Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Swiss mining giant Glencore predicted an uncertain outlook for mining saying its global mines supply would remain hurt due to COVID-19 and new projects will be delayed. The company’s aging equipment and declining ore grades will impact global supply, reported Glencore in its financial earnings release on August 6. 


The company believes that demand will rebound with Chinese factories increasing demand as a result of the country’s significant economic stimulus. It is too early to predict zinc’s supply balance in 2020 due to the pandemic, the company said. 

The company reported a loss of $2.6bn in H1 (Jan-June). The company’s earnings before interest and taxes was $1.5bn. H1 unit costs for Copper was 109¢/lb, zinc 28¢/lb, nickel (ex Koniambo) 230¢/lb and thermal coal $46/t.


Zinc and lead

As a consequence of COVID-19, both Chinese and Western smelters have rushed to secure replacement concentrates which led to pressure on spot treatment charges (TCs) — from Jan-Feb $310-315/dmt down to $163/dmt in May, with a modest rebound to $170/dmt in June. Concentrates imports into China have risen by over 42pc in June from the prior year. Monthly imports decreased significantly in May-June, confirming supply tightness. This is likely to sustain in the near term. 

Glencore expects mine supply to recover as COVID restrictions are being eased and metal production increased, but the final impact on demand remains uncertain. The level of metal surplus remains wide.


For lead, the COVID crisis supply effect has been less drastic than zinc given the smaller primary market, losing approximately 0.2mn mt of mined supply. The disruption has driven spot TCs lower from $180/dmt in January to $140/dmt in June.



Nickel consumption in the key stainless steel segment was down dramatically on the prior year despite a strong rebound of Chinese production, particularly for high-nickel containing 300-series, amid a collapse in output in practically all other regions. 

Furthermore, the deterioration of the overall economic environment has negatively affected demand in alloy, special steels and plating. Expected increased sales of electric vehicles (EVs) in Europe, on the back of favourable government support in various countries, is mitigated by some short-term weakness in the Chinese EV market. 

Nevertheless, the long-term outlook for nickel consumption in this segment remains positive as demand for higher nickel-content batteries continues to grow. Meanwhile, disruption in supply has not been material, with lost production from traditional nickel suppliers offset by the continued increase in nickel pig iron (“NPI”) output from Indonesia. Overall, the primary nickel market is in surplus as a result of demand weakness and Indonesian NPI production.


Aluminium and Copper

Aluminium too reflected reduced demand expectations in Q1 which was exacerbated by the global macro reaction to the pandemic from April. With raw material prices and currency following the downward trend, there was little cost support. By May, the LME price was down 19pc compared to December 2019 levels. 


Copper supply disruptions began in late March with Peru, which produces around 12pc of global mined copper, announced a pandemic induced lockdown. In Q2, however, with improving consumption in China, the outlook for copper began to improve. Refined copper inventories declined at the fastest rate in recent years signalling a tight refined physical market. 


Cathode premiums increased markedly to their highest levels in 5 years, said the company. Increased competition for concentrates continues as shortage of mine supply and smelting capacity growth in China is supporting prices. Treatment and refining charges were volatile during the period, reaching multi-year lows towards the end of June. The copper price ended in H1 above $6,000 /mt, due to mine supply contraction and a vulnerable scrap supply chain.


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