World Commodity Forecasts Industrial Raw

Materials October 2023

ProQuest document link

ABSTRACT (ENGLISH)
The current bearish sentiment in the market is being driven by several factors such as slower than expected demand
growth in China and South-East Asia. Market deficits are putting a floor under oil prices Despite aggressive
monetary tightening by OECD central banks and disappointing economic growth in China, global crude oil
consumption is still set to reach an all-time high in 2023. With OPEC adhering to reductions in production quotas
and Saudi Arabia implementing further unilateral cuts, we estimate that the global oil market has already fallen into
deficit, sending the price of oil (dated Brent Blend) above US$90/barrel in September. Individual commodity prices
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Rubber (US$/tonne) 1,864.1 1,766.3 2,217.5 2,162.4
1,928.3 2,049.9 2,200.2 2,280.5 2,363.7 2,450.0 Cotton (US cents/lb) 77.9 71.9 101.2 129.9 94.0 89.5 86.3 85.3
84.3 83.3 Wool (Aus cents/kg) 1,232.0 1,195.0 1,191.4 1,195.0 1,195.0 1,195.0 1,195.0 1,195.0 1,195.0 1,195.0
Aluminium (US$/tonne) 1,791.2 1,701.5 2,476.4 2,707.6 2,233.8 2,413.0 2,750.0 2,710.7 2,768.5 2,827.6 Copper
(US cents/lb) 272.3 279.8 422.7 399.7 390.2 417.3 457.6 467.2 477.0 487.1 Lead (US cents/lb) 90.6 82.7 100.0
97.6 98.2 100.1 99.0 101.6 104.3 107.0 Nickel (US$/lb) 6.3 6.2 8.4 11.7 10.7 10.0 10.0 10.4 10.8 11.1 Tin (US$/lb)
8.5 7.8 14.8 14.2 11.8 12.2 12.7 12.8 12.9 13.0 Zinc (US cents/lb) 115.6 102.6 136.3 158.1 115.8 110.3 110.0 103.0
96.4 90.2 Iron Ore ($/ dry metric tonne unit) 93.8 108.9 161.7 121.3 104.3 89.5 85.0 80.0 75.3 70.9 Steel
(US$/tonne) 501.5 486.5 842.5 680.0 588.5 617.5 651.3 655.0 658.8 662.6 Gold (US$/troy oz) 1,392.5 1,770.3
1,799.6 1,800.6 1,930.5 1,983.4 2,015.6 2,012.5 2,009.4 2,006.3 Palladium (US$/troy oz, London) 1,542.4 2,204.6
2,417.3 2,135.4 1,502.9 1,425.0 1,460.0 1,460.0 1,460.0 1,460.0 Platinum (US$/troy oz) 864.0 883.4 1,091.1 961.7
1,055.6 1,100.0 1,150.0 1,200.0 1,252.2 1,306.6 Silver (US cents/troy oz) 1,621.8 2,053.7 2,516.5 2,179.4 2,193.7
2,000.0 1,970.0 1,950.0 1,930.2 1,910.6 DAP ($/tonne) 306.4 300.8 601.0 772.2 541.0 452.9 380.9 380.9 380.9
380.9 Phosphate Rock ($/tonne) 88.0 76.1 123.2 266.2 331.5 236.3 137.3 137.3 137.3 137.3 Oil: Brent (US$/b) 64.0
42.3 70.4 99.8 83.2 81.5 76.0 70.9 68.1 65.5 Oil: OPEC reference price (US$/b) 64.1 41.4 69.7 99.9 82.5 80.4 75.0
70.0 67.2 64.6 Oil: WTI (US$/b) 57.0 39.3 68.0 94.4 78.2 77.1 72.4 67.6 65.0 62.4 Natural gas (US$/mmBtu,
Europe) 4.8

FULL TEXT

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 (US
$
ind
ex,
199
0=1
00; Ind
Price forecast summary %
% ex
cha
nge
yea
r on
yea
r)

202 202 202 202 202 202 202 202

1 2 3 4 5 1 2 3

-
202 WC 222 254 218 216 37. 14.
2024 -2.6 14.
5 F .0 .8 .6 .7 9 7
2

- -
210 220 194 201 40.
-0.9 -0.9 IRM 15. 4.6 11.
.7 .3 .1 .5 4
8 9

Ba
- -
se 242 249 222 233 48.
3.8 7.0 15. 2.7 10.
met .5 .0 .3 .8 4
6 7
als

- -
Fib 133 154 128 125 18. 15.
5.1 9.0 18. 17.
res .4 .5 .3 .0 9 9
2 0

Ru - -
217 211 188 200 25.
-2.6 -1.9 bbe 11. -2.5 10.
.2 .8 .9 .8 5
r 9 8

Cr -
297 421 350 343 26. 66. 41.
6.3 7.3 ude 16.
.1 .0 .9 .9 6 5 7
oil 7

Chinese state spending will boost industrial commodity prices in early 2024
EIU estimates that the industrial raw materials (IRM) price index will fall by just under 12% on average in 2023.
Overall, prices of industrial commodities are still well above pre-pandemic levels, as the IRM index surged by more
than 40% in 2021 and by a further 4.6% in 2022. However, supply-chain disruptions, which were exacerbated by the
war in Ukraine, have eased, and the economic fallout stemming from Russia's invasion has led to a slowdown in

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Europe and falling demand there for steel and base metals. Monetary tightening by most major central banks has
further curbed demand in developed economies. We expect the index to begin to pick up in early 2024 as growth in
the global economy begins to recover. We also expect China's leadership to introduce measures to increase
government spending and otherwise put the economy back on a recovery track, which will begin to have a more
noticeable impact on IRM markets in 2024.
We expect base metal prices to increase by over 5% on average in 2024, after falling by more than 10% in 2023.
Volatile demand patterns will keep prices range-bound until state spending in China creates enough of an uplift in
demand to put upward pressure on prices, but this is now not likely until 2024. In 2021-22 container shortages and
supply-side issues, some related to the war in Ukraine, boosted the prices of several major industrial metals,
including copper, aluminium, zinc, tin and precious metals that are used heavily in the electric-vehicle (EV) sector,
such as palladium.
Average copper and aluminium prices will decline as economic activity slows
We estimate that average prices of aluminium, which has by far the highest weighting in the metals index, will fall by
17.5% in 2023 as the market rebalances after two consecutive years of strong growth-prices surged by more than
45% in 2021 and 9% in 2022. The current bearish sentiment in the market is being driven by several factors such as
slower than expected demand growth in China and South-East Asia. Other factors include the uncertainty brought
about by still-high inflation and rising interest rates. Price sentiment for copper has weakened since mid-April, amid
concerns about what has been to date tepid demand in China. Although investment to support decarbonisation
plans will continue to underpin copper prices, tightening monetary policy to quell rapidly rising inflation has curbed
consumer spending in 2023, keeping copper prices below the record high of 2022. However, copper prices will
strengthen considerably in 2024 as decarbonisation initiatives boost demand and underinvestment in mine projects
continues to limit production gains.
Market deficits are putting a floor under oil prices
Despite aggressive monetary tightening by OECD central banks and disappointing economic growth in China, global
crude oil consumption is still set to reach an all-time high in 2023. Continued strong demand growth in emerging
Asia and stockpiling in China are the main factors. With OPEC adhering to reductions in production quotas and
Saudi Arabia implementing further unilateral cuts, we estimate that the global oil market has already fallen into
deficit, sending the price of oil (dated Brent Blend) above US$90/barrel in September. Prices should remain at
around this level for the rest of the year.
We forecast that the global oil market will experience periods of deficit in 2024 as well, especially as OPEC extends
its cuts and oil demand remains strong in China-a recovery in transport and, to a lesser extent, a bottoming out of
the property sector will lead to stronger demand for petrochemical products. We expect oil prices to remain above
US$80/b in 2024. Prices will trend downwards more significantly from 2025, owing to permanent demand destruction
in OECD countries, particularly in Europe, and slowing demand growth in the developing world. A more concerted
effort to transition away from hydrocarbons will push oil prices below US$70/b by 2027.
Natural gas prices will resume a downward trend from mid-2024
Despite sharp falls in natural gas prices in mid-2023, average prices for the year in European and Asian markets are
set to remain elevated by historical standards, whereas the US benchmark Henry Hub price is trading below its five-
year average. We forecast that European prices will increase in late 2023 and early 2024 as utilities start to draw
down regional stocks as Europe enters the 2023/24 winter season. A rise in Asian demand will also increase the
cost of liquefied natural gas (LNG) deliveries, which have largely filled the gap left by Russia since mid-2022.
European gas prices will resume a downward trend, especially from mid-2024, amid subdued demand and
increased supply, whereas US prices will be boosted in 2024 by steady growth in LNG exports. Increased global
demand for LNG, driven by continued strong demand from Europe, will keep a floor under LNG contract prices.

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 (19
90 20 20 20 20
EIU commodity price index
=1 22 23 24 25
00)

4 1 2 3 4 1 2 3 4 1 2
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr

US
4 $
3 Qtr
Qtr ind
ex

W 23 23 22 20 21 21 21 21 21 21 21
CF 3.7 1.1 0.6 9.8 2.9 3.9 6.6 7.0 8.4 6.6 4.7

21 IR 19 20 19 18 19 19 19 20 20 21 21
213.9
3.9 M 2.6 4.0 2.9 7.6 1.9 3.0 8.4 5.1 9.6 2.9 3.2

Ba
se
21 21 23 22 21 21 22 22 23 24 25 25
217.1 me
9.4 8.4 6.2 0.4 3.3 9.3 0.5 9.2 9.1 6.3 0.8 1.7
tal
s

Fi
25 13 13 12 12 12 12 12 12 12 12 12
256.6 bre
9.8 3.1 1.5 8.2 7.3 6.3 5.9 5.9 4.9 3.3 3.3 3.3
s

R
12 18 18 18 18 19 19 19 20 20 21 20
122.3 ub
2.0 6.2 8.7 9.7 4.2 2.9 9.2 6.1 2.4 5.6 0.8 7.7
ber

Cr
22 ud 37 34 33 36 36 35 34 33 33 32 32
220.3
3.4 e 2.7 3.5 0.0 0.3 9.9 5.3 5.3 7.5 7.5 4.2 8.4
oil

%
ch
an
ge,
30
321.0 ye
8.3
ar
on
ye
ar

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 W - - -
- - - - -
CF 14. 21. 11. 3.4 2.6 1.3
3.0 8.9 7.4 1.8 0.9
SS 1 1 4

- - -
- IR - - - 10.
-1.4 15. 18. 19. 2.9 9.3 9.2 7.5
2.1 M 5.2 0.4 5.4 3
7 4 9

Ba
se - - -
- - 12. 12. 13.
5.9 4.7 me 16. 18. 18. 0.5 4.0 9.8
1.7 6.7 1 3 7
tal 9 5 6
s

Fi - - - -
- - - - - - -
7.3 5.5 bre 10. 17. 26. 15.
5.1 4.2 1.8 1.8 2.4 2.1 2.1
s 1 7 6 4

R - - - -
-
-2.1 ub 17. 18. 15. 10. 3.6 5.6 3.3 9.9 6.6 5.8 5.9
1.1
ber 8 4 5 3

Cr
- - -
ud 11. - - - - -
8.8 8.7 17. 30. 13. 3.4 4.6
e 0 0.8 6.3 8.8 8.8 4.9
7 6 9
oil

Individual commodity prices 2019 2020 2021 2022 2023 2024 2025 2026 2027

Rubb
er 1,864. 1,766. 2,217. 2,162. 1,928. 2,049. 2,200. 2,280. 2,363.
2028
(US$/t 1 3 5 4 3 9 2 5 7
onne)

Cotto
n (US
2,450.0 77.9 71.9 101.2 129.9 94.0 89.5 86.3 85.3 84.3
cents/l
b)

Wool
(Aus 1,232. 1,195. 1,191. 1,195. 1,195. 1,195. 1,195. 1,195. 1,195.
83.3
cents/ 0 0 4 0 0 0 0 0 0
kg)

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 Alumi
nium 1,791. 1,701. 2,476. 2,707. 2,233. 2,413. 2,750. 2,710. 2,768.
1,195.0
(US$/t 2 5 4 6 8 0 0 7 5
onne)

Copp
er (US
2,827.6 272.3 279.8 422.7 399.7 390.2 417.3 457.6 467.2 477.0
cents/l
b)

Lead
(US
487.1 90.6 82.7 100.0 97.6 98.2 100.1 99.0 101.6 104.3
cents/l
b)

Nickel
107.0 (US$/l 6.3 6.2 8.4 11.7 10.7 10.0 10.0 10.4 10.8
b)

Tin
11.1 (US$/l 8.5 7.8 14.8 14.2 11.8 12.2 12.7 12.8 12.9
b)

Zinc
(US
13.0 115.6 102.6 136.3 158.1 115.8 110.3 110.0 103.0 96.4
cents/l
b)

Iron
Ore
($/ dry
90.2 93.8 108.9 161.7 121.3 104.3 89.5 85.0 80.0 75.3
metric
tonne
unit)

Steel
70.9 (US$/t 501.5 486.5 842.5 680.0 588.5 617.5 651.3 655.0 658.8
onne)

Gold
(US$/t 1,392. 1,770. 1,799. 1,800. 1,930. 1,983. 2,015. 2,012. 2,009.
662.6
roy 5 3 6 6 5 4 6 5 4
oz)

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 Pallad
ium
(US$/t
1,542. 2,204. 2,417. 2,135. 1,502. 1,425. 1,460. 1,460. 1,460.
2,006.3 roy
4 6 3 4 9 0 0 0 0
oz,
Londo
n)

Platin
um
1,091. 1,055. 1,100. 1,150. 1,200. 1,252.
1,460.0 (US$/t 864.0 883.4 961.7
1 6 0 0 0 2
roy
oz)

Silver
(US
1,621. 2,053. 2,516. 2,179. 2,193. 2,000. 1,970. 1,950. 1,930.
1,306.6 cents/
8 7 5 4 7 0 0 0 2
troy
oz)

DAP
1,910.6 ($/ton 306.4 300.8 601.0 772.2 541.0 452.9 380.9 380.9 380.9
ne)

Phosp
hate
380.9 Rock 88.0 76.1 123.2 266.2 331.5 236.3 137.3 137.3 137.3
($/ton
ne)

Oil:
Brent
137.3 64.0 42.3 70.4 99.8 83.2 81.5 76.0 70.9 68.1
(US$/
b)

Oil:
OPEC
refere
65.5 nce 64.1 41.4 69.7 99.9 82.5 80.4 75.0 70.0 67.2
price
(US$/
b)

Oil:
WTI
64.6 57.0 39.3 68.0 94.4 78.2 77.1 72.4 67.6 65.0
(US$/
b)

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 Natur
al gas
(US$/
62.4 mmBt 4.8 3.2 16.1 40.3 12.8 10.0 5.8 4.8 4.7
u,
Europ
e)

Natur
al gas
4.7 (US$/ 2.6 2.0 3.9 6.4 2.6 3.4 3.2 2.9 2.6
mmBt
u, US)

Liquef
ied
natura
l gas
2.4 (US$/ 10.6 8.3 10.8 18.4 14.4 12.0 11.2 11.0 10.8
mmBt
u,
Japan
)

Coal
(US$/t
10.6 onne, 77.9 60.8 138.1 344.9 173.1 155.0 107.5 90.0 81.0
Austra
lia)

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Enlarge this image.
AluminiumStocks and prices
EIU expects aluminium prices on the London Metal Exchange (LME) to average US$2,238/tonne in 2023 and
US$2,413/tonne in 2024. Market conditions have not changed notably since last month, with spot demand still weak
and production stable. In line with our forecasts, the market generally expects demand to remain subdued until the
first quarter of 2024, which will constrain prices over the remainder of 2023.
Traders look to stock financing trade deals to generate revenue
LME prices are still finding support at US$2,100/tonne. Cash prices averaged US$2,142/tonne over July and
August, with an average cash to three-month contango of US$45/tonne during the same period. With consumer
demand weak, traders have been shifting focus to stock financing trade, which becomes more lucrative when the
contango widens. However, with little material available in the LME warehousing system, most of the focus of this
activity is on the Gwangyang warehouse in South Korea, which by late August was holding 70% of all LME open
stocks.
Low warehouse stockpiles of aluminium will provide some support to prices in late 2023 and in 2024. In absolute
terms, LME stockpiles are low, which increases the risk of a supply crunch should smelter production be disrupted.
Total stocks in LME warehouses are currently close to 500,000 tonnes, against weekly global primary aluminium
demand of about 1.3m tonnes and ex-Chinese weekly consumption of 540,000 tonnes.
Low stockpiles are exacerbated by buyers' aversion to Russian-produced metal
Moreover, this absolute level of tonnage overstates the metal available to consumers, as many end-users of
aluminium are self-sanctioning against the use of aluminium produced in Russia, which makes up a growing
proportion of LME warehouse supply. At the end of January 2023 Russian material accounted for 40.3% of the
aluminium in LME warehouses. By the end of July 2023 (latest available data) this share had risen to 81%. This was
disproportionate to Russia's 5% share of annual aluminium production.
Despite low stockpiles of aluminium, market traders are showing little concern. Across all regions, physical
premiums have been pushed down by the low levels of interest in spot purchases. In the US, some deals are now
being settled at less than 2 US cents/lb for the first time since late 2022. European duty paid premiums are now
back at less than US$300/tonne for the first time since the beginning of 2023.

