After a weak first half of 2023, second half brings hope for metals

Resource commodities like crude oil and base metals have felt the double whammy of higher rates and weak demand in the first half (H1) of this calendar year (CY23).

On the one side, the US Federal Reserve (Fed) continued raising interest rates. On the other, China’s demand failed to improve on expected lines. Moreover, globally, including in China, the overall macroeconomic (macro) indicators were not conducive to growth. As a result, except for copper, the prices of most base metals continued their downtrend, as seen in 2022.  In the past 12 months, zinc has been a major loser, with a 27 per cent fall. 

In H1CY23, zinc is down around 22 per cent, while nickel has fallen around 31 per cent after seeing good gains in calendar year 2022.

Among the gainers of H1CY23, copper prices are marginally higher, while tin is up most. In the base metals complex, copper holds the fort because of demand from electric vehicles, 40 per cent of whose components have copper in them.

What is good for copper, because of the EV segment, is bad for crude oil. 

To support prices, the Organization of the Petroleum Exporting Countries announced a cut in crude oil production in early June. As regards ferrous metals, iron ore prices are down 10 per cent in the past 12 months and 4.7 per cent in H1CY23.

S&P Global Commodity Insights forecasts the Platts Iron Ore Index (62 per cent Fe) to average $120 per tonne cost and freight in 2023. Currently, it is around $113 per tonne. Good prospects for iron ore have an Indian impact also.

On steel, T Gnanasekar, director, Commtrendz Research, says prices began increasing in 2023 after a deep fall from decade-highs and China, the biggest consumer, is struggling due to Covid and the real estate crisis.

“Steel prices are now in a range. With China coming up with more measures for recovery, steel prices are likely to gain traction in the coming quarters,” observes Gnanasekar.