Strong macro headwinds provide a mixed outlook for mined commodity markets
Electrification on the agenda for battery metals
After a very strong start to 2018, zinc prices have plummeted, with September’s average down by 30% compared to the February peak, although 9 month prices were up by 9% year-on-year. Robust mine growth and a contraction in smelter production will result in a third consecutive year of metal deficits. The ongoing decline in zinc stocks will provide fundamental support for prices, recovering gradually from current levels to revisit the early 2018 highs in the first half of 2020.
Lithium and cobalt markets have both succumbed to strong supply growth in response to high prices. Since the start of 2018, Chinese lithium carbonate prices have almost halved and cobalt prices have fallen by over one third since March. Despite some softness in medium-term prices, the narrative remains positive for both metals given the rising requirements for vehicle electrification and energy storage. Double-digit growth is expected for lithium demand out to 2025 and despite the anticipated wave of supply, the cobalt market will be in deficit as soon as 2023.
Lead has broadly followed zinc, with average prices in September down by 22% relative to January’s peak, although 9 month cash quotes increased by 3% year-on-year. While refined supply is set to outpace demand to 2021, we do not expect this to be materially detrimental to prices.