Primary aluminium: stocks and prices 2021 2022 2023 2024

Stock
2025
sa

1 Qtr 6,363 4,546 4,255 4,074

4,117 2 Qtr 6,463 4,046 3,705 3,774

3,917 3 Qtr 7,163 4,246 4,105 3,824

4,117 4 Qtr 5,046 4,455 4,224 4,067

%
4,149 chang -16.8 -11.7 -5.2 -3.7
e

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 Price
2.0
sb

1 Qtr 2,096 3,280 2,395 2,212

2,750 2 Qtr 2,400 2,874 2,258 2,340

2,650 3 Qtr 2,648 2,353 2,099 2,500

2,750 4 Qtr 2,762 2,323 2,183 2,600

2,850 Year 2,477 2,706 2,233 2,413

%
2,750 chang 45.6 9.3 -17.5 8.1
e

Our estimates for the global primary aluminium market balance are unchanged from last month's. We estimate a
global production deficit of 591,300 tonnes in 2022, and we forecast deficits of 231,100 tonnes and 156,700 tonnes
in 2023 and 2024 respectively. Under our baseline forecast, the projected deficits in 2023 and 2024 will be
considerably smaller than in 2021 and 2022, but market stockpiles will diminish. Any minor disruption to output, or
even a small uptick in demand growth, will deepen these deficits quickly. Furthermore, considering the lack of non-
Russian material in LME warehouses, it is clear that the aluminium market is finely balanced, despite the current
weakness in demand.

('000
tonnes
unless
Primary aluminium: supply and demand otherwi 2021 2022 2023
se
indicate
d)

Global
67,386. 68,430. 69,561.
2024 2025 product
3 4 0
ion

Global
73,205. 68,402. 69,021. 69,792.
71,301.2 consu
1 5 8 1
mption

73,123. Balanc -
71,457.9 -591.3 -231.1
3 e 1,016.2

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 Total
reporte
-156.7 81.7 d 5,046.4 4,455.1 4,224.0
market
stocks

Days'
4,067.3 4,149.0 consu 26.9 23.6 22.1
mption

Demand
We expect growth of about 1.1% in global demand for primary aluminium in 2023. We forecast that demand in
China, which accounts for about three-fifths of global consumption, will grow by 1.8%. Meanwhile, demand outside
China will increase by just 0.2% in 2023, before growth accelerates to 1.9% in 2024.
Weak demand growth in China will be the biggest constraint on global aluminium demand in 2023 and 2024. Despite
the reopening of China's economy from covid-19 lockdown restrictions at the end of 2022, demand for aluminium
has been slow to recover. Significant weakness in the country's real estate sector, where several large property
developers are in financial distress and property values are declining, has limited demand for aluminium to use in
construction. Although China's government is expected to enact modest economic stimulus in late 2023 and in 2024,
this is expected to have only a slight positive impact on construction activity and thus aluminium demand growth in
the country.
Aluminium negotiations in the year to date reinforce the picture of lacklustre demand growth. The start of what is
traditionally the strongest season for aluminium demand in the northern hemisphere has so far failed to show any
signs of strength. Aluminium buyers in many of the large consuming sectors remain cautious, and continued to run
destocking programmes in the second quarter of 2023. Negotiations are under way for 2024 annual contracts, but
progress is slow across most aluminium products. Contract activity is reported to be stronger among buyers who
require low-carbon metal. The fact that Russia's Rusal is a major supplier of this material has caused significant
sourcing difficulties.
Demand from the packaging sector is weaker, but from transport has improved
Demand from the packaging sector, which accounts for about 15% of global aluminium usage, has been stalling in
2023, after three years of above-trend growth. In North America and Europe many raw material buyers, particularly
for use in the manufacture of beverage cans, over-ordered in 2022 as they sought to lock in supply in a tight market.
The downside of this has been that these consumers have been sitting on excess stock and are now processing this
material rather than purchasing additional volumes. Packaging proved to be a reliable source of aluminium demand
during the covid-19 pandemic, supporting the sales and revenues of many large aluminium rolling mills. Reduced
aluminium demand from packagers in 2023 has thus been more of a shock than the reduced sales into construction,
which is tied into economic growth and was broadly expected.
Countering the weakness in packaging demand, orders from automotive and aerospace, which have come off three
weak years, are showing signs of strength. The supply-chain issues that badly hit the automotive sector from 2020
to early 2022 have subsided. In the aerospace sector, issues relating to titanium supply and skilled labour shortages
are aluminium demand growth as the large aircraft manufacturers struggle to meet production schedules.
Nevertheless, demand is much improved from where it was over the past couple of years.
Demand for "green" primary aluminium is growing
Demand for low-carbon or "green" aluminium has persisted over 2023. Low-carbon aluminium is typically defined as
having a maximum emission of 4 tonnes of carbon dioxide (CO2) per tonne of primary aluminium produced. This

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effectively restricts the certification of green primary aluminium brands to metal produced by smelters that use a
hydropower source. Primary aluminium produced using a coal-based power source typically has emission levels of
more than 15 tonnes of CO2 per tonne of aluminium produced. According to the IEA, about 80% of China's
aluminium production is powered by electricity generated from coal, frequently from local coal plants. Conversely, in
Europe, North America and South America, more than 75% of the energy for aluminium production comes from
hydroelectric sources. Many consumers are now viewing a high carbon footprint as problematic and are specifically
sourcing low-carbon material to achieve their own sustainability targets. Hydro Aluminium, Rio Tinto, Alcoa, Rusal
and Century Aluminium are the major players in the green aluminium sector, while Emirates Aluminium has plans for
aggressive expansion of low-carbon aluminium production powered by nuclear energy. In the near term, with many
customers now unwilling to purchase material from Russia's Rusal, and with negligible output growth from other
players, locking in future volumes has become more challenging.
Higher volumes of recycled material will be needed to fill the supply gap
In addition to low-carbon primary aluminium, there is also growing acknowledgement of the low-carbon credentials
of material with a high content of end-of-life scrap. For example, a rolling slab or extrusion billet manufactured with
75% recycled content can have an emission footprint of less than 2.5 tonnes of CO2 per tonne of aluminium
produced. This is because only about 5% of the energy required to produce primary aluminium is used to produce
recycled aluminium. There are currently few certified brands of low-carbon recycled material, but Hydro Aluminium
and Alcoa both manufacture such brands, having gained experience in this field from the certification of their green
primary metal. As more traditional secondary producers gain an understanding of the opportunities in this sector, we
expect certification to gather pace. The automotive sector will be a significant source of demand for low-carbon
steel; firms including BMW, Volkswagen and Mercedes Benz have already committed to increasing utilisation of low-
carbon aluminium in the coming years.

('000
tonnes
Primary aluminium: consumption unless 2021 2022 2023
otherwise
indicated)

2024 2025 China 40,466.4 40,675.7 41,391.6

42,529.9 43,559.1 EU 6,898.7 7,002.9 6,896.4

6,989.5 7,109.1 US 5,567.1 5,666.1 5,703.0

5,753.2 5,879.7 India 1,826.4 1,908.5 1,967.7

2,072.2 2,176.6 Japan 1,741.0 1,692.3 1,703.3

South
1,720.1 1,734.2 1,212.2 1,223.6 1,239.5
Korea

1,266.3 1,293.7 Turkey 1,426.8 1,463.9 1,485.8

1,537.8 1,591.6 Brazil 1,132.6 1,142.8 1,101.7

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 1,117.5 1,135.6 Russia 635.4 571.9 554.7

560.9 566.3 Canada 590.1 598.4 602.0

610.2 620.0 Others 6,905.9 7,075.7 7,146.4

World
7,300.2 7,457.3 68,402.5 69,021.8 69,792.1
total

%
71,457.9 73,123.3 6.8 0.9 1.1
change

Supply
We forecast that global aluminium production will rise by 1.7% in 2023 and by 2.5% in 2024. The adjustments
largely relate to our revised view for China, where we are forecasting production growth of 2.2% in 2023 and 2% in
2024. In China, output in July was running at an annualised rate of 40.9m tonnes, unchanged from January 2023.
Outside China, output is running slightly below our forecasts
Aluminium production in most regions ex-China is currently quite stable. Output in January 2023 was running at an
annualised rate of 28.1m tonnes, and by July 2023 this had risen to just 28.2m tonnes, according to the International
Aluminium Association. Lower output in several regions has been offset by an increase in Latin America, where the
ramp-up of the restarted Alumar smelter continues. The International Aluminium Institute statistics suggest that ex-
Chinese aluminium production is running below our estimates for the year. Annualised output for the year to July
was 28.2m tonnes, compared with our forecast of 28.9m tonnes. We expect that actual output is running higher that
the IAI indicates, as several smelters do not report output to the organisation. Nevertheless, 2023 production could
come in at about 200,000 tonnes below our current estimates, which is under review.
Restarts at Yunnan province's shuttered potlines will continue
Output in China was running at an annualised rate of 41.1m tonnes in the first seven months of 2023, compared with
our full year estimate of 41.3m tonnes. We remain comfortable with this estimate, as restarts in drought-affected
provinces will lift monthly operating levels for the rest of the year. In July about 1.2m tonnes per year of smelting
capacity was reactivated in Yunnan, although it is still being ramped up, which adds to the near-250,000 tonnes per
year of capacity that was restarted in June. We estimate that a further 400,000 tonnes per year was reactivated
throughout August. These planned additions to output, which will only be partially offset by small-scale closures in
other provinces, will bring output in the country in line with our estimates for the year.
Only Indian producers have approved expansions in output
In late 2022 India's Vedanta confirmed plans to raise capacity at its Balco smelter by nearly 400,000 tonnes per year
to 1m tonnes per year by 2023, and to raise overall company output by a further 200,000 tonnes per year. However,
this is the only confirmed expansion in primary aluminium production in the past year. In the Middle East, Alba
(Bahrain) is assessing the possibility of adding another potline, and Emirates Global Aluminium (UAE) is focusing its
current expansion plans on the development of a 150,000-tonnes per year recycling facility for the manufacture of
billet rather than extending its primary aluminium reduction capacity. There are no known expansion plans at any
other smelters in the region, despite lower power pricing. Most of the smelters in the Gulf Co-operation Council
(GCC) region are powered by natural gas sourced from state-owned companies, and some states have decided to
allocate incremental gas availability to export, often in the form of liquefied natural gas (LNG) into Asia, rather than
expanding aluminium capacity.
Another major cause for concern at smelters in both India and the GCC is to what degree their products will be
locked out of the European market in the future owing to their high carbon footprint following the late-2022
finalisation of the agreement on Carbon Border Adjustment Mechanism (CBAM), which will apply to the import of

PDF GENERATED BY PROQUEST.COM Page 13 of 106

certain products to the EU from October 1st 2023. CBAM is one of the components of the EU Green Deal, which
aims to reduce greenhouse gas emissions by 55% by 2030. CBAM will come into force in October 2023 with the
introduction of carbon-emissions-reporting obligations for the import of certain goods, including aluminium, into the
EU. From 2026 importers of aluminium and other high-carbon products will be obliged to pay a levy, effectively
raising the cost. Emirates Aluminium is seeking to shift most of the company's 2.7m-tonnes/year capacity to nuclear
power from natural gas power in the coming years, which would make it low-carbon aluminium exempt from the
CBAM.

('000
tonnes
Primary aluminium: production unless 2021 2022 2023
otherwise
indicated)

2024 2025 China 38,837.0 40,430.0 41,316.0

42,142.3 42,985.2 Russia 3,950.0 3,900.0 3,500.0

3,500.0 4,000.0 Canada 3,138.0 2,993.0 3,250.0

3,250.0 3,250.0 UAE 2,490.0 2,537.3 2,562.7

2,588.3 2,614.2 India 3,959.7 4,100.0 4,300.0

4,364.5 4,430.0 EU 1,965.6 1,340.1 1,040.1

1,390.1 1,740.1 Australia 1,601.0 1,500.0 1,550.0

1,519.0 1,488.6 US 900.0 750.0 780.0

950.0 950.0 Brazil 769.0 900.0 1,032.3

South
1,167.0 1,317.0 717.0 725.0 725.0
Africa

725.0 725.0 Others 9,059.0 9,255.0 9,505.0

9,705.0 9,705.0 World total 67,386.3 68,430.4 69,561.0

71,301.2 73,205.1 % change 3.8 1.5 1.7

PDF GENERATED BY PROQUEST.COM Page 14 of 106

Enlarge this image.
CoalStocks and prices
EIU expects prices for benchmark Newcastle thermal coal to average significantly lower than in 2022 over the
remainder of 2023 and beyond. Prices will also remain volatile over our forecast period, to 2025, owing to Western
bans on Russian coal and broader geopolitical disruption to energy supplies.
Coal prices plunged in the first half of 2023, from nearly US$300/tonne in early January to about US$140/tonne in
late July, before rebounding to US$160/tonne by late August. We expect prices to rise between Q4 2023 and Q1
2024 owing to increased heating demand in the northern hemisphere. In particular, coal will play a central role in
fulfilling European energy demand during the winter of 2023/24, as non-Russian gas supplies may not be sufficient.
Nonetheless, with gas storage levels high at present, the squeeze on gas supplies in the coming European winter
should not be as severe as in 2022/23, which will limit the rise in prices. Europe is well supplied with gas, owing to
an influx of liquefied natural gas (LNG), demand destruction and plenty of stocks in storage. Europe's storage tanks
are about 90% full on average. The tightness of the natural gas market will nonetheless mean that prices remain
sensitive to supply disruptions, as has been the case in August, driven by the threat of industrial action at LNG
plants in Australia.
Gas-to-coal switching will not be as aggressive in 2023-24
An uptick in natural gas prices between Q4 2023 and Q1 2024 will sustain the importance of coal in Europe's energy
mix over 2024. A significant decline in natural gas prices over the first three quarters of 2023 means that natural gas
has started to push coal back out of the power generation mix in Europe after coal gained prominence in 2022. But
increased natural gas demand in the northern hemisphere in the winter of 2023/24 will push gas prices higher,
making coal a more viable option in some markets. This will be the case particularly in eastern Europe (for example,
Poland), where gas-fired power capacity is more limited than coal. In Germany, the country's last three nuclear
reactors, with total capacity of about 4 GW, were shut down in April, which may lead to an increase in coal
consumption for power generation.

Coal: prices 2021 2022 2023 2024

2025 Pricesa

1 Qtr 89.5 243.6 200.0 180.0

PDF GENERATED BY PROQUEST.COM Page 15 of 106

 160.0 2 Qtr 109.7 352.3 150.0 150.0

100.0 3 Qtr 169.1 413.3 100.0 100.0

80.0 4 Qtr 183.9 370.4 190.0 190.0

90.0 Year 138.1 344.9 160.0 155.0

%
107.5 chang 127.1 149.8 -53.6 -3.1
e

Structural factors will limit the degree to which coal demand can rise in Europe over 2023/24. High prices for carbon
allowances under the EU's Emissions Trading Scheme (EU ETS) are affecting the profit margins for coal plants
(more so than for gas plants). Moreover, the potential for fuel switching is limited by the fact that a number of
countries in western Europe have already retired many coal plants. Furthermore, the EU import ban on Russian coal
since August 2022 means that EU countries have to import more coal from further afield, for example from the US,
Colombia, South Africa, Indonesia, Kazakhstan and Australia.

