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The base-metals commodity markets are going through an “unprecedented” period, Saad Rahim, chief economist at global trader Trafigura.
“Macroeconomic factors such as land war in Europe [between Ukraine and Russia], conflict in the Middle East [between Israel and Hamas], the highest rates of interest and inflation in decades, underinvestment, and the energy transition [to renewable fuels], have all affected the markets,” he said.
Poor manufacturing output in Europe was also affecting the base-metals markets, Rahim said.
He noted that Germany’s purchasing manager’s index was currently lower than it was during the energy crisis, and almost as bad as it was during the Covid-19 pandemic.
“Germany in particular is very exposed to energy costs, [putting pressure] on energy-intensive industries in Germany,” he said.
Demand for base metals such as aluminium has been affected by a major contraction in Germany’s automotive industry, a key consumer of the light metal. According to the German Association of the Automotive Industry (VDA), production dropped by 30.6% to 266,800 vehicles in August 2023, from 384,738 vehicles in June. It had shown some strength at the beginning of the year. with more than 438,500 vehicles produced in March.
Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam, at $215-225 per tonne on October 13, down by 18% since September 1.
Capital formation measures such as investment, manufacturing and property development have been replaced by a focus on high-value household consumption sectors. fastmarkets
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