Surging demand for green metals
Base metals performed strongly in 2021 with copper ending the year 25.7% higher and zinc gaining 31.5% during the year.
Demand for base and battery metals continues to be driven by the global transition towards greener and cleaner technologies, while ongoing supply-side constraints helped support significant price increases.
The metal last set a record in 2011 around the peak of the commodities supercycle, sparked by China’s economic growth and internal infrastructure investment.
The renewed interest in copper has been fuelled by global efforts to cut carbon emissions. This surging demand for green metals has put a strain on supply while new mine production has been slow to arrive.
Copper the “new oil”
Goldman Sachs (NYSE:GS) has described copper as 'the new oil’ because electric cars need several times more copper than their internal combustion engine-powered counterparts.
CRU has noted that demand from green energy applications is expected to account for 40% of the growth in refined copper demand in 2022 and that this will remain the key demand driver in the coming years.
Copper prices are forecast to moderate slightly in 2022, yet remain supported over the long-term, as demand outpaces supply.
Zinc prices to remain elevated
The surge in zinc prices came on the back of news that Belgium-based Nyrstar was cutting production by up to 50% at its three European zinc smelters and Glencore PLC (LSE:GLEN), which also has three zinc smelters in Europe, planned to adjust production to save energy costs.
Supply concerns are expected to continue to support zinc prices into 2022.
S&P Global believes zinc prices will remain elevated throughout the year with fewer mines expected to start up in 2022-2025 — especially in China, where mined zinc is estimated to decline to 3.8 million tonnes in 2022.