(m
Coal: supply and demand 2021 2022 2023
tonnes)

Producti
2024 2025 7,803.1 8,233.8 8,458.0
on

Consum
8,174.0 8,235.0 7,541.0 7,724.1 7,641.0
ption

7,662.0 7,654.0 Balance 262.1 509.7 817.0

Demand
We expect global demand to stagnate in 2023, as a global economic slowdown will constrain electricity demand. We
have recently raised our forecast for 2023 global real GDP growth from 2.2% to 2.3%, with a further upgrade to US
growth offsetting another downgrade for China. Nonetheless, this would be a significant deceleration from 3.1% in
2022. In 2024 coal demand growth will accelerate slightly, to 0.3%. Although we expect more robust global real GDP
growth of 2.4% in 2024, this will have a limited impact on coal demand, owing to relatively high energy prices and
structural factors that affect coal use in thermal-electricity generation, such as cheaper renewables and clean energy
policy drivers. These structural factors will result in coal consumption contracting by 0.7% in 2025, to the lowest level
since 2021. A significant decline in coal consumption in Europe, which will have secured more alternative gas
supplies to plug the gap left by Russia, and the US will offset increased coal demand in China and India.
China's coal consumption will remain strong in 2024-25
Power consumption in China will increase in 2023, in line with recovering economic growth, but coal consumption
will remain stagnant. We expect GDP growth of 5.2% this year, down from 6.1% just two months ago. We expect
coal consumption to remain flat in 2024-25 as stronger demand for power is increasingly met by renewables
expansion. A report published by the International Energy Agency (IEA) in July 2023 noted that coal demand in

PDF GENERATED BY PROQUEST.COM Page 16 of 106

China increased by more than expected in 2022. This was mainly because the calorific value (CV) of coal produced
in China was lower, resulting in higher than expected volumes. In addition, more coal than expected was gasified to
produce synthetic liquid fuels, plastics and fertilisers, according to the IEA.
In January-July power generation in China increased by 3.8% compared with the year-earlier period, according to
official data. Thermal power generation (which includes coal, natural gas and oil) increased by 7.2% year on year in
the first half of 2023.
Coal will continue to lose share to renewables in China's energy mix
We expect renewable electricity generation in China to continue to gain market share in 2023 and beyond. This is
despite the government supporting domestic coal production to keep domestic coal prices in check. The government
is committed to reaching peak greenhouse gas emissions by 2030 and achieving net zero by 2060.
China added 59 GW of new power plant capacity in the first three months of 2023, of which almost 8 GW was coal-
fired plants and the remainder mostly solar and wind, according to China's regulator, the National Energy
Administration (NEA). Wind and solar power now account for about 14% and 16% of China's installed power
capacity, while coal plants account for about 51%, hydropower 16% and nuclear power 2%, according to the NEA.
However, the commissioning of new coal-fired plants in China is expected to accelerate later in 2023, with about 70
GW of new coal power capacity expected to be added. Moreover, research by the Global Energy Monitor suggests
that China approved over 50 GW of coal-fired power capacity projects in the first half of 2023. The provinces
approving the most new coal so far in 2023 include Hebei with 7.7 GW, Jiangsu with 7.3 GW, Shandong with 6.7
GW, Guangdong with 6 GW, and Hubei with 5.4 GW. While significant, the positive impact of these new coal plants
on total coal power in China will be partially offset by the closures of older coal plants.
US coal consumption will decline in 2024-25
In the US, coal consumption will remain in terminal decline. Coal power plant retirements and rising usage of
renewables will limit demand in the coming years. According to the short-term energy outlook of the US Energy
Information Administration (EIA) from early August 2023, 15 GW of coal power capacity will be retired by the end of
2023. The share of electricity generated by coal in the US will fall from 20% in 2022 to 16% in 2023 and 15% in
2024, according to the monthly report. Coal-fired power generation in the US fell by 27% in the first half of 2023
compared with the year-earlier period.
Europe's coal demand could increase over the 2023/24 winter
We expect coal to play an important role in European power generation during the region's 2023/24 winter. Despite
current healthy gas storage levels, shortages next winter cannot be ruled out. According to data from an
independent energy think-tank, Ember, coal-fired power generation declined by about 23% in the first half of 2023
compared with the year-earlier period. Coal accounted for less than 10% of the EU's electricity generation in May for
the first time. Moreover, May and June were two of the lowest months for EU coal consumption ever. In June 2023
the Netherlands used coal for only five days, with a record 17 consecutive days with no coal use. Regionally, higher
output from nuclear power reactors in France played a role as reactors returned online after inspections and
maintenance. Improved conditions for hydropower and accelerated installation of renewables also contributed to the
fall in coal-fired power generation.
The long-term decline of coal power in the EU will accelerate
Although the war in Ukraine may delay the phasing-out of coal power in European countries in 2024-25, the long-
term decline of coal will remain in place. Moreover, the phasing-out of coal and natural gas in Europe will be more
aggressive in the long term owing to the war. We expect renewables to generate a rapidly increasing share of
electricity in Europe in 2024-25, given policy support, falling costs and relatively high carbon prices under the ETS.
This trend will continue over time, as EU member states must reduce emissions by 55% from 1990 levels by 2030-a
significantly more aggressive target than the previous benchmark of 40%. The EU is also close to adopting a 42.5%
target share for renewables in final energy consumption by 2030, up from a target of 32% currently. Further reforms
to the ETS will make the market environment for coal generation tougher in the near future. In late February 2023
the ETS carbon price was over EUR100/tonne (US$109.2/tonne) for the first time. Although prices had fallen back

PDF GENERATED BY PROQUEST.COM Page 17 of 106

into the EUR80-90/tonne range by the end of August, they are set to average over EUR80 for a second consecutive
year, similar to 2022 and about four times the 2019-20 average.
The UK plans to phase out most coal by 2024, Greece and Italy by 2025, and the Netherlands by 2030. In Spain, the
phasing-out of coal is well under way, with the remaining plants expected to go off line by 2030 at the latest. In
August 2023 the Spanish government accepted a request by Endesa, the largest electric utility company in Spain, to
close its 1.5 GW As Pontes coal plant by August 2024. The company plans to develop about 1 GW of wind power
projects in the Galicia region to compensate for the lost capacity.
India's coal demand is expected to continue growing in 2024 and 2025
We estimate that Indian demand for coal rebounded by 6.4% in 2022, and we forecast further growth of 2% in 2023.
This is lower than the IEA's forecast of 5% growth. According to India's Central Electricity Authority (CEA), thermal-
power generation (almost all coal) in April-July 2023 was up by more than 3.8% year on year. According to the
Ministry of Coal, coal-fired power generation in July 2023 was up by 11.6% year on year, but down by about 1.1%
on the previous month.

(m
tonnes
unless
Coal: consumption otherwis 2021 2022 2023
e
indicated
)

2024 2025 China 3,850.6 4,000.0 4,000.0

3,950.0 4,000.0 India 1,100.0 1,170.0 1,193.0

1,200.0 1,230.0 US 504.0 450.0 400.0

395.0 360.0 Russia 204.2 205.2 206.0

200.0 200.0 Germany 134.4 140.0 120.0

110.0 85.0 Japan 177.7 172.4 165.0

South
167.0 150.0 181.2 177.6 181.0
Africa

South
180.0 170.0 120.1 117.7 115.0
Korea

117.0 115.0 Poland 100.0 115.0 100.0

100.0 100.0 Australia 120.3 117.9 114.0

100.0 100.0 Others 1,048.5 1,058.4 1,130.0

PDF GENERATED BY PROQUEST.COM Page 18 of 106

 World
1,225.0 1,180.0 7,541.0 7,724.1 7,724.0
total

%
7,744.0 7,690.0 4.4 2.4 0.0
change

Supply
We forecast that coal production will rise in 2023, driven by higher output from China, Indonesia and India, in
particular. Production will drop in 2024 and 2025 as the high prices that encouraged production in 2021-22 recede
and the market returns to a significant surplus. However, this is subject to geopolitical developments. Pledges by the
EU and the G7 nations to reduce dependence on Russian energy could boost exports from coal suppliers including
Australia, the US, Colombia, South Africa and Indonesia. The EU banned coal imports from Russia (of which
Germany and Poland were the biggest importers) from August 2022; the US and Japanese sanctions will have less
of an impact. A Brussels-based industry association, Euracoal, noted in its most recent market report that the EU
ban on Russian imports had increased Russian coal exports to China, India and South Korea, albeit often at a heavy
discount. Furthermore, China recently ended its unofficial ban on Australian coal imports. The ban was previously
introduced in 2020, leading to China replacing Australian imports with coal from Mongolia and Russia.
China's output increases and imports fall
In the first seven months of 2023 coal production in China increased by 3.6% year on year to 2.7bn tonnes.
According to customs data, coal imports for the period stood at 260m tonnes-up by about 88.6% on the same period
in 2022. A report published by Fitch, a ratings agency, in August 2023 noted that China's higher coal imports were
driven by lower prices caused by weaker demand from other major importers in North Asia and Europe, higher
Indonesian production and the redirection of Russian coal to Asia. We expect demand from the power sector to keep
local production fairly robust during the 2024-25 forecast period.
Higher global prices support US coal output
We expect US coal production to fall in 2023, albeit less aggressively than the EIA's forecast of a decline of 4.2% in
2023 and 19.5% in 2024. According to the EIA, US production was virtually the same in the first half of 2023 as in
the year-earlier period. However, the EIA forecasts that coal-fired electricity generation was 18% lower in the second
half of 2023 than in the year-earlier period. The administration of the US president, Joe Biden, is unlikely to support
the country's coal-mining sector; its policy to make US power generation emissions-free by 2035 will eventually
eliminate coal-fired power altogether unless it is supported by carbon capture and storage technology.
India will increase its coal self -sufficiency
India is continuing to ramp up coal production, with output 14.9% higher year on year in July, according to the
Ministry of Coal. Coal India Limited (CIL), the country's largest state-owned producer, reported 13.4% year-on-year
growth in that month. India also imported about 21m tonnes in June, about 25% less than a year earlier. The August
2023 Fitch report said that India's coal imports should remain strong in the near term, but that rising domestic
production and the accelerating pace of renewable capacity additions would moderate imports over the medium
term.
After rising in 2023, Australia's output will stagnate in 2024-25
Australia has pledged to achieve net-zero emissions by 2050, but has not set a phase-out date for coal
consumption, and coal exports are not expected to be affected by the target, at least in the medium term. We expect
output to rise in 2023, to decline slightly, to 440m tonnes in 2024, and then stagnate in 2025. The medium-term
outlook depends mainly on export opportunities, which rely on demand in Asian markets. One advantage that
Australian exporters have is that the higher quality of their coal makes it harder for China to find a replacement. In
May 2023 Australia's government approved its first coal mine since it was elected, the Isaac River coal mine in
Central Queensland. Expected output from the mine is just 500,000 tonnes annually over five years.

PDF GENERATED BY PROQUEST.COM Page 19 of 106

 (mine
output; m
tonnes
Coal: production unless 2021 2022 2023
otherwise
indicated
)

2024 2025 China 4,000.0 4,300.0 4,500.0

4,300.0 4,400.0 India 773.0 850.0 920.0

920.0 930.0 US 524.0 550.0 520.0

460.0 430.0 Australia 425.0 410.0 444.0

Indonesi
440.0 440.0 559.6 600.0 630.0
a

630.0 630.0 Russia 437.0 431.0 418.0

South
400.0 400.0 229.0 232.0 243.0
Africa

250.0 240.0 Germany 125.0 130.0 83.0

80.0 75.0 Poland 104.6 102.0 92.0

Kazakhst
90.0 90.0 115.0 116.4 118.0
an

119.0 119.0 Others 510.9 512.4 490.0

World
485.0 481.0 7,803.1 8,233.8 8,458.0
total

%
8,174.0 8,235.0 5.7 5.5 2.7
change

PDF GENERATED BY PROQUEST.COM Page 20 of 106

Enlarge this image.
CopperStocks and prices
EIU expects the London Metal Exchange (LME) cash price to average US$8,602/tonne in 2023-a modest decline
from an average of US$8,813/tonne in 2022. LME cash copper prices rallied to US$9,300/tonne in January 2023,
from a low of US$6,942.50/tonne on July 15th 2022. Price sentiment has weakened since mid-April amid concerns
of tepid demand in China and the return of a stronger US dollar. Although investment to support decarbonisation
plans will continue to underpin copper prices, our current forecast implies that tightening monetary policy to quell
rapidly rising inflation will continue to curb consumer spending in 2023, keeping the LME copper price below the
record high of US$11,113/tonne of October 19th 2022. We forecast that the LME cash price will strengthen to an
average of US$9,200/tonne in 2024 and US$10,088/tonne in 2025 as decarbonisation initiatives boost demand and
underinvestment in mine projects continue to limit production gains.

Refined copper: stocks and prices 2021 2022 2023 2024

2025 Stocks
a

1 Qtr 911.9 722.0 412.8 438.8

599.5 2 Qtr 870.1 701.0 404.7 489.2

609.0 3 Qtr 763.7 626.0 396.5 539.6

618.5 4 Qtr 624.1 421.0 388.4 590.0

%
628.0 chang -22.6 -32.5 -7.7 51.9
e

6.4 Pricesb

PDF GENERATED BY PROQUEST.COM Page 21 of 106

 8,503. 9,995. 8,926.
1 Qtr 8,710.0
6 8 1

9,699. 9,511. 8,463.

9,800.0 2 Qtr 8,970.0
7 8 2

9,371. 7,744. 8,380.

10,000.0 3 Qtr 9,420.0
7 3 0

9,698. 7,999. 8,640.

10,250.0 4 Qtr 9,700.0
1 9 0

9,318. 8,813. 8,602.

10,300.0 Year 9,200.0
3 0 3

%
10,087.5 chang 51.0 -5.4 -2.4 6.9
e

Expansion projects should limit upward price pressures

The fundamentals of the refined copper market will rebalance in 2023-25 as mine and smelter expansion projects
start production. This comes after a period of significant deficits in 2019-22 as a huge restocking cycle offset the
slump in industrial activity and consumption caused by the covid-19 pandemic. Risks to this outlook appear
balanced. Despite the risk that inflationary pressures erode consumer spending, expansion of green-energy
infrastructure and the electrification of the global automotive fleet will support rising demand. Recent mine and
smelter expansions have suffered minimal disruption, but we maintain our view that factors such as resource
nationalism and stricter environmental oversight are likely to persist in the long term. This raises concerns that new
mine projects and planned smelter expansions will be insufficient to meet future demand. Moreover, we expect
underinvestment in future projects to tighten the underlying fundamentals in the second half of the decade.
Reduced cancellations are moderating demand for additional cathodes
LME stocks totalled 97,525 tonnes in late August, compared with a mid-April low of 51,550 tonnes. A reduction in
cancelled warrants in August suggests that the market has little demand for additional material. Currently only 0.5%
of stocks are booked for removal, compared with almost 70% in late June. Two-way stock flows are likely to become
increasingly busy owing to tightening availability. The US Department of the Treasury imposed sanctions against a
Russian producer, Ural Mining and Metallurgical Company (UMMC), but this is unlikely to affect broader warehouse
flows; LME members previously voted against an outright ban of Russian material from its warehouse network, and
other self-imposed sanctions have led market participants to avoid Russian material. In China, the Shanghai Futures
Exchange (SHFE) registered total copper stocks of 40,585 tonnes on August 25th, down from a recent peak of
252,455 tonnes on February 24th.

PDF GENERATED BY PROQUEST.COM Page 22 of 106

 ('000
tonnes
unless
Refined copper: stocks otherwis 2021 2022 2023
e
indicated
)

Produc
2024 2025 298.5 285.0 285.0
ers

Consu
285.0 285.0 110.3 110.0 110.0
mers

Mercha
110.0 110.0 13.1 14.0 14.0
nts

Exchan
14.0 14.0 202.1 218.0 185.4
ges

387.1 425.0 Total 624.0 627.0 594.4

Change
796.1 834.0 in -182.6 3.0 -32.6
stocks

Weeks'
201.7 38.0 consum 1.3 1.3 1.2
ption

Stock flows between the LME and SHFE warehouses rose in 2022 as easing US monetary policy drove currency
volatility. We expect China to account for more than 46% of global refined copper production by 2025.

('000
Refined copper: supply and demand 2021 2022 2023
tonnes)

2024 2025 Production 24,518.1 25,135.8 26,260.6

Consumptio
27,036.7 27,940.9 24,777.6 25,852.5 26,293.3
n

26,835.1 27,902.9 Balance -259.5 -716.8 -32.6

Demand
We expect consumption of refined copper to remain supported overall in 2024-25, but demand for copper cathodes

PDF GENERATED BY PROQUEST.COM Page 23 of 106

will be further constrained in the short term, as headwinds related to global monetary tightening and the war in
Ukraine will persist throughout 2024, and probably beyond. In China, rapid urbanisation and significant investments
in renewable energy infrastructure will boost consumption. However, the strong initial rebound in consumer activity
after the end the country's zero-covid policy has fizzled. Outward investment through China's Belt and Road Initiative
(BRI) and a recovery in international travel from China will support demand elsewhere in Asia through increased
construction activity. In addition, the Russia-Ukraine war is leading to a faster uptake of electric vehicles (EVs)
globally, and we expect oil prices to remain high throughout the forecast period. More broadly, we think that
investments to support the decarbonisation agenda will trigger a step-change in copper demand towards the end of
our forecast period.
Expanding renewable energy capacity is supporting China's copper demand
China will remain pivotal for copper demand, as it accounts for more than 50% of global consumption-up from 25% a
decade ago. Although the strong rebound in consumer activity after the end of its zero-covid policy has now faded,
we maintain our view that high levels of state-led infrastructure investment will continue to support copper
consumption. Rapid expansions of renewable energy capacity will continue to support copper consumption; Chinese
authorities appear set to exceed their target of raising total wind and solar capacity to 1,200 GW-more than double
the capacity in 2020-well ahead of their target of 2030. This, alongside the authorities' ambitious urbanisation
agenda to reduce rural poverty, will support copper consumption. Demand could be further bolstered by the rapid
expansion of China's EV market, even as authorities roll back subsidies. Conversely, although we believe that the
main policy goal for this year is to avoid a hard landing in the property sector and any related systematic risks, we
forecast only a marginal improvement in the property market. More broadly, China's ambition to become carbon
neutral by 2060 will support demand in the long term.
Asia's outlook for 2024 has improved
Consumption in other emerging markets will face mixed fortunes in the near term. The post-covid recovery in China
has lost momentum, resulting in sluggish consumer spending and tepid outward investment. Consumer price
inflation will moderate across the region in 2024-25, but remain high by historical standards, offering only limited
space to ease monetary policy. Although we believe that economic activity in the Asia-Pacific region will finally return
to nearer pre-pandemic levels in 2024, we expect growth rates to remain below historical trends. More broadly, we
expect accelerated infrastructure investment, especially through China's BRI and the G7 nations' Build Back Better
World project, to support copper consumption during our forecast period as China and Western democracies vie for
political influence in poorer nations.
Europe's economic indicators will improve marginally in 2024
Economic growth in Europe will slow to 1% in full-year 2023, amid persistently high inflation (which is weighing on
consumers' purchasing power), tight monetary policy (with interest rates rising across Europe) and a subdued
external environment. The likelihood of an energy crunch in the 2023-24 winter has fallen significantly, on the back
of comfortable gas reserves and declining gas prices. However, ongoing heatwaves or an especially cold winter
could still cause the gas market to tighten substantially. Supportive factors include EU-funded investment and still-
generous fiscal support, the return of Chinese demand following the lifting of its zero-covid policy, and easing global
supply-chain frictions. The increase in energy costs for the European industrial sector in 2023 and beyond will erode
European competitiveness in several industries, especially base metals.
EU demand will continue to be supported under the RePowerEU initiative
Despite these negative factors, we expect copper usage in the EU to remain at around recent levels in 2024-25.
Demand in the region is likely to benefit in the long term, as state aid is likely to remain elevated. The inclusion of
copper as a "strategic" material under the recently proposed Critical Raw Materials Act (the region's response to the
US Inflation Reduction Act, or IRA) could support the development of mining, processing and recycling capacity in
the region. Spending under the EUR750bn (US$818bn) covid-19 recovery fund will continue to bolster new-energy
vehicle sales and related infrastructure, including 1m electric and hydrogen-vehicle charging stations by 2025.
Consumption could be bolstered further by accelerated green-energy investment plans under the RePowerEU

PDF GENERATED BY PROQUEST.COM Page 24 of 106

initiative, which is designed to improve energy security and green the bloc's power sources. Nonetheless, the impact
of high inflation on consumers' purchasing power will hit copper consumption in the short term. More broadly, trade
tensions between the EU and China remain a longer-term challenge.
A US economic slowdown is on the horizon
Copper consumption in the US will fall by 1.8% in 2023 but will rise by an average of 2.4% in 2024-25, supported by
the IRA, which was passed in August 2022. The act, which includes tax credits for green energy production and
electricity storage (batteries), facilitates major investments in clean energy over the next decade. It also includes
US$7.5bn in funding to build a nationwide network of EV charging stations to support proposed plans for zero-
emission vehicles (including battery electric, hybrid or fuel-cell EVs) to make up half of new vehicle sales in the US
by 2030. These plans include a US$3.1bn investment to support domestic production of advanced batteries and EV
battery-recycling capabilities.

