Weekly Metals News Digest – August 12-16
Significant Accumulation of Lead and Zinc in Singapore
The London Metal Exchange (LME) warehouses in Singapore have seen a substantial accumulation of lead and zinc, reaching nearly 430,000 tons—a tenfold increase since May 2023. This growth is attributed to two main factors: a global economic slowdown that has dampened demand for base metals, and a slower-than-expected rise in industrial production in China, particularly in July. The reduced imports of non-ferrous metals, including lead and zinc, have led traders to anticipate increased consumption in China before releasing supplies from Singapore.
However, the concentration of such large stocks in Singapore presents a potential risk, as it could limit availability to consumers outside Asia. Despite this, Singapore remains a key hub for non-ferrous metal trade, thanks to its strategic location and strong international business connections.
Slowing Growth in China's Copper Rod Production
In July, China's copper rod production reached 851,000 tons, marking a 2.6% increase from the previous month and a 1.3% year-over-year rise. This increase followed a drop in global copper prices below $10,000 per ton. Experts from the Shanghai Metal Exchange predict that production could rise by another 2.6% to 885,400 tons by the end of August. However, a slowdown in domestic demand is expected to curb further growth.
As the Chinese economy shows signs of a downturn, the government is anticipated to implement measures to stimulate recovery, potentially affecting orders for copper products. Investor confidence has waned, with capital investment in China at its lowest since the 2020 pandemic, and funds being withdrawn from Chinese bank accounts.
Emirates Global Aluminium's First Low-Carbon Bauxite Shipment
Emirates Global Aluminium, a leading global aluminum producer, has completed its first shipment of bauxite using a Capesize-class dry bulk carrier powered by liquefied natural gas (LNG). These massive vessels, up to 300 meters long and 50 meters wide, can transport up to 180,000 tons of bauxite in a single trip.
The bauxite was mined in Guinea and transported to a customer in China. The use of LNG as fuel for these ships significantly reduces greenhouse gas emissions, by about 30%, thus lowering the carbon footprint of the aluminum production process. This shipment marks a step forward in reducing emissions within the global shipping industry, which is responsible for over 2% of the world's greenhouse gases.
Increasing Russian Aluminum Stocks in LME Warehouses
In July, Russian aluminum accounted for 65% of the aluminum stocks at LME warehouses, up from 50% in June, while Indian aluminum stocks decreased from 40% to 33%. This shift is likely due to the acceptance of Russian aluminum produced before April 13, 2024, following a UK government ban on LME accepting new Russian aluminum. Despite this, the growth in Russian aluminum stocks is slow, with a slight increase from 232,350 tons at the end of June to 233,775 tons a month later.
The rise in Russian aluminum stocks may be due to a reluctance from buyers, possibly because of the UK and US government restrictions. Although no formal sanctions have been imposed, consumers appear cautious about engaging with Russian aluminum.
Variscan Mines Prepares for Zinc Mining in Spain
Square Trading Singapore has entered an agreement with Australia's Variscan Mines to market lead and zinc concentrates from its Novales-Udias and Guajaraz projects in Spain. The agreement will last five years from the first invoice date for concentrate supply.
Currently, zinc ore is not mined in Spain, despite a significant domestic consumer, the Asturiana de Zinc metallurgical plant, which imports raw materials from abroad. This agreement marks a potential shift in sourcing for the plant, which can produce up to 450,000 tons of zinc annually.
China's Impact on the Global Non-Ferrous Metals Market
China continues to be the world's largest producer and consumer of non-ferrous metals. In the first half of 2024, it produced 21.3 million tons of primary aluminum out of the global total of 35.8 million tons, equating to a 60% share. Similar dominance is seen in copper, zinc, and lead production.
However, signs of economic stagnation in China, driven by a construction crisis and ineffective government interventions, have begun to affect the non-ferrous metals market. Imports of these metals are slowing, which is expected to continue through the second half of 2024 and into early 2025. This trend could exert downward pressure on global prices for non-ferrous metals.
