it shut down the Nikolaev Alumina Refinery in Ukraine over what it said were logistical problems.
There was good news too, including a July decision by the US company Steel Dynamics to build a plant for the production of flat-rolled aluminium. Given that the company produces steel, this provided an indicator of just how attractive the aluminium business is, despite all the challenges. In November, Novelis began construction work on a recycling enterprise in South Korea.
In September, Russia’s Arnest Group (which produces aluminium aerosol packaging) bought a number of aluminium canning factories from the US company Ball Corporation. This not only ensured the continued stability of Arnest’s operations but also meant that its tax payments, part of which had previously gone to the US, now went entirely into the Russian budget. Two months later, Industrial Investments bought the Samara Metallurgical Plant, which produces flat-rolled aluminium, from the US company Arconic.
Finally, China increased its aluminium production throughout 2022, restoring it to pre-pandemic levels. According to the results of the first 10 months of 2022, the production of aluminium grew by 3.3% to 33 million tons.
Copper:
There were ups and downs aplenty in the copper industry in 2022. The year began with a ban on British company Antofagasta PLC developing the Twin Metals copper-nickel deposit in the US. International giant Rio Tinto then signed an agreement with the Mongolian government on the expansion of the operating mine at the Oyu Tolgoi copper deposit and settled a long-running tax dispute with the government.
In March, Mexican company Southern Copper had to deal with the enforced closure of its Cuajone mine in Peru. The plant had been operating normally, but there were tensions with the local population, who demanded that Southern Copper pay USD 5 billion in compensation to the region’s communities. Talks produced no results, and the railway to Cuajone was blocked by protesters, which halted deliveries of concentrate from the mine. Given that Peru is one of the largest exporters of copper ores, this led to prices soaring to USD 10,000 per ton (the first time since July 2011).
Also in March, the British government introduced a 35% duty on the import of Russian copper, and soon afterwards the LME banned the storage of Russian copper in its warehouses. This also contributed to the increase in prices for the red metal. Prices began to decline gradually only in June, and even Chilean copper giant Codelco’s closure of a blister copper plant with an annual capacity of 400,000 tons had no real effect.
Udokan Copper, which is developing the largest copper deposit in Russia, was forced to postpone the launch of its processing plant to 2023 due to difficulties in obtaining equipment. In June, Norilsk Nickel announced the construction of a new copper production facility in Monchegorsk. The enterprise will have an annual capacity of 150,000 tons of copper, with investments in the project totalling RUB 140 billion (USD 2.2 billion).
Meanwhile, South Korea’s SK Nexilis announced the construction of Europe’s largest copper foil plant in Poland. It will produce 50,000 tons of foil per year and supply it to manufacturers of lithium-ion batteries.
Just as it has been doing with aluminium, China has been ramping up copper production to make up for time lost during the lockdowns. In the first nine months of 2022, Chinese copper production grew by 1.1% to 7.6 million tons.
Nickel:
The global nickel market was relatively quiet in 2022, although it periodically startled players with sharp price spikes. For example, on 12 January the price of three-month nickel futures on the LME reached USD 22,420 per ton, repeating a 10-year high.
The price rise was linked to an increase in demand for nickel from producers of stainless steel (in which nickel is the main alloying additive) and a decrease in stocks in LME warehouses. Optimistic expectations about its use in the production of batteries for electric vehicles also had an impact: before the price jump, the US electric vehicle manufacturer Tesla signed a contract with the Canadian company Talon Metals to purchase 75,000 tons of nickel over a six-year period from its new Tamarack facility.
On 8 March, nickel prices broke through the USD 100,000-per-ton barrier for the first time ever in the history of the LME. The surge was caused by fears that the supply of nickel from Russia would be suspended, as well as the games China’s Tsingshan Holding Group was playing with its contracts. As a result, the LME took the decision to halt trading (the last time this happened was 1985).
Prices subsequently fell, and have shown no particular signs of rising over the last few months. By October, however, market players were worried once again, spooked by the news that the Indonesian government intended to create a nickel cartel along the lines of OPEC. A structure like this would be able to control the price of the metal, much like its oil counterpart.