('000
tonnes
Refined copper: consumption unless 2021 2022 2023
otherwise
indicated)

2024 2025 China 13,885.2 14,837.6 15,371.8

15,679.2 16,306.4 EU 3,109.5 3,194.3 3,130.5

3,161.8 3,193.4 US 1,766.0 1,724.0 1,693.0

1,721.8 1,773.4 Japan 909.4 892.0 856.3

South
864.9 903.8 601.3 658.1 646.3
Korea

Latin
659.2 692.2 392.8 375.5 379.2
America

394.4 423.2 India 502.6 684.2 717.7

757.2 787.5 Taiwan 411.3 372.0 362.0

369.2 385.8 Others 3,199.5 3,114.8 3,136.6

3,227.5 3,437.3 World total 24,777.6 25,852.5 26,293.3

26,835.1 27,902.9 % change -0.3 4.3 1.7

Supply
We expect global refined copper production to expand by an average of 3.1% per year in 2024-25, as ample raw-
material availability and smelter expansions will support production growth, primarily in China. Various mine-
expansion projects are due to enter production during our forecast period, improving availability in the global
concentrates market. However, the El Niño weather pattern could result in greater disruption in the short term,

PDF GENERATED BY PROQUEST.COM Page 25 of 106

limiting the pace of production growth during our forecast period. More broadly, stronger price sentiment, coupled
with demand-growth expectations resulting from the decarbonisation agenda, could fuel an increase in project
investment, but this will not offset a lack of investment in project development over the past decade. As a result, we
expect refined metal production to slow and, in turn, to tighten the underlying fundamentals later in the decade. In
addition, broader factors such as growing environmental oversight, resource nationalism and trade tensions will
remain the rising challenges in the long term.
Growth in global copper-mine production will accelerate in 2024-25
We expect growth in global copper-mine production to accelerate during our forecast period, after production
plateaued between 2017 and 2020. An estimated 2m tonnes/year (t/y) of mine capacity has been added in 2022-23,
and will be bolstered with a further 1.2m t/y of capacity projected to be added in 2024-25. In Chile, along with various
expansion projects, the 300,000-t/y Quebrada Blanca Phase 2 was in the commissioning period in early 2023. Work
to expand capacity further at the Kamoa-Kakula mine, coupled with the Tenke Fungurume Mine (TFM) expansion,
will bolster production in the Democratic Republic of Congo (DRC) from the second half of 2023. The underground
expansion at the Oyu Tolgoi mine in Mongolia (a joint venture between Rio Tinto and the Mongolian government)
will raise production towards the end of our forecast period.
El Niño weather patterns could result in significant mine disruptions
However, short-term risks appear tilted to the downside. The arrival of EI Niño will hamper copper mine operations,
as it has in previous years with producers in Latin America contending with heavy rains and flooding while those in
Australia and South-east Asia faced water shortages.
Mergers among miners could boost investment in new mine projects
Mergers, acquisitions and joint-venture projects among copper mining companies are multiplying in response to
concerns about underinvestment in new mining projects and could lead to an increase in investment in future
projects. Despite this, factors such as tighter environmental oversight, resource nationalism, and broader political
and social unrest will continue to pose downside risks. However, we maintain our view that mining production growth
will slow towards the middle of the decade.
Spot treatment charges improve as supplies stabilise
Our central view remains that additional capacity will support a gradual rise in global mine production. Spot
treatment charges (TCs) for clean, standard-grade copper concentrates stood at US$88.30/tonne in mid-August
2023, recovering from a seven-month low in early March, owing to improved availability. In December 2022
Freeport-McMoRan agreed 2023 annual benchmark TCs with Chinese smelters at US$88/tonne-an increase of 35%
from the US$65/tonne agreed for 2022.
China will continue to expand its smelting capacity in 2024-25
China's contribution to the pace of global refined copper production will remain crucial, as the country is the world's
largest importer of raw materials, a leading producer of cathode and has the largest smelting capacity. China plans
to add more to the total output in 2024-25, but tighter environmental standards announced by the Ministry of Ecology
and Environment, designed to reduce heavy-metal emissions by the middle of the current decade, pose some risks.
This will act as a drag on refined copper production growth towards the end of our forecast period. In addition,
restrictions on imports of poor-quality scrap will increase reliance on copper concentrates, which will leave smelters
more susceptible to disruption, be it due to energy costs, treatment charges or supply-chain issues.
Outside China, notable smelter projects are scheduled in India, the DRC, the US, Uzbekistan and Indonesia-the
latter as part of Freeport-McMoRan's agreement with the Indonesian government.

Copper: production 2021 2022 2023 2024

PDF GENERATED BY PROQUEST.COM Page 26 of 106

 Mine
output:
2025
('000
tonnes)

Chile 5,624.9 5,330.5 5,383.8 5,583.0

5,694.7 Peru 2,299.3 2,438.6 2,682.5 2,763.0

2,785.1 China 1,740.6 1,665.6 1,672.3 1,692.3

1,793.9 US 1,233.0 1,232.4 1,205.3 1,253.5

Congo
(Democr
1,241.0 atic 1,797.8 2,359.8 2,572.2 2,675.1
Republic
)

2,915.9 Others 8,603.1 8,671.9 8,758.6 8,819.9

8,996.3 Total 21,298.7 21,698.9 22,274.7 22,786.9

%
23,426.8 3.7 1.9 2.7 2.3
change

Refined
output:
2.8
('000
tonnes)

China 10,487.5 11,216.0 12,023.6 12,264.0

12,877.2 EU 2,712.9 2,614.1 2,637.7 2,664.0

2,637.4 Chile 2,274.0 2,149.2 2,119.1 2,153.0

2,144.4 Japan 1,516.7 1,556.5 1,586.0 1,570.2

1,573.3 US 970.8 972.0 966.2 985.5

983.5 Russia 1,041.6 1,041.6 1,062.4 1,070.9

1,079.5 Others 5,514.7 5,586.4 5,865.7 6,329.1

PDF GENERATED BY PROQUEST.COM Page 27 of 106

 World
6,645.6 24,518.1 25,135.8 26,260.6 27,036.7
total

%
27,940.9 1.5 2.5 4.5 3.0
change

Enlarge this image.

CottonStocks and prices
EIU estimates that cotton prices will have dropped by an average 27.7% in 2023 owing to headwinds on the demand
side, especially as the global textile sector is in a poor state and investors continue to be concerned about still-high
inflation and macroeconomic uncertainties. Cotton prices will edge down by a further 4.8% in 2024 and 3.5% in
2025, in line with our expectation of surpluses in the market. This will bring prices closer to their historical levels,
after they reached a decade high of US$3.61/kg in May 2022 owing to bullish demand expectations and supply side
issues at the time. Price volatility has increased since 2020 as a result of the covid-19 pandemic, the Russia-Ukraine
war and increased macroeconomic uncertainties, and volatility is likely to continue during our 2024-25 forecast
period owing to investor concerns about the global economy.

(Cotloo
kA
index;
US$/k
g
Cotton: prices 2021 2022 2023
unless
otherwi
se
indicat
ed)

2024 2025 1 Qtr 2.0 3.0 2.2

PDF GENERATED BY PROQUEST.COM Page 28 of 106

 2.0 1.9 2 Qtr 2.0 3.5 2.1

2.0 1.9 3 Qtr 2.2 2.7 2.0

2.0 1.9 4 Qtr 2.7 2.2 2.0

1.9 1.9 Year 2.2 2.9 2.1

%
2.0 1.9 chang 40.7 28.4 -27.7
e

We expect that Chinese stocks will increase modestly in 2023/24, from 8.86m tonnes at the end of the 2022/23
season (year ending July 31st) to 8.9m tonnes. Meanwhile, global stocks (excluding China) will rise from 19.2m
tonnes at the end of the 2022/23 season to nearly 21m tonnes by end-2023/24, in line with a surplus on the global
market. In 2024/25 Chinese stocks will increase slightly, and the global market will record another surplus. As a
result, global stocks (excluding China) will increase to 22.2m tonnes.

(m
tonnes
unless
Cotton: supply and demanda otherwi 2020/21 2021/22 2022/23
se
indicate
d)

Producti
2023/24 2024/25 24.0 25.2 24.6
on

Consu
25.1 25.3 25.7 25.8 23.5
mption

23.3 24.1 Balance -1.7 -0.6 1.2

1.7 1.2 Stocksb 18.7 18.1 19.2

%
21.0 22.2 -8.3 -3.5 6.5
change

Demand
We estimate that global cotton demand contracted by 9.2% in the 2022/23 season, in line with a slowdown in
economic growth driven by still-high inflation, tight monetary policy and the ripple effects from the war in Ukraine.
High prices and lower consumer confidence have been a particular constraint on the global textiles sector, as textile
and apparel consumption is heavily dependent on discretionary spending. Textile demand and cotton consumption
move in tandem, and we estimate that weak textile demand will have pushed down cotton consumption sharply in

PDF GENERATED BY PROQUEST.COM Page 29 of 106

2022/23.
Demand growth will contract by 0.5% in the 2023/24 season as the delayed impact of the rise in interest rates will
constrain activity in the remainder of 2023 and into 2024, with economic growth remaining below trend in 2024.
Global cotton demand will then pick up by 3.2% in the 2024/25 season as economic activity returns closer to its
long-term trend.
Throughout our 2024-25 forecast period cotton demand will remain below historical levels. Several factors will
continue to weigh on consumption, including a 25% tariff that was first introduced in 2018 by China, the world's
largest consumer, on US cotton imports. Over the longer term, an expanding global population will increase demand
for textile fibre, and cotton demand should therefore rise gradually.
Weak demand for textiles will weigh on Chinese cotton consumption
China is a major player in the cotton sector and is the world's biggest consumer; however, we expect that demand
contracted by about 9.8% in the 2022/23 season and will contract by 4.9% in the 2023/24 season. China's economic
rebound following the end of its zero-covid policy has fallen short of expectations. In the 2024/25 season, slightly
stronger global economic activity will support global demand for textiles, which will bolster Chinese cotton
consumption. We expect Chinese demand to rebound by 3% in the 2024/25 season.
Throughout the forecast period poor relations with the US will continue to pose a challenge to the Chinese cotton
sector. The 25% tariff imposed in 2018 severely disrupted supply chains (US cotton fibre typically accounts for about
45% of Chinese textile manufacturers' total cotton imports because of its high quality). We expect the US to maintain
most of the tariffs that it imposed on China in 2018-19 amid the trade war. However, China is developing new ties
with suppliers such as Brazil and Vietnam, which will support stronger cotton demand in China in the medium term.
Policy-led initiatives will support cotton demand in India in the long term
In 2022/23 weak global demand for textile products and tensions with China pushed down demand for Indian cotton,
which we estimate contracted by 5.5% in the 2022/23 season. India's textile sector and, as a result, its cotton
demand depend in large part on demand for finished yarn from China (a major buyer of Indian yarn) and textile
demand in Western markets. In 2023/24 a weak Indian rupee will support textile exporters' competitiveness in the
global market, and stronger global growth will bolster Indian cotton consumption. That said, higher borrowing costs
in India will still constrain demand growth;, we therefore expect consumption to remain stable. Stronger global
growth and a still-weak rupee will translate into a rebound in cotton consumption in India of 4% in the 2024/25
season.
Over the longer term we expect cotton demand to increase. The government has intensified efforts to support the
textile sector through labour reforms such as allowing flexible hiring practices, raising subsidies for technology
upgrades for firms that meet job-creation targets, and introducing rebates on state taxes and duty exemptions for
export-only millers. It has also increased the minimum support price for cotton. These incentives will encourage
investment in the sector, pushing up cotton demand in India.
Domestic demand destruction will hurt cotton consumption in Pakistan
We estimate that cotton consumption in Pakistan contracted by 22.5% in the 2022/23 season. Domestic production
was devastated by floods at the end of 2022, forcing producers to rely on expensive imports, which lowered
consumption. We expect a partial rebound in the 2023/24 and 2024/25 seasons; on the one hand the Pakistani
rupee will depreciate against the US dollar, sustaining exporters' competitiveness in the global market, which will
push up consumption in Pakistan. On the other hand, Pakistan's textile sector will also continue to be affected by an
uncertain policy environment, which is constraining growth in demand.
Low efficiency and productivity in Pakistan's garment sector (the technology base of which is generally less
sophisticated than that of global competitors) will also continue to weigh on consumption growth throughout our
forecast period. For decades the industry has received strong state support in the form of subsidies and tax breaks,
helping it to maintain its dominant position in the local economy. However, textile manufacturers have failed to
convert this into an advantage internationally, and have gradually lost market share to regional competitors such as
Bangladesh and Vietnam.

PDF GENERATED BY PROQUEST.COM Page 30 of 106

Low global demand will hurt Bangladesh's textile sector
Bangladesh is the world's second-largest exporter of ready made garments after China, and the textile industry
sector drives developments in cotton consumption. We estimate that cotton demand dropped by 7.5% in 2022/23, in
line with weak global textile consumption and reduced garment production at home due to power outages. We then
expect cotton demand to grow by 6.3% in 2023/24 and by 4.7% in the 2024/25 season. About a quarter of the cotton
used by Bangladeshi millers is imported from India, where a weak Indian rupee should support consumption growth.
Meanwhile, stronger global growth will support textile demand and in turn cotton consumption in Bangladesh.
Bangladesh has duty-free market access to the EU, Canada, Japan and Australia. It also benefits from the EU's
Generalised System of Preferences, which grants preferential market access via reduced duties and will support
consumption. Nevertheless, poor safety standards and working conditions have cost Bangladesh its privileged
access to the US market. Safety standards (as demanded by Western retailers) are being implemented slowly,
raising the risk that Western buyers will turn to other sources.

(m tonnes
unless
Cotton: consumptiona 2020/21 2021/22 2022/23
otherwise
indicated)

2023/24 2024/25 China 8.4 8.3 7.5

7.1 7.3 India 5.7 5.3 5.0

5.0 5.2 Pakistan 2.2 2.5 1.9

1.9 2.0 Turkey 1.7 1.9 1.7

Banglades
1.7 1.8 1.6 1.7 1.6
h

1.7 1.8 Vietnam 1.5 1.5 1.3

1.4 1.5 Brazil 0.7 0.7 0.7

0.7 0.7 US 0.5 0.6 0.5

0.5 0.5 Indonesia 0.5 0.6 0.4

0.4 0.4 Uzbekistan 0.8 0.7 0.6

0.6 0.6 Thailand 0.2 0.2 0.2

0.2 0.2 Others 2.0 2.1 2.1

Global
2.1 2.1 25.7 25.8 23.5
total

PDF GENERATED BY PROQUEST.COM Page 31 of 106

 Total (%
23.3 24.1 11.5 0.4 -9.2
change)

Supply
We estimate that global production contracted by 2.3% in the 2022/23 season. Cotton production is highly exposed
to natural risks such as unfavourable weather conditions and pest infestations. In 2022/23 a particularly high
international reference price for cotton positively affected planting decisions, leading to an increase in planted area
in China and India (the two largest producers). However, production growth was disappointing in India, with
speculation that some farmers were holding back their crops, hoping that prices would rise. Meanwhile, an
infestation of jassids (a vegetable leafhopper) and less than expected production in West Africa pushed down overall
cotton output. Several adverse weather events in other countries also weighed on output growth in 2022/23; heavy
flooding in Pakistan and droughts in Texas (US) drastically reduced production in those countries.
We expect cotton production to rebound by 1.8% in 2023/24. Cotton planting and planting decisions for the 2023/24
season have started. Soil moisture is high in Texas, and we expect output to rebound in the next season. Currently
there are no reports of adverse weather events that could affect production in the 2023/24 season. We expect cotton
production to grow modestly in 2024/25, although it is still too early to have a clear picture of crop yields for that
season. Nevertheless, we expect output to remain well below the historical highs of 2011-15. Risks to growth stem
from the Russia-Ukraine war; Russia is a major producer of natural gas, which is a vital component in fertiliser
production.
Input costs and international scrutiny will remain risks to Chinese cotton
We estimate that Chinese production increased by 4.4% in the 2022/23 season, mostly driven by high yields and
larger planted areas in Xinjiang province, which benefits from generous subsidies and is accountable for more than
80% of the country's output.
We expect production growth to contract by 6.4% in the 2023/24 season. China's cotton sector faces difficulties that
include limited arable land, water scarcity and a lack of modern farming techniques. We expect production to
rebound by 1.8% in the 2024/25 season, as the government has started reforms to modernise and improve the
sector's efficiency. There are important downside risks to our forecast, including weather shocks, higher than
expected input costs due to the Russia-Ukraine war and a reversal of subsidies for Xinjiang farmers. Although
international scrutiny of China's Xinjiang cotton sector has increased (the US has banned use of Xinjiang cotton
since June 2022, and several global brands have also expressed concerns), we do not expect this to affect
production during our forecast period. Global traceability is particularly difficult, especially as yarn from Xinjiang can
be found in factories throughout China.
Dry weather has pushed cotton production down in the US
We estimate that US production declined by 17.3% in the 2022/23 season. Although cotton-planted area was
greater than in the previous season, severe drought in Texas, which produces about 40% of the country's output, led
to either complete loss of the crop or low fibre quality, and badly hit national production in 2022/23. Meanwhile, a
hurricane in Georgia, the second-largest cotton-producing state, negatively affected yields.
US production will decline by 3.3% in the 2023/24 season. Trade restrictions, weather shocks and the Russia-
Ukraine war are all downside risks. In the 2024/25 season we expect output to grow modestly, by 1.8%.
Floods in Pakistan have caused a fall in output of nearly a third
At the end of 2022 devastating floods in Pakistan, the world's fifth-largest cotton producer, destroyed a large part of
the country's cotton crops, and we estimate that output contracted by more than 30% in 2022/23. We expect
production to rebound strongly in the 2023/24 season, by about 94%, in line with higher planted area and improved
yields. We then expect cotton production to contract slightly by 5.5% in the 2024/25 season, held back by
inconsistent government policies and outdated farming practices. Uncertainties related to weather shocks will
continue to pose downside risks to these forecasts.
Farmers hope for better prices in India

PDF GENERATED BY PROQUEST.COM Page 32 of 106

We estimate that Indian cotton output grew by 5.4% in the 2022/23 season, as large planted areas were boosted by
high yields (supported by higher than normal rainfall). We expect output to contract slightly, by 09%, in the 2023/24
season. Planted area will shrink as farmers shift towards higher return crops such as oilseeds. Meanwhile, El Niño,
which tends to bring lower rainfall and higher temperatures in India, could also negatively affect cotton production. In
2024/25 we expect production to pick up moderately, by about 2% as the government implements measures to
modernise the sector, enhance productivity and improve pest management. Weather shocks and pest infestations
will continue to present downside risks to these forecasts. Technological improvements should support production
growth over the long term.
Australian production will contract after two years of bumper crops
In Australia, after two consecutive years of exceptionally high growth due to above-average rainfall as a result of a
favourable La Niña (which provided high moisture in dryland cotton areas, increasing water storage in irrigated
cotton areas), we estimate that production stayed at about 1.3m tonnes in the 2022/23 season, and that it will
contract to about 1.1m tonnes in the 2023/24 season. Improved water management will support a rebound in
production growth in the 2024/25 season, raising output to about 1.2m tonnes.

(m tonnes
unless
Cotton: productiona 2020/21 2021/22 2022/23
otherwise
indicated)

2023/24 2024/25 India 6.0 5.2 5.5

5.5 5.6 China 5.9 5.7 6.0

5.6 5.7 US 3.2 3.8 3.2

3.1 3.1 Pakistan 1.0 1.3 0.8

1.6 1.5 Brazil 2.4 2.6 3.0

CFA Franc
2.8 2.9 1.1 1.0 1.0
zone

1.6 1.5 Uzbekistan 0.7 0.6 0.6

0.6 0.6 Turkey 0.7 0.8 0.9

0.9 0.9 Australia 0.6 1.3 1.3

1.1 1.2 Others 2.5 2.9 2.4

Global
2.4 2.4 24.0 25.2 24.6
total

25.1 25.3 % change -8.6 5.0 -2.3

PDF GENERATED BY PROQUEST.COM Page 33 of 106

Enlarge this image.
Crude oilStocks and prices
Despite aggressive monetary tightening by OECD central banks and disappointing economic growth in China, global
crude oil consumption is still set to reach an all-time high in 2023. Continued strong demand growth in emerging
Asia and stockpiling in China are the main factors. With OPEC adhering to reductions in production quotas and
Saudi Arabia implementing further unilateral cuts, EIU estimates that the global oil market has already fallen into
deficit, sending the price of oil (dated Brent Blend) above US$90/barrel in September. Prices should remain around
this level for the rest of the year.
Market deficits are putting a floor under oil prices
We forecast that the global oil market will experience periods of deficit in 2024, especially as OPEC extends its cuts
and oil demand remains strong in China-a recovery in transport and, to a lesser extent, a bottoming out of the
property sector will lead to stronger demand for petrochemical products. We expect oil prices to remain above
US$80/b in 2024. Prices will trend downwards more significantly from 2025, owing to permanent demand destruction
in OECD countries, particularly in Europe, and slowing demand growth in the developing world. A more concerted
effort to transition away from hydrocarbons will push oil prices below US$70/b by 2027.

(US$/b
unless
otherwis
Oil: prices 2021 2022 2023
e
indicated
)

2024 2025 Brenta

1 Qtr 60.6 99.0 81.4

84.3 76.9 2 Qtr 68.6 112.7 78.2

81.9 77.9 3 Qtr 73.0 99.2 85.4

PDF GENERATED BY PROQUEST.COM Page 34 of 106

 80.0 76.1 4 Qtr 79.6 88.4 87.7

80.0 73.1 Year 70.4 99.8 83.2

%
81.5 76.0 66.5 41.7 -16.7
change

-2.0 -6.8 WTIa

1 Qtr 57.8 94.5 76.1

79.5 73.0 2 Qtr 66.1 108.7 73.8

77.4 74.1 3 Qtr 70.6 91.8 80.2

75.8 72.6 4 Qtr 77.3 82.9 82.6

75.9 69.8 Year 68.0 94.4 78.2

%
77.1 72.4 72.9 38.9 -17.2
change

OPEC
-1.3 -6.2 referenc
e basket

1 Qtr 60.0 97.6 80.7

82.8 75.8 2 Qtr 67.4 112.4 78.4

81.0 76.9 3 Qtr 72.6 101.9 84.7

79.0 75.1 4 Qtr 79.0 87.7 86.3

78.9 72.1 Year 69.7 99.9 82.5

%
80.4 75.0 68.5 43.3 -17.4
change

A tightening market will put renewed pressure on stocks

The global oil market has tightened significantly now that some OPEC+ members (which include, in addition to
OPEC producers, a group of non-OPEC countries, most significantly Russia) have fully implemented additional
production quota cuts agreed on in April. Saudi Arabia also announced an additional, unilateral cut at the OPEC+
meeting on June 4th, with production in the kingdom falling by about 900,000 barrels/day in July. Demand for
petroleum products in China has also started rebounding more significantly, despite a slower than expected
recovery in overall economic growth. We estimate that the market fell into significant deficit in the third quarter and

PDF GENERATED BY PROQUEST.COM Page 35 of 106

expect it to remain in deficit in the fourth. The market will remain tight in 2024 as OPEC+, led by Saudi Arabia, keeps
to voluntary production targets agreed in April. OPEC+ members formalised these cuts at their June meeting,
extending them into 2024 and also reducing 2024 production quotas. With many governments having already
tapped their strategic petroleum reserves, the need to rebuild stocks will put further upward pressure on demand in
the medium term.
The global oil market recorded a small surplus in 2022, increasing significantly in the fourth quarter as Russian
production remained near pre-war highs ahead of the EU's import ban. The OPEC+ production cuts announced in
October 2022 were also slow to take effect. The market's return to a sizeable surplus in late 2022 and early 2023
coincided with a near-25% drop in the oil price between early November 2022 and mid-May 2023. As at September
12th this decline had nearly completely reversed.

(m b/d
unless
otherwi
Oil: supply and demand 2021 2022 2023
se
indicat
ed)

Produc
2024 2025 95.3 100.1 101.3
tiona

Consu
102.3 103.5 97.7 99.9 101.6
mption

Balanc
102.8 103.5 -2.3 0.1 -0.3
e

Stocks 2,646. 2,776. 2,750.

-0.4 0.0 b
7 2 2

Stocks
to
2,814.
2,768.5 consu 8.4 8.6 8.5
1
mption
ratioc

Demand
We estimate that global crude oil demand will increase by 1.7% in 2023, or the equivalent of almost 1.7m
barrels/day (b/d). We estimate that OECD oil demand will stagnate, but China's ongoing reopening will support
another strong year of demand growth in non-OECD countries. We forecast global oil demand growth of 1.1% in
2024, or the equivalent of an additional 1.2m b/d, as the world economy enters a recovery phase. High inflation and
global monetary tightening still threaten to curb demand more significantly than we are currently forecasting in 2024.
From 2025 demand growth will tail off more significantly as longer-term trends return to the fore. We expect OECD
oil consumption to start declining, given those countries' focus on energy efficiency and measures to tackle climate
change. Similar trends are at play in the rest of the world, but given their stage of development and strong economic
growth, oil demand will continue to expand at a modest pace for at least a few more years. We expect developed

PDF GENERATED BY PROQUEST.COM Page 36 of 106

economies to fall short of the financial pledges that they made at the UN's 26th and 27th climate change
conferences (COP26 in 2021 and COP27 in 2022), which will further delay the green transition in the developing
world.
OECD oil demand will not return to pre-pandemic levels
We forecast that OECD demand will continue to stagnate in 2024-25, after rebounding by 2.6% in 2022 in the wake
of the covid-19 pandemic. Many OECD economies, particularly those in Europe and the Asia-Pacific region, are
working to accelerate their transition away from fossil fuels and towards renewable energy sources. Under the
administration of Joe Biden, the US has also started making great strides, at least in terms of allocating funds to
finance the energy transition. European countries' efforts to wean their economies off Russian oil will also be a factor
in the green transition. Even so, these countries are limited in how quickly they can make that transition
High interest rates will curb US consumption
Previous high inflation and monetary tightening by the Federal Reserve (Fed, the US central bank) are the main
headwinds facing the US economy as the central bank continues to seek to tame inflation without precipitating a
recession. We currently expect the US economy to slow sharply in 2024. Oil demand growth will be even more
subdued, with consumption never returning to 2019 levels. However, the impact of the green transition will be felt in
earnest probably no earlier than 2026, when we expect US demand to begin contracting slowly as the US economy
truly begins to reduce consumption of fossil fuels.
Efforts to lessen dependency on Russia are limiting demand in Europe
We forecast that consumption in OECD Europe will essentially stabilise as economies there recover in 2024, before
resuming a more pronounced secular decline from 2025. Although most countries in Europe have made significant
progress in lining up alternative supplies to Russian crude deliveries, the exercise of weening their economies off
Russian oil has hit growth in the region; most major EU economies have slowed significantly in 2023 and the
recovery is likely to remain muted in 2024. This, coupled with the EU embargo on all seaborne imports of Russian
crude and oil products, will push Europe to limit its consumption of oil, which will remain well below pre-pandemic
levels.
Emerging markets will drive demand growth in 2024-25
Over the forecast period the lion's share of annual growth in demand will come from non-OECD countries. In
emerging Asia, which is by far the main driver of demand growth in the developing world, consumption will expand
by an estimated 4.8% this year to account for more than four-fifths of the increase in global demand. Demand in
China and India will remain strong, with both countries importing record amounts of discounted Russian oil. In 2024-
25 emerging Asia (including China) will account for over two-thirds of global demand growth (with the Middle East
and Africa accounting for almost all of the remainder). Emerging-market countries more generally have largely
avoided the sharp slowdowns expected in most of the OECD in 2023, and their rapid development and further
industrialisation will push demand for hydrocarbons higher throughout the forecast period.
China is still expected to be a driver of global demand growth in 2023-24
Recovering demand for automotive and jet fuel as travel approaches pre-pandemic levels and evidence of
stockpiling have contributed to an estimated 7% increase in China's oil consumption in 2023, the equivalent of more
than 1m b/d. Government measures to bolster the depressed housing market will eventually provide a modest boost
to demand for crude oil and oil products in 2024, when we forecast a rise in Chinese demand of 3%, or more than
470,000 b/d. Risks to our demand forecasts are increasingly to the downside, however, as China's reopening has so
far not unleashed as much pent-up demand as originally expected, at least by oil traders. In addition, with China
sourcing increasing amounts of its crude oil from Russia, the impact on prices is likely to be more subdued, even if
our forecasts prove to be correct.

PDF GENERATED BY PROQUEST.COM Page 37 of 106

 (m b/d
unless
otherwis
Oil: consumption 2021 2022 2023
e
indicate
d)

America
2024 2025 24.3 25.1 25.2
s

25.3 25.4 Europe 13.2 13.5 13.4

13.4 13.3 Pacific 7.3 7.4 7.4

Total
7.4 7.4 44.9 46.0 46.0
OECD

46.1 46.1 CIS 4.9 4.9 5.0

5.0 5.1 China 15.1 14.7 15.7

Other
16.2 16.5 13.5 14.1 14.4
Asia

Latin
14.7 14.9 6.0 6.2 6.3
America

Middle
6.3 6.3 8.4 9.0 9.1
East

9.2 9.4 Africa 4.8 5.1 5.1

Non-
5.3 5.3 OECD 0.8 0.8 0.8
Europe

Total
0.8 0.8 non- 52.8 53.9 55.6
OECD

Overall
56.7 57.5 97.7 99.9 101.6
total

PDF GENERATED BY PROQUEST.COM Page 38 of 106

 %
change,
102.8 103.5 6.3 2.3 1.7
year on
year

Supply
In response to still-high prices and continued demand growth, at least in non-OECD economies, we estimate a
supply response of about 1.2m b/d from producers in 2023. None of that will come from OPEC, owing to cuts in
production quotas announced in October 2022 and April 2023, which were formalised in June. Russian production is
set to decline by just 205,000 b/d despite the implementation of EU bans on imports of Russian crude oil and oil
products. That still makes the US the only major producer that is still in a position to make up the difference. Strong
demand growth in non-OECD countries and still-elevated prices have encouraged US producers to raise output to
record highs in both years. As prices remain elevated, we expect global production to pick up more strongly in 2024-
25 and to increase by an average of 1.1m b/d per year. We expect global supplies to increase by 760,000 b/d per
year on average in 2026-27.
OPEC+ formalises recent cuts until end-2024
OPEC+ continues to prioritise price levels, which has led to a series of production cuts. In October 2022 the cartel
decided to slash production quotas by 2m b/d in total, owing to concerns about possible major recessions in most
major OECD economies. Then in early April, in response to a fall in oil prices to less than US$80/b, a core group of
OPEC countries led by Saudi Arabia announced further cuts in production quotas equal to 1.1m b/d.
In June OPEC+ formalised the cuts announced in October 2022 and the voluntary reductions pledged in April. Saudi
Arabia's decision to also shoulder an additional cut-of 1m b/d, initially only for July but now extended to the end of
the year-is symptomatic of acute Saudi concerns about prices running below the US$80/b mark, reckoned to be the
minimum required to sustain the government's vast economic development programme. Other members that
previously joined Saudi Arabia in making additional "voluntary" cuts from May (including Kuwait, Iraq and the UAE)
were persuaded to formalise those commitments into reduced OPEC+ output ceilings throughout 2023. Russia also
agreed on paper to extend a 500,000-b/d cut announced in February, but fellow members expressed doubts openly
about the veracity of Russia's reported production. Tensions around Russian oil policy are likely to persist as that
country's discounted crude erodes its Gulf counterparts' position in major Asian markets.
The production baselines on which the deal is based better reflect members' actual capacity. Previous collective
cuts have increasingly been undermined by the inability of some producers-notably Angola and Nigeria, which
pumped almost 1m b/d less than their combined ceilings in April-to fill existing quotas. Six states, mostly in Africa,
were persuaded to accept lower ceilings in 2024. Meanwhile, the UAE, which has long complained that its baseline
has failed to reflect subsequent major capacity increases, secured an agreement for a 200,000-b/d upward revision
next year, presumably as a condition to accepting to prolong the deal, which still leaves its ceiling about one-fifth
below capacity.
Despite the growing tensions between OPEC members and Russia, we believe that the moves by OPEC+ oil
ministers demonstrate their resolve to keep global prices elevated and to maintain co-operation between the cartel
and Russia-something that has been difficult to achieve historically. That said, announced cuts are now reaching
levels that threaten OPEC+ members' market shares-something that has driven production decisions in the past.
Given that many OPEC countries have not been able to meet their production quotas, in reality we expect
production cuts to fall far short of those announced, with output declining by an average of about 780,000 b/d this
year. Based on the quotas announced in June, we expect OPEC production to increase by just over 540,000 b/d on
average in 2024.
Russian output is now set to hold up better than expected
Russia's production of crude oil has proven surprisingly resilient to Western financial sanctions and bans, but we
estimate that output will contract in 2023 now that the EU's ban has taken full effect and Russia has at least formally

PDF GENERATED BY PROQUEST.COM Page 39 of 106

agreed to extend producton cuts of 500,000 b/d. Western financial sanctions imposed on Russia after it invaded
Ukraine and import bans by the US, Canada and the UK have had only a limited impact on Russian production, and
exports are currently back to their pre-war peak. Russia has found ready buyers in China, India and much of the
developing world, albeit at significantly discounted prices to most benchmarks. At more than 10.8m b/d in the
second quarter of 2023, Russian oil production was 530,000 b/d below its recent pre-war peak in the first quarter of
2022. We estimate that average Russian production will fall by just 1.8% on average in 2023 to 10.9m b/d.
In the longer term, Western sanctions will limit investment in Russia's upstream oil industry, which was already
underinvested owing to sanctions that have been in place since 2014. The departure of majors such as BP and Shell
will further curb Russia's ability to ramp up production, even if it can continue to find buyers for its crude oil. We do
not expect Russian production to return to levels recorded pre-invasion in 2021, let alone the post-Soviet peak
recorded in 2019.
US production is responding to the tight market
After proceeding cautiously despite significantly higher oil prices, US shale producers are finally ramping up
production; we estimate that they will increase output by nearly 1.2m b/d to an average of 19m b/d, a record high, in
2023. We expect production to peak at 19.2m b/d in 2024, but declining prices will curb activity from 2025, especially
as prices fall closer to the average breakeven price (West Texas Intermediate) for new fracking wells, which has
surpassed US$60/b in most regions, according to the Federal Reserve Bank of Dallas.