Lithium:
The lithium market brought joy to many investors in 2022, but not all of them. Rio Tinto, for instance, ran into trouble in Serbia. In January, the Serbian government annulled the company’s license to mine the unique Jadar deposit. Rio Tinto had plans to invest USD 2.4 billion in developing the field and constructing an enterprise that would have produced 54,000 tons of lithium carbonate a year. These plans were opposed by local farmers and environmental activists concerned about pollution, and the Serbian authorities opted not to risk enraging them.
Latin America, meanwhile, welcomed investors in lithium fields with open arms. Two Chinese companies, Tibet Summit Resources and Zijin Mining, immediately announced plans to develop salt lakes and extract lithium from them in Argentina, followed Rio Tinto and the South Korean steelmaker POSCO. Codelco (the world’s largest copper producer) now intends to do the same in Chile.
In April, the global lithium market was shaken by the news that Norilsk Nickel and the Rosatom state nuclear corporation plan to jointly develop the Kolmozerskoye pegmatite deposit – Russia’s largest – in Murmansk Region. For Norilsk Nickel this project represents a diversification of business, while for Rosatom it is an opportunity to secure a supply of raw material for the lithium-ion battery gigafactory it is building in Kaliningrad Region. The project is extremely profitable for Russia, since lithium is not currently mined in the country, although it does have two plants that produce the metal.
As for lithium prices, in 2022 they tripled to USD 77,000 per ton of lithium carbonate in November, putting pressure on lithium-ion battery manufacturers who feared that this would lead to a drop in demand for their products. Fortunately, this did not transpire.
Forecasts for 2023
Aluminium
The 2023 prospects for the global aluminium market will largely depend on the price of natural gas and other energy resources. At the time of writing, US and European Union sanctions against Moscow and the reduction in energy supplies from Russia to Europe mean there are no real prerequisites for prices to fall.
Accordingly, the European Union’s aluminium industry may continue to reduce the production of primary aluminium, which the production of secondary aluminium is unlikely to be able to compensate for in full. The situation will be similar in the US. China, on the other hand, will be able to increase the production of aluminium, but probably by no more than 3-4%.
We can therefore expect that in 2023 global aluminium prices will be around USD 2,200–2,300 per ton, unless the global economy collapses, in which case prices will fall to USD 2,000 per ton.
Copper
The main factor influencing the global copper market in 2023 will be the appetite of China, which uses the metal in its power, automotive and electronics industries. The country is the planet’s largest consumer of the red metal, with a share of global demand for copper estimated at 50–55%.
For now, demand for copper in China is holding up, but there are concerns over the new wave of COVID-19. Beijing will use the now-familiar method of harsh quarantines to extinguish the outbreak, which will result in a shutdown of industrial enterprises, including those that consume copper.
Additionally, it remains possible that the economies of the US and European Union, which are also major global consumers of copper, will stagnate. This will lead to an excess of copper on the market and exert pressure on prices, which may fall to USD 7,000 per ton in 2023.
Nickel
Nickel will not be getting an easy ride in 2023. The metal is needed both for the smelting of stainless steel and the production of lithium-ion batteries. And while demand for lithium-ion batteries will remain high, stainless steel production is likely to slow next year.
Nickel prices will likely remain high, since the Indonesian government still intends to introduce a duty on the export of ferronickel and nickel pig iron. This will automatically lead to a reduction in supply on the global market and the unwinding of the price spiral, so it is entirely possible that prices will reach USD 27,000–30,000 per ton.
Lithium
Global prices for lithium may well remain high next year. Why? The production of lithium-ion batteries and electric vehicles will continue to grow, while the supply of lithium will not be able to keep up.
Moreover, many previously announced projects for the development of lithium deposits will not be completed on time in Latin America, Africa and Australia. This is because many of them are located in remote or difficult-to-access regions, where it is a challenge to create all the necessary production and auxiliary infrastructure. It may therefore take up to 10 years to establish production.
The only thing that would lead to a fall in prices is a global economic recession, which could result in a drop in demand for electric vehicles. At the same time, the production of batteries for smartphones and laptops will help to maintain lithium consumption and prices.