(m b/d
unless
Oil: production 2021 2022 2023
otherwise
indicated)

OPEC
2024 2025 26.4 29.1 28.4
crude

OPEC
28.9 29.8 5.2 5.4 5.3
NGLs

Total
5.4 5.5 31.6 34.5 33.7
OPEC

%
change,
34.3 35.4 2.6 9.2 -2.3
year on
year

1.6 3.3 US 16.8 17.9 19.0

19.2 19.2 Russia 10.9 11.1 10.9

10.9 11.0 Canada 5.6 5.8 5.8

5.9 5.9 China 4.1 4.2 4.3

4.4 4.4 Others 26.5 26.7 27.5

PDF GENERATED BY PROQUEST.COM Page 40 of 106

 Total non-
27.6 27.7 63.7 65.6 67.6
OPEC

%
change,
68.1 68.2 1.1 2.9 3.1
year on
year

Processin
0.7 0.1 2.3 2.3 2.4
g gains

Overall
2.5 2.6 95.3 100.1 101.3
total

%
change,
102.3 103.5 1.6 5.0 1.2
year on
year

Enlarge this image.

GoldStocks and prices
Gold prices have traded between US$1,800/troy oz and US$2,000/troy oz for most of 2023, at similar levels to 2022.
Although rising global interest rates tend to be associated with declining gold prices (because they incentivise
investors to move funds to other assets), in 2023 gold has benefited from increased demand as a safe-haven asset,
given a backdrop of significant geopolitical and geoeconomic uncertainty. EIU estimates that gold prices will average
US$1,930/troy oz over 2023 as a whole.
Prices are likely to start rising again in 2024, particularly from the second quarter, reflecting rising speculation about
monetary policy easing by the Federal Reserve (Fed, the US central bank). We forecast a full-year average gold
price of US$1,974/troy oz in 2024, representing a 2.3% increase. We assume that the Fed and the European
Central Bank (ECB) will lower interest rates slightly as inflation weakens from the third quarter of 2024 to late 2026.
As a result, we forecast that gold prices likely will rise further in 2025, to average US$2,013/troy oz.

PDF GENERATED BY PROQUEST.COM Page 41 of 106

 Gold: pricesa 2021 2022 2023 2024

2025 1 Qtr 1,797.8 1,873.4 1,888.3 1,935.0

2,000.0 2 Qtr 1,815.0 1,874.0 1,978.3 1,970.0

2,010.0 3 Qtr 1,789.4 1,726.0 1,930.0 1,985.0

2,025.0 4 Qtr 1,796.3 1,729.0 1,925.0 2,005.0

2,015.0 Year 1,799.6 1,800.6 1,930.3 1,973.8

%
2,012.5 1.7 0.1 7.2 2.3
change

We expect the market balance to shift from deficit in 2022-23 into surplus in 2024-25, reflecting both an increase in
gold supply and slightly weaker demand. However, as the correlation between prices and the physical market
balance is weaker for gold than for many other commodities, this will have a limited negative effect on prices. Gold is
not consumed like many other commodities, particularly perishable commodities. Instead, the majority of gold
purchased each year adds to the large quantity of readily available stocks (including jewellery) stored by investors
and central banks. According to the World Gold Council, 47.9% of global gold purchases were made by investors or
central banks in 2022. Although jewellery accounted for 45.4% of purchases, the Council noted that half of this
demand came from China and India, where gold jewellery is often purchased as an investment asset. Owing to the
importance of investors in driving gold purchases, prices are mostly driven by market sentiment rather than by
underlying supply-demand dynamics, which is likely to remain the case in 2024-25.

Gold: supply and demand (tonnes) 2021 2022 2023

2024 2025 Supply 4,220.2 4,278.7 4,322.0

4,404.0 4,470.0 Demand 4,014.6 4,712.5 4,559.5

4,213.5 4,190.0 Balance 205.6 -433.8 -237.5

Official
190.5 280.0 sector gold 27,956.3 26,874.7 26,074.7
holdings

Demand
Despite rising investor interest in gold exchange-traded funds (ETFs), we estimate a 3.2% fall in global gold demand
in 2023. This will be due to lower central bank purchases and net retail investment following unusually strong
demand in 2022. In 2022 banks and investors accelerated gold purchases in response to Russia's invasion of
Ukraine. We forecast a sharper 7.6% fall in demand in 2024, followed by a smaller 0.6% decline in 2025. Although
demand for gold jewellery, which accounts for about half of global demand, will grow in both years, this will be offset

PDF GENERATED BY PROQUEST.COM Page 42 of 106

by a further decline in central bank gold purchases (although these levels will remain extremely high by historical
comparison). We forecast continued net inflows into gold ETFs, driven by interest-rate cuts in the US from mid-2024.
Greater use of gold in industry, particularly consumer technology, will result in some growth in this sub-sector.
Monetary policy easing from mid-2024 will generate net inflows into gold ETFs
With major central banks indicating that they may have to raise interest rates further in the face of still-above-target
inflation, gold has flowed out of gold ETFs in recent months. However, we still believe that central banks are
approaching the end of their monetary policy tightening cycles and we therefore do not expect gold ETF outflows to
persist. ETF inflows in the second half of 2023 should result in full-year net inflows of 50 tonnes. As inflation eases in
the coming quarters and the market begins to price in interest rate cuts during the second half of 2024, we expect
gold ETF inflows to accelerate, resulting in net inflows of 200 tonnes for 2024 as a whole. Assuming that monetary
policy easing continues in 2025, we expect gold ETF net inflows of 150 tonnes that year.
Growth in jewellery purchases will pick up moderately in 2024-25
After estimated weak growth of 0.9% in gold jewellery purchases in 2023, we forecast moderately firmer growth in
2024-25. On the one hand, underlying economic conditions will be stronger in many markets in 2024-25 as inflation
abates and interest rates fall, which will lift disposable income and boost consumer demand for gold jewellery. In
China, falling real estate prices will encourage households to shift savings into the limited range of alternative
investment assets available to them, including gold. China accounted for a quarter of global jewellery demand in
2022, and we forecast that purchases will rise by 8.6% in 2023 and 4.8% in 2024. On the other hand, high gold
prices will constrain jewellery purchases to some extent, particularly in price-sensitive, lower-income markets. We
forecast that gold jewellery purchases will rise by 2% in 2024 and 1.6% in 2025.
Gold bar purchases will weaken in 2024-25, but remain high
Concerns about inflation and broader geopolitical threats underpinned demand for physical gold in 2022-23.
However, we expect reduced investor anxiety regarding these threats to result in slightly weaker physical gold
demand. With pent-up demand from the pandemic having already unwound, and as inflation continues declining in
most economies and gold prices remain high, we forecast that net retail investment will contract to 900 tonnes in
2024 and 850 tonnes in 2025 (from about 1,200 tonnes annually in 2021-23).
Central bank purchases will remain strong (but weaker than in 2022) in 2024-25
Central banks outside the US have been net gold purchasers for more than a decade as part of broad-based efforts
to diversify their foreign-exchange holdings, particularly by countries that are not aligned with the West, such as
China, Russia and Turkey. Their purchases accounted for 1,082 tonnes of all gold purchases in 2022, only slightly
less than net retail investment and roughly half the level of gold jewellery purchases. The war in Ukraine accelerated
official sector purchases sharply (they more than doubled from 2021), to a record high. We estimate that purchases
will remain high in 2023, at 800 tonnes. We expect central banks to remain net purchasers of gold in 2024-25, but
the level of purchases is likely to ease to 550 tonnes in 2024, before picking up slightly to 580 tonnes in 2025.
Industrial gold use will rebound in 2024-25
Demand from the industrial and dental sectors fell by 6.5% in 2022, which reflected weak demand from the
electronics subsector amid falling consumer confidence. We estimate that this trend will prove to have continued in
2023. In 2024-25 a recovery in consumer demand for electronics and the rising use of gold in technology, driven by
strong demand for memory chips and light-emitting diodes (LEDs), will lift gold demand. The use of gold in printed
circuit boards in 5G infrastructure is also likely to increase. We expect the long-term decline of gold in the dental
sector to continue, given the strong price competitiveness and performance of ceramic substitutes.

PDF GENERATED BY PROQUEST.COM Page 43 of 106

 (tonn
es
unles
s
Gold: consumption 2021 2022 2023
other
wise
indica
ted)

Jewel
lery
2024 2025 consu 2,230 2,195 2,210
mptio
n

Chin
2,254 2,290 673 571 620
a

650 670 India 611 601 608

620 630 US 149 144 144

Russ
147 150 42 36 31
ia

Egyp
29 27 32 34 36
t

Turk
37 37 34 37 35
ey

Saud
i
36 37 33 38 40
Arabi
a

41 42 UAE 34 47 50

Indo
51 52 27 28 29
nesia

30 31 Iran 26 30 32

Offici
al
33 34 450 1,082 800
sector
sales

PDF GENERATED BY PROQUEST.COM Page 44 of 106

 Net
retail
550 580 1,193 1,237 1,200
invest
menta

900 850 ETFs -189 -110 50

Indust
rial
200 150 330 309 300
&dent
al

310 320 Total 4,015 4,713 4,560

%
4,214 4,190 chang 9.2 17.4 -3.2
e

Supply
High gold prices in 2024-25 are likely to sustain growth from the main sources of global supply, including mining
firms and recycling activity. We forecast that supply will increase by 1.9% in 2024 and 1.5% in 2025, following
estimated growth of 1% in 2023. High prices will discourage forward selling (or hedging) of future gold supply by
mining firms. Producers typically prefer not to lock in fixed-price contracts when prices are rising. However, absolute
levels of de-hedging will remain small and have a limited impact on overall global gold supply.
Production will fall in China and Australia in 2024-25
Despite the recent discovery of a significant gold deposit in China's eastern province of Shandong, it remains
unclear when actual production is likely to start. As a result, we maintain our forecast that gold mining production in
China will fall in 2023-25. Most Chinese mining firms remain focused on overseas mining opportunities, which
explains the resumption of the long-running downward trend in domestic gold mining output in 2022 after a short-
lived recovery in 2022 (related to the impact of mines reopening after the coronavirus pandemic). Aside from the
recent Shandong discovery, there will be limited investment in domestic operations, which in turn will hamper
China's gold output. Production will also be affected by domestic factors, including more stringent safety inspections,
tighter environmental regulations and rising overhead costs, which will raise the domestic cost of production.
Combined with ongoing efforts by the Chinese government to consolidate the sector, we forecast that gold mining
output will fall by 2.9% on average per year in 2024-25.
In Australia, new capacity coming on stream means that we estimate some increase in gold production in 2023.
However, we forecast a drop in 2024-25 as there is a sparse project pipeline, and output at some older mine will
decline.
Sanctions will hamper investment in Russia and constrain gold production
Sanctions on Russia will continue to hamper gold mining activity in the country in 2024-25 through a disruption in
sales channels and constrained financing for gold mining investment. Russian gold miners will seek to circumvent
sanctions by selling gold to Asia, with reports of an increase in Chinese imports of Russian gold, but buyers will
continue to demand a discount (as they are doing with other commodity purchases from Russia). Sanctions will also
complicate accessing credit and importing mining equipment into Russia, which will slow investment into new and
existing mines. Overall, we forecast a decline in gold mining production of 3.4% on average in 2024-25.
Canadian production will continue to rise in 2023
We forecast that gold mining production in Canada will rise by about 2.5% per year on average in 2024-25, following

PDF GENERATED BY PROQUEST.COM Page 45 of 106

estimated growth of 4% in 2023. There has been active exploration in the country in recent years, with several mines
set to begin or ramp up production in the most northern territory of Nunavut in 2023-25. Extra mining capacity will
also lift gold production in Quebec and Ontario, including Eldorado Gold's Sigma-Lamaque project, Agnico Eagle's
Macassa mine and PureGold's Red Lake mine.
Peru's mining sector has been hampered by anti-mining protests and widespread social unrest related to high
inflation, which has undermined political and economic stability and affected investment in the sector in 2022-23.
Ongoing instability and the absence of any "mega-projects" in the sector will be a drag on output in the medium
term. Even assuming that domestic conditions improve in 2024-25, contributing to a partial recovery in gold mining,
production will remain much lower than pre-pandemic levels.
Recycling activity and net producer de-hedging will be driven by prices
We expect recycling activity to increase by about 2.1% per year in 2024-25, boosted by higher gold prices. Rising
gold prices will limit the availability of long-term gold supply contracts with recycling firms, some of which will prefer
not to lock in fixed-price contracts in case prices rise more rapidly than expected. Such de-hedging accelerated in
2020-21 owing to rapidly rising gold prices over the period. Although more stable prices slowed de-hedging activity
in 2022, we expect higher prices to boost de-hedging in 2023-25.

(tonnes
unless
otherwi
Gold: production 2021 2022 2023
se
indicate
d)

Mine
2024 2025 3,090 3,147 3,182
supply

3,234 3,265 China 329 372 360

Australi
350 340 312 314 318
a

316 314 Russia 309 309 300

Canad
290 280 223 192 200
a

207 210 US 187 173 190

Kazakh
192 195 115 130 113
stan

115 118 Mexico 125 124 118

120 122 Ghana 88 117 116

PDF GENERATED BY PROQUEST.COM Page 46 of 106

 Indone
117 118 103 116 110
sia

Uzbeki
112 115 100 100 101
stan

102 103 Peru 97 97 96

98 100 Sudan 94 94 95

Old
92 93 gold 1,136 1,144 1,170
scrap

Net
produce
1,190 1,220 -5.4 -11.9 -30.0
r
hedging

-20.0 -15.0 Total 4,220 4,279 4,322

%
4,404 4,470 -2.6 1.4 1.0
change

Enlarge this image.

LeadStocks and prices
EIU expects lead prices to reflect balanced supply and demand fundamentals and that the London Metal Exchange
(LME) cash price will average US$2,164/tonne in 2023. Easing supply-chain issues have allowed vehicle
manufacturers to raise car production and, along with rising seasonal demand from battery manufacturing, have
boosted the LME cash price to US$2,340/tonne in early January, up from a recent low of US$1,728.50/tonne on
September 27th 2022. However, the LME cash price corrected in February, and prices have been confined to a

PDF GENERATED BY PROQUEST.COM Page 47 of 106

broad range of US$2,000-2,200/tonne since then.
Supply and demand fundamentals point to a balanced market
Although inflationary pressures are weighing on consumer spending, especially in Europe, China's decision in
December to abandon its zero-covid policy could bolster demand for lead by more than we currently expect in 2023.
China's policy reversal is easing supply-chain disruptions, particularly for the automotive sector. Although a phased
restart of previously idled smelter capacity in Europe is under way, ongoing discipline will continue to limit availability
of refined lead outside China in the short term, which will affect prices. However, modest mine expansions and
increased adoption of life-of-product schemes will still raise metal production elsewhere, and lead has been unable
to offset rising competition from lithium-ion in the crucial battery sector. In the longer term, the increasing average
age of vehicles in Europe and the US, the use of lead-acid batteries to power on-board low-voltage systems in new-
energy vehicles, the adoption of hybrid battery energy storage systems (ESS) and research into next-generation
lead-acid batteries will continue to support of demand.

Refined lead: stocks and prices 2021 2022 2023 2024

2025 Stocks
a

1 Qtr 409.0 384.0 324.0 287.4

157.8 2 Qtr 449.0 365.0 321.4 258.7

114.4 3 Qtr 495.0 340.0 318.8 230.0

70.9 4 Qtr 398.0 314.0 316.1 201.3

%
27.5 chang -10.6 -21.1 0.7 -36.3
e

-86.3 Pricesb

2,014. 2,324. 2,139. 2,260.

1 Qtr
3 5 8 0

2,128. 2,196. 2,116. 2,190.

2,100.0 2 Qtr
3 4 6 0

2,333. 1,976. 2,155. 2,200.

2,200.0 3 Qtr
4 0 0 0

2,325. 2,105. 2,245. 2,180.

2,190.0 4 Qtr
5 4 0 0

2,200. 2,150. 2,164. 2,207.

2,240.0 Year
4 6 1 5

PDF GENERATED BY PROQUEST.COM Page 48 of 106

 %
2,182.5 chang 20.6 -2.3 0.6 2.0
e

Refined lead stocks in the LME warehouse network remain near multi-year lows, reflecting tight availability outside
China. Stocks totalled 54,575 tonnes in late August 2023, up fractionally from 32,200 tonnes in late April. Periodic
backwardation in LME spreads between cash and longer-term contract prices has failed to attract significant
volumes of metal into the LME warehouses. Meanwhile, cancelled warrants (stocks booked for removal) accounted
for 12% of total stocks in late August, down from 60% at end-December, which suggests that downstream
consumers are comfortably supplied. The LME decided against banning the trade and deliveries of Russian
materials after consulting with its members, but given the tight availability of metal supplies outside China, stock
flows should become more volatile in the short term. In China, lead stocks on the Shanghai Futures Exchange
(SHFE) totalled 53,600 tonnes on August 25th, reflecting seasonal downstream demand trends.

('000
tonnes
unless
Refined lead: supply and demand otherwis 2021 2022 2023
e
indicated
)

Global
2024 2025 producti 12,378.6 12,296.2 12,545.7
on

Global
12,682.0 12,786.2 consum 12,335.0 12,395.5 12,556.1
ption

US
stockpile
12,796.9 12,960.0 0.0 0.0 0.0
disposal
s

0.0 0.0 Balance 43.5 -99.2 -10.5

-114.9 -173.8 Stocks 488.5 389.3 378.8

Weeks'
264.0 90.2 consum 2.1 1.6 1.6
ptiona

Demand
We expect global demand for refined lead to increase by 1.3% in 2023. Global GDP growth will slow sharply in
2023, owing to the effects of high interest rates and supply-chain risks stemming from both the war in Ukraine and

PDF GENERATED BY PROQUEST.COM Page 49 of 106

heightened US-China tensions. In China the reversal of the government's zero-covid policy will allow vehicle-makers
to raise production as supply chains stabilise, although the strong initial rebound in consumer activity after the end of
zero-covid has fizzled. Meanwhile, US consumer spending is set to slow as high borrowing costs create financial
strain. In Europe, high inflation and sluggish growth are set to dominate until end-2023. However, record average
vehicle ages in developed markets such as Europe and the US, coupled with El Niño-related weather events, will
support demand for replacement batteries. Despite the shift to more environmentally friendly batteries, efforts to
contain greenhouse-gas emissions will support battery-related demand in the automotive sector and back-up power
storage, particularly the off-grid renewable-power systems, as electric bicycles (e-bikes) and short-range electric
vehicles gain popularity. We forecast that global demand for refined lead will rise by an average of 1.6% a year in
2024-25.
China's economic outlook is dimming
In China, the strong initial rebound in consumer activity after the end of its zero-covid policy has fizzled; we now
expect growth to average 5.2% per year in 2023-24. In contrast to the hawkish stance of Western central banks, we
expect the People's Bank of China (China's central bank) to maintain its accommodative monetary policy position in
2023. As a result, we expect the increase in China's lead consumption to accelerate slightly, to an average of 1.9%
per year in 2023-25, owing to the positive effect of stimulus measures in the automotive sector.
Against this relatively accommodative stance, the outlook for lead demand remains supportive during our 2024-25
forecast period. Despite the decision to reverse the purchase tax cut for small-engine passenger cars from 10% to
5%, as announced in June 2022, the China Association of Automobile Manufacturers estimates that sales will rise
by 3% in 2023. We continue to forecast that new-energy vehicles will gain increasing market share during our
forecast period. Officials forecast that they will account for more than 35% of China's total vehicle sales by 2025.
However, this strong growth will continue to support demand for lead-acid batteries, which are used to power on-
board systems. Domestic sales of e-bikes increased by 9.8% in 2022, following the implementation of new national
standards. The surging price of lithium-ion batteries also supported increased demand for lead-acid batteries.
Authorities keep revising ambitious renewable energy targets, supporting demand for lead-acid batteries in ESS.
Asia-Pacific growth will remain slower than in the previous decade
Prospects for lead consumption elsewhere in Asia over our forecast period appear mixed. Our near-term growth
outlook for the Asia-Pacific region has been fairly stable; however, it is below the regional average in the 2010s of
almost 5%, reflecting challenges in overcoming shocks associated with the covid-19 pandemic and geopolitical
strains caused by the US-China rivalry and Russia's invasion of Ukraine. Along with the arrival of El Niño-related
weather disruptions, risks of supply-chain interruptions are skewed to the upside. Furthermore, consumer price
inflation will moderate across the region in 2023-24, but remain high by historical standards. As a result, central
banks will have only limited space to ease monetary policy. More broadly, the US-China relationship will shape
developments in Asia throughout our forecast period. Japanese vehicle manufacturers are considering repatriating
some of their manufacturing base from China, which will boost lead consumption in Japan.
Sluggish economic activity will continue to weigh on EU demand
Economic growth in Europe will slow to 1% in full-year 2023, amid tight monetary policy (with interest rates rising
across Europe) and a subdued external environment. An energy crunch in 2023-24 appears unlikely, given
comfortable gas reserves and declining gas prices. However, ongoing heatwaves or an especially cold winter could
still cause the gas market to tighten substantially. The EU has relaxed fiscal and state aid rules to mitigate the
impact of the Ukraine war on EU consumers and businesses. Despite this, the European Central Bank (ECB) has
tightened monetary policy to tackle high inflation and is likely to start easing monetary policy only from the second
half of 2024, based on the assumption that annual inflation will slow more significantly in 2024.
EU passenger vehicle sales will rise but will remain below 2019 levels
Despite these challenges, the outlook for lead demand remains respectable. A rebound in demand from China and
easing global supply-chain frictions will support external demand. We estimate that sales of passenger vehicles in
the region will return to modest growth in 2023. Although we believe that they will remain below the pre-pandemic

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peak of 13m in 2019, an ageing fleet will continue to support demand for replacement lead-acid batteries. The
RePowerEU initiative, which received funding from the EUR750bn (US$818bn) Recovery and Resilience Fund, will
drive far-reaching changes in the EU's energy mix and infrastructure. As a result, we expect lead demand to remain
stable in 2023 and in our 2024-25 forecast period. However, elevated trade tensions with major trade partners,
particularly China, remain a major downside risk over our forecast period.
US consumption will slow sharply until the second half of 2024
Despite initial resilience, we expect US economic growth to slow significantly in the coming months. Historically high
inflation and the steep rise in interest rates will continue to dent consumer spending and weigh further on
investment. This will result in subdued overall growth, which we expect to slow to 1.8% in 2023 and just 0.9% in
2024. This is still a benign outcome for the US economy, following the most aggressive tightening cycle by the
Federal Reserve (Fed, the central bank) in decades and new banking sector strains. The strong starting point of the
labour market and the build-up in personal savings during the pandemic will help to avoid a sharper drop in
consumption and investment. Although easing supply-chain pressures have allowed US vehicle manufacturers to
increase production recently, spending on big-ticket items such as new vehicles will suffer as a result of the
combined effect of the sharp rise in interest rates and still-high inflation. However, the negative effect on original
equipment manufacturers will be offset by higher demand for replacement lead-acid batteries. Despite this, we
expect spending under the infrastructure investment bill and the Inflation Reduction Act (IRA) to support lead
demand, which we expect will grow by 0.7% in 2023 and by an average of 1.6% per year in 2024-25.

('000
tonnes
unless
Refined lead: consumptiona otherwis 2021 2022 2023
e
indicated
)

2024 2025 China 5,059.2 5,104.5 5,247.5

5,331.4 5,400.7 EU 1,484.0 1,497.0 1,467.1

1,497.9 1,518.8 US 1,567.0 1,578.0 1,567.0

South
1,592.0 1,617.5 674.0 622.0 633.2
Korea

664.9 651.6 India 866.0 920.0 956.8

975.1 1,003.4 Japan 263.0 304.0 309.5

318.1 327.1 Mexico 337.0 334.0 335.3

336.7 338.0 Taiwan 118.0 95.0 102.8

105.1 107.4 Others 1,966.8 1,940.9 1,937.0

PDF GENERATED BY PROQUEST.COM Page 51 of 106

 World
1,975.8 1,995.5 12,335.0 12,395.5 12,556.1
total

%
12,796.9 12,960.0 4.7 0.5 1.3
change

Supply
We expect global refined lead production to grow by about 2% in 2023 and by an average of 1% per year in 2024-
25, marking a modest rebound from an estimated contraction of 0.7% in 2022. Although various new, restart and
expansion projects are set to boost the availability of raw materials during our forecast period, several projects have
been delayed and some mines have closed, reducing the anticipated scale of additional material expected to enter
the market. Falling treatment charges (the fee paid to smelters to process ore) are putting pressure on smelters'
margins. Lower energy prices in Europe have encouraged a phased restart of temporarily idled smelters, but
ongoing discipline will continue to limit the scale of production growth. Stable prices, coupled with the rising average
age of vehicles on US and European roads, will continue to support scrap supplies, but logistical constraints in major
regional markets will negatively affect the flow of lead-acid battery scrap supplies. This will limit secondary smelters'
ability to raise production. Regulations making lead-acid battery manufacturers responsible for the entire life cycle
will drive increased activity among secondary smelters in the long term.
Favourable margins supported Chinese smelter output in early 2023
Recent upgrades and expansions among secondary smelters in China will continue to support rising production, as
will favourable margins for processing specified volumes of lead at smelters (tolling). This is likely to be the start of a
long-term trend under China's Extended Producer Responsibility plan, which aims to make manufacturers
responsible for a product's entire life cycle. We expect Chinese refined lead output to expand by 1.7% a year on
average in 2023-25, but reforms announced by the Ministry of Ecology and Environment in November 2021 to cut
emissions of pollutants in major industries by 2025 will add to downward pressure on lead output.
Lead-smelter capacity outside China will face mixed fortunes this year and in our 2024-25 forecast period. In
Australia, Pure Environmental, a waste treatment firm, is developing a secondary smelter to recycle lead-acid
batteries (a project previously owned by Chunxing Corporation, Australia), which will boost production further after
the restart of the redeveloped Port Pirie zinc-lead smelter sometime this year. Some plants in Tunisia and the UAE
will add further smelting capacity during our forecast period, mostly to recycle scrap material.
Smelter closures will slow production growth in Europe in 2023
In April Nyrstar (which is a part of Trafigura Group, a multinational commodity-trading company) announced the
restart of operations at the 150,000-tonne/year smelter Stolberg lead plant in Germany following the completion of
its purchase from Ecobat (Germany) in February. The plant had been closed since July 2021. However, elevated
energy prices still pose a significant challenge for smelter margins, particularly in Europe. Ecobat, the world's
biggest lead-acid battery recycler, has suspended operations at its two smelters in Italy (with a combined capacity of
80,000 t/y of refined lead output) since October 2022.
Lead-concentrate supplies to smelters will be balanced in 2023-25
Although modest mine capacity additions are scheduled for the remainder of this year and in 2024-25, the overall
outlook for lead-concentrate supplies for smelters appears balanced. The ramp-up of new mines and expansion
projects that commenced in 2022 will continue to provide additional supplies. These include Nexa Resources of
Luxembourg's Aripuanã mine in Brazil and the Neves-Corvo mine in Portugal operated by Canada-based Lundin
Mining. Galena Mining (Australia) commissioned its 95,000-t/y Abra Base Metals Project in Australia in January
2023. Other projects scheduled to begin production during our forecast period include EDM Resources' ScoZinc in
Canada and the Corani mine in Peru being developed by Bear Creek Mining, another Canadian firm, with combined
capacity of 90,000 t/y. Additionally, low zinc prices have resulted in the closing of some high-cost mines, including
Tara Mines (Ireland), which is operated by Boliden (Sweden) and has a capacity of 20,000 t/y. Glencore

PDF GENERATED BY PROQUEST.COM Page 52 of 106

(Switzerland) will wind down production from the Lady Loretta mine in Australia ahead of its closure towards the end
of 2024.

('000
tonnes
unless
Refined lead: productiona otherwis 2021 2022 2023
e
indicated
)

2024 2025 China 5,203.0 5,226.0 5,388.0

5,436.5 5,496.3 EU 1,431.0 1,334.0 1,304.7

1,330.8 1,328.1 US 975.0 953.0 944.4

South
943.5 947.3 790.0 773.0 776.9
Korea

773.0 776.1 Mexico 420.0 437.0 434.8

435.7 436.6 Canada 203.0 194.0 191.5

191.7 191.9 Japan 247.0 295.0 294.1

294.4 294.7 Australia 164.0 152.0 179.4

181.0 182.6 Others 2,945.6 2,932.2 3,031.9

World
3,095.6 3,132.7 12,378.6 12,296.2 12,545.7
total

%
12,682.0 12,786.2 3.5 -0.7 2.0
change

PDF GENERATED BY PROQUEST.COM Page 53 of 106

Enlarge this image.
Liquefied natural gasPrices
EIU forecasts that contract prices for liquefied natural gas (LNG) will fall by more than 10% per year on average in
2024-25, after dropping by almost a quarter in 2023. This will reflect both the expected decline in oil prices and
changes written into new LNG contracts and renewals. LNG prices-both contract-based and spot-fell sharply over
January-August, as the price of dated Brent Blend crude oil slipped from an average of nearly US$100/barrel in
2022 to about US$80/b. In addition, natural gas prices in Europe and the US fell to their lowest levels in more than
two years. Prices set in contracts with US suppliers, most of which are tied to the Henry Hub benchmark, have also
settled at a significantly lower level than in 2022.
Storage levels in Europe will weigh on contract LNG prices
Europe's new role as a heavy purchaser of LNG cargoes will continue to affect LNG pricing. European countries
have ramped up LNG imports since Russia shut its pipelines to European gas deliveries in mid-2022. The Japan
Korea Marker (JKM) remains the main benchmark for the Asian LNG spot market. Europe's large presence on the
global LNG market means that trends in the European Title Transfer Facility (TTF) benchmark price for European
natural gas also influence JKM. Higher than usual levels of natural gas storage in Europe caused prices of all of the
various natural gas and LNG benchmarks to decline in the first half of 2023. North-West Europe Market (NWM) and
Agency for the Co-operation of Energy Regulators (ACER) prices ranged between US$8 and US$10.5 per mmBtu in
June and July, compared with a range of US$11-13/mmBtu for JKM.
Both European and Asian LNG prices will remain sensitive to disruptions to LNG supply. Spot prices in both Europe
and Asia rose in mid-August in response to news of potential strikes by workers at facilities operated by Australia's
two largest LNG exporters, Woodside (Australia) and Chevron (US). Any disruption to Australian supply would
prompt Asian buyers to bid up prices to secure cargoes from the US, the Middle East and Africa that would
otherwise be bound for Europe. Towards the end of August the JKM price reached US$14/mmBtu, while TTF
touched US$12/mmBtu. Prices eased in the last week of August after a settlement was announced for Woodside's
workers, but workers at Chevron's Wheatstone and Gorgon facilities commenced a strike on September 8th. As at
September 11th the company was intending to use legal methods to break the strike rather than reaching an
agreement with unions. The two plants have combined capacity of about 24m tonnes/year, about 5% of the global
total. A prolonged strike running into the northern hemisphere winter would push up JKM and TTF prices, although
the impact would be partially mitigated by the high levels of natural gas storage in Europe and by the general
weakness of Asian demand.
Contract LNG prices will remain elevated
Contract LNG prices have fallen by about 40% from their mid-2022 peak, but they will remain above the 2016-20

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average during the forecast period. We expect the average Japan contract price to decline from US$18.4/mmBtu in
2022 to US$14.4/mmBtu in 2023, before falling further to US$12/mmBtu in 2024, reflecting the gradual decrease in
oil prices and the increase in LNG supply. We expect the price to drop to US$11.2/mmBtu in 2025. Prices will be
affected by the terms of renegotiation of both maturing contracts and contracts for supplies from newly developed
LNG projects.

Liquefied natural gas: pricesa 2021 2022 2023 2024

2025 Prices

1 Qtr 8.9 15.6 18.2 12.9

11.5 2 Qtr 8.9 16.2 13.7 11.9

11.0 3 Qtr 10.9 21.3 12.4 11.3

11.0 4 Qtr 14.3 20.7 13.3 12.0

11.4 Year 10.8 18.4 14.4 12.0

11.2 % change 29.5 71.2 -21.8 -16.5

Demand
We expect global LNG imports to increase by 3.9% per year on average in 2024-25, following growth of 3.5% in
2023. Imports rose by 4.5% in 2022, according to the International Group of LNG Importers (GIIGNL), an industry
association based in France. Europe will continue to be one of the leading destinations, as LNG is filling the gap left
by the halt to most pipeline supplies from Russia. Chinese imports will recover after falling by 20% in 2022, but there
will be a big fall in imports by Japan owing to nuclear power station restarts in the country.
LNG trade growth will be constrained by limited new export capacity outside the US. Major new projects in Qatar,
Nigeria, Australia and the US are scheduled to come on stream in the mid-2020s, but most of the higher import
demand over the next two to three years will be met by increased use of existing export capacity. Conversely, import
capacity will continue to increase rapidly, with new regasification terminals opening in northern Europe, China, India,
Vietnam and the Philippines.
EU import growth will slow from the frenetic pace of 2022
We expect LNG import growth by EU member states to slow to about 4% per year on average in 2024-25, compared
with an estimated 8.3% in 2023 and a surge of more than 60% in 2022. European imports, including to non-EU
member states Turkey and the UK, accounted for about one-third of global LNG trade in 2022. Europe's target of
filling storage to 90% of capacity by end-October was met with two months to spare. LNG tankers waiting offshore
and Ukraine's pipelines are being used to bulk up storage capacity, but large stocks have already been built up.
European buyers will look to increase imports from Qatar, but this will depend on the ability of state-owned
QatarEnergy to negotiate release terms for some of its Asian contracts. Most of Qatar's exports are based on long-
term contracts with Asian clients-China, South Korea, Taiwan, Japan, Pakistan and India-and only about 20%
currently with European countries, primarily the UK, Italy and the Netherlands. In late 2022 QatarEnergy announced
an agreement to supply 2m t/y of LNG to a terminal that is being developed at Brunsbüttel in northern Germany for
15 years from 2026. The Qatari exporter is stepping up efforts to conclude contracts for its 33m-t/y North Field East

PDF GENERATED BY PROQUEST.COM Page 55 of 106

expansion project, which will start deliveries in 2025.
In 2023-24 Europe's LNG import capacity will be enhanced by the installation of several floating storage and
regasification units (FSRUs). Germany is fast-tracking the installation of up to five FSRUs, and two more German
FSRUs received their first cargoes in the first quarter of 2023. In May China secured a foothold in the European
market with a 20-year contract for Petrochina, a state-owned energy company, to supply up to 1.5m t/y of LNG to
the Gate terminal in the Netherlands. This gives the Chinese company scope to resell surplus contracted cargoes.
China will overtake Japan as the world's largest LNG importer in 2023
Japan regained first place as the world's largest market for LNG in 2022, owing to a 20% decline in China's imports.
China increased imports of natural gas by pipeline from Russia, Turkmenistan and Kazakhstan, but covid-19
restrictions had a severe impact on energy demand. After a slow start to 2023, Chinese imports gained momentum
in the second quarter as spot prices fell, and they were up by 8.6% year on year in January-July. We expect
Chinese imports to increase by 14.2% in 2023, despite the weakness of the economic recovery. This will stem from
low-base effects and the steady rise in city gas consumption. Further growth of about 8% per year on average in
2024-25 will lift China's imports to 85m tonnes, significantly higher than Japan's. Reforms to China's gas distribution
system have also enabled new players (mainly city-based private utilities) to negotiate import contracts with
international suppliers, which will underpin future growth in demand and allow new companies to invest in their own
LNG import facilities. China's import capacity is currently more than 100m t/y, and is set to reach 140m t/y by 2025 if
all of the new terminals currently under construction come on stream.
Nuclear restarts dampen LNG demand in Japan
Japan's LNG imports will continue to decline as nuclear power generation and renewable sources increase. Ten
nuclear reactors have restarted operations but with interruptions for maintenance and security measures. The
government is now seeking to step up nuclear restarts and has drawn up proposals to allow reactors to operate
beyond the current limit of 60 years. Largely owing to nuclear restarts, Japan's LNG imports fell by 15.5% year on
year in the first seven months of 2023. We expect them to fall by almost 10% over the full year and by a further 1.8%
on average in 2024-25.
South Korea's LNG imports will fall in 2023
South Korea's LNG imports have fluctuated in the past few years, and we expect this pattern to continue, albeit to a
lesser extent, with demand falling by 1.9% in 2023, before recovering by 1.6% in 2024 and 2.3% in 2025. Demand
has been affected by the performance of South Korea's nuclear sector; several plants are returning to service after
prolonged maintenance shutdowns, and the president, Yoon Suk-yeol, has strongly advocated increased use of
nuclear power. The government has revised down its projections for LNG's share in the power mix and is following
Japan's lead in extending the life of nuclear plants.
Taiwan's LNG imports will continue to increase steadily. Import capacity will be boosted from 2026 by upgrades to
its two existing LNG import terminals. We expect imports by India, Pakistan and Bangladesh to recover as spot
prices decline over 2023-25. These three countries typically rely more on spot purchases than on long-term
contracts, and thus demand is sensitive to spot prices. Thailand is also increasing its imports, and Asian demand will
be boosted by the recent start-up of LNG-receiving terminals in the Philippines and Vietnam. We expect India's
imports to grow by 6% on average in 2024-25, with imports from other south Asian countries to increase by about
8%.

PDF GENERATED BY PROQUEST.COM Page 56 of 106

 (m
tonne
s
unles
Liquefied natural gas (LNG): consumptiona s 2021 2022 2023
other
wise
indica
ted)

2024 2025 Japan 74.3 72.1 63.7

62.9 61.5 China 79.3 63.3 72.3

South
78.5 84.5 46.9 47.2 46.3
Korea

47.0 48.1 India 24.0 19.9 20.6

Taiwa
22.0 23.1 19.4 19.9 20.1
n

Other
20.3 20.8 28.6 29.0 31.6
Asia

34.9 37.1 EU 62.9 101.0 109.4

Middl
113.8 118.0 e 7.1 7.1 7.2
Eastc

Latin
7.1 7.3 Ameri 18.8 11.4 12.6
cab

Other
13.3 13.8 10.9 18.1 18.9
s

World
20.0 20.6 372.3 388.9 402.7
total

%
419.6 434.9 chang 4.5 4.5 3.5
e

Supply
We forecast that LNG supply will increase by 3.9% per year on average in 2024-25, with the bulk of additional

PDF GENERATED BY PROQUEST.COM Page 57 of 106

exports coming from the US. There will be a significant contribution from new producers, notably Mozambique,
Mauritania and Senegal; however, Egypt's exports will decline, owing to falling domestic production, which will only
be partly offset by increased pipeline imports from Israel. Plans for a floating LNG plant in Israel will take time to be
realised. The UAE has also started work on a new LNG project that is scheduled to start in 2026. Its location has
been switched from Fujairah to Al-Ruwais, an energy industrial zone in western Abu Dhabi.
US exports will increase substantially in 2023-24
US export growth was constrained in 2022 by the closure from June 2022 to February 2023 of the Freeport LNG
plant, which accounts for about 17% of US capacity. US exports still increased over the year, mainly as other plants
came on stream and through higher capacity utilisation. The 12.6% rise in US exports in 2022 followed the start of
operations at two new terminals, the first train of Venture Global's Calcasieu Pass and the sixth train at Cheniere
Energy's Sabine Pass. With Freeport back on stream, and with the additional trains at Calcasieu Pass, US exports
will increase by 14.4% in 2023. The first trains at the Golden Pass and Plaquemines plants are scheduled to start in
2024, pushing up US exports by 9.2% in 2024 and by 7.9% in 2025, to just over 100m t/y.
Increasing demand in Europe and Asia is stimulating US LNG investment
The prospect of steadily increasing demand from Europe and an eventual recovery in Asian demand continues to
encourage US LNG developers to expand capacity. The leading player, Cheniere Energy, is pressing ahead with its
Stage 3 project at Corpus Christi in Texas, which will add 10m t/y of capacity by 2026. Corpus Christi currently has
three 5m-t/y trains, the most recent of which was completed in March 2021. Golden Pass, the main developers of
which are QatarEnergy and ExxonMobil, is scheduled to have three 5.2m-t/y trains. Despite the more challenging
financial environment, two major US developers concluded financing packages in March for new projects: the
second phase of Venture Global's Plaquemines project in Louisiana, and Sempra Energy's Port Arthur LNG project
in Texas. In mid-July a final investment decision was announced for NextDecade's Rio Grande LNG project in
Texas.
Australian supply growth will slow over the forecast period
Australian exports have levelled off after a growth spurt that has enabled it to overtake Qatar as the world's largest
supplier of LNG. Further growth hinges on whether proposed new investments go ahead. Pressure is also mounting
to cut LNG exports to release more gas for domestic use. The largest new project under way is the second phase of
Woodside's 5m-t/y Pluto LNG project, set to start in 2026. We expect Australia's exports to decline by 1.1% in 2022,
owing to increased domestic demand. There could be a more significant fall if there is prolonged industrial action at
Chevron's Gorgon and Wheatstone plants. Australia's exports are likely to remain flat until the start-up of the new
Pluto project in 2026.
Qatar is investing to retain future market share
Qatar's LNG production is likely to remain just below 78m tonnes in 2023, but we expect exports to start rising in
2024-25 owing to a major expansion programme. Qatar is planning to launch six new LNG trains with a total
combined capacity of about 50m t/y by 2027, with a first-phase target of lifting total production to 110m t/y in 2025.
Major US and European companies have been selected as equity partners. QatarEnergy has also started active
marketing for the expansion. In November 2022 China's Sinopec signed a 27-year contract for 4m t/y of LNG from
the expansion project. Sinopec has also secured a 5% equity stake in one of the four trains in the first phase of the
expansion, North Field East. A similar contract has been signed with China National Petroleum Corporation.
Russian production will grow, but only slowly
Russia has set ambitious targets to increase its LNG export capacity, which is currently at 33m t/y. LNG exports are
intended to compensate for the closure of most of its pipelines to Europe, which accounted for most of Russia's gas
exports prior to the Russia-Ukraine war. Novatek, which operates the LNG plants in the Yamal peninsula, said that
its LNG exports to Europe grew by 13.5% in 2022. Western sanctions have slowed the development of the 19.8m-t/y
Arctic 2 project, but Russia is working to develop its own technologies. We do not expect the first phase of the
project to come on stream until 2025.
Prospects for supply from other areas have improved

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The clamour for new sources of gas supply has improved the prospects for a string of other recently approved
projects in new LNG development areas, such as Mozambique, Senegal, Mauritania and Canada. In mid-November
Eni shipped the first cargo from its 3.4m-t/y Coral South floating LNG project in Mozambique. Meanwhile, the start-
up of the first phase of the Tortue LNG project in Senegal and Mauritania has been pushed back to late 2023.

(m
tonne
s
unles
Liquefied natural gas (LNG): productiona s 2021 2022 2023
other
wise
indica
ted)

Austr
2024 2025 78.5 79.0 79.5
alia

80.5 81.7 Qatar 77.0 78.5 77.7

78.3 78.5 US 67.0 75.4 86.3

Russi
94.2 101.7 29.7 32.2 33.1
a

Malay
34.3 35.9 24.9 27.6 28.2
sia

Nigeri
28.5 28.1 16.4 14.2 13.8
a

Indon
14.5 14.1 13.8 13.9 14.6
esia

Algeri
14.7 14.9 11.8 7.8 9.2
a

Trinid
ad
9.4 9.6 and 6.2 10.0 10.5
Toba
go

10.4 10.6 Oman 10.1 11.0 11.1

PDF GENERATED BY PROQUEST.COM Page 59 of 106

 Other
11.1 11.0 36.9 39.2 38.8
s

World
43.7 48.7 372.3 388.9 402.7
total

%
419.6 434.9 chang 4.5 4.5 3.5
e

Enlarge this image.

Natural gasStocks and prices
EIU expects natural gas prices to fall by as much as two-thirds in the main global markets in 2023. Prices in
European and Asian markets will remain elevated by historical standards, whereas the US price will be below the
five-year average. We expect European prices to continue falling in 2024-25, amid subdued demand and increased
supply, while US prices will be boosted by steady growth in liquefied natural gas (LNG) exports.
European prices have declined significantly in 2023. After contracting in 2022, industrial demand remained weak,
while warmer than average temperatures limited domestic heating consumption during the first quarter of 2023.
European consumers also benefited from weak demand in Asia, which lowered the price of LNG imports. A rapid
build-up of natural stocks also reduced the risk premium placed on natural gas prices, as this buffer has made the
European market relatively less vulnerable to a supply squeeze.
European natural gas stocks were 95bn cu metres at the end of August, according to Gas Infrastructure Europe, an
industry association. This was 92% full, meaning that the target of achieving 90% of storage capacity by end-
October, ahead of the seasonal rise in demand, had been met with two months to spare. Storage capacity on LNG
tankers waiting in the Atlantic and the Ukrainian pipeline system is also being used to augment European supply
buffers. Ukraine's storage increased by 50% between June and September 2023, with gas being pumped from
neighbouring European countries, reaching about 9bn cu metres. European authorities will be working to ensure that
stocks are no lower than one-third of capacity by April 2024 (the end of the region's 2023/24 winter).
While weaker than in 2022, European prices will remain volatile
While European prices will be far weaker than in 2022, they will remain volatile. A continued absence of Russian
pipeline gas supply means that regional prices will react strongly to potential disruptions to LNG supply, as LNG

PDF GENERATED BY PROQUEST.COM Page 60 of 106

shipments have largely filled the gap left by Russia since mid-2022. This price sensitivity was illustrated in August,
when the threat of strikes by workers employed by Australia's leading LNG exporters, Woodside and Chevron,
pushed the European Title Transfer Facility (TTF) benchmark price up by more than 30% to US$13/mmBtu during
the month. Prices moved below US$10/mmBtu after a settlement was announced between Woodside and trade
unions. However, unions working on Chevron's projects have since voted for strike action, which could push prices
up once more if a settlement is not reached.
We expect European prices to temporarily increase in late 2023 and early 2024 as utilities start to draw down
regional stocks. An increase in Asian demand will also increase the cost of LNG deliveries. Most significantly, we
expect modest economic stimulus in China to boost power demand in the country, which has been weak in the year
to date. Aside from China, we expect limited LNG demand growth in Asia in 2023-24. Increased nuclear power
generation will constrain demand in both Japan and South Korea. We forecast an average European natural gas
price of US$12.8/mmBtu in 2023. Although two-thirds lower than the 2022 average, this would be 143% higher than
the 2016-20 average. We expect that prices will fall to an average of US$10/mmBtu in 2024 and US$5.8/mmBtu in
2025.
Natural gas storage was abundant in the US at the end of the 2022/23 winter, and we expect stocks to remain at a
comfortable level over the next two years. Stocks in the US stood at 87.3bn cu metres in late August-20% higher
than the level one year earlier and 9.5% above the five-year average, according to the US Energy Information
Administration (EIA). This reflected smaller than usual withdrawals from storage in the first quarter of 2023. We
expect production to rise in the US in 2023-24, which, coupled with weak domestic demand, will be sufficient to
offset the effect of rising LNG exports, allowing stocks to remain above or around the five-year average during that
period.
US prices will recover strongly in 2024-25
The US Henry Hub price fell sharply in the first half of 2023 in response to a weather-related slump in demand. This
was in sharp contrast to 2022, when the price averaged US$6.4/mmBtu, the highest since 2008, supported by the
surge in LNG exports to Europe and strong domestic demand growth. We expect Henry Hub to average
US$2.6/mmBtu in 2023, as buoyant storage and increased production will offset the effect of extra deliveries to LNG
exporters. The price will then climb to US$3.3/mmBtu in 2024-25 as LNG exports continue to increase.

(US$/mmBt
Natural gas: prices u; 2021 2022 2023
averages)

2024 2025 Henry Hub

1 Qtr 3.4 4.6 2.7

3.5 3.3 2 Qtr 2.9 7.4 2.2

3.2 2.8 3 Qtr 4.3 7.9 2.7

3.6 3.3 4 Qtr 4.7 5.5 2.9

3.2 3.5 Year 3.9 6.4 2.6

3.4 3.2 % change 91.1 65.3 -59.1

PDF GENERATED BY PROQUEST.COM Page 61 of 106

 29.0 -3.7 Europe

1 Qtr 6.5 32.6 16.8

12.4 7.3 2 Qtr 8.8 31.6 11.3

9.6 6.2 3 Qtr 16.9 60.2 10.9

9.0 4.8 4 Qtr 32.2 36.9 11.9

9.1 5.1 Year 16.1 40.3 12.8

10.0 5.8 % change 397.0 150.3 -68.3

El Niño could raise demand and prices in late 2023 and in 2024
Depending on its severity, El Niño could be positive for global natural gas demand and prices over late 2023 and in
2024. In July 2023 the World Meteorological Organisation (WMO) confirmed that El Niño conditions had developed
and forecast a 90% probability of the weather event continuing until the end of 2023. The WMO also noted that the
effect that an El Niño event had on global weather patterns usually played out in the year after its development, so
weather disruptions could be significant in 2024. El Niño periods typically cause higher temperatures in Asia and the
US, which would stoke demand for energy for cooling in these regions. In Europe, El Niño tends to bring colder
winters to northern countries, which would increase gas demand for heating.

(bn cu
Natural gas: supply and demand 2021 2022 2023
metres)

Producti
2024 2025 4,046.1 4,029.6 4,101.7
on

Consum
4,199.6 4,335.4 4,014.4 3,899.2 3,887.9
ption

3,980.1 4,129.4 Balance 31.7 130.4 213.9

Demand
We expect global natural gas consumption to grow by 3.1% per year on average in 2024-25 as lower prices trigger a
recovery in demand after two years of contraction. Our forecast assumes that there will be no clear resolution of the
Russia-Ukraine conflict and no prospect of a return to pre-war flows of Russian pipeline natural gas to Europe. We
forecast that demand will contract by 0.3% in 2023, following a 2.9% decline in 2022. A modest increase in Chinese
consumption will be insufficient to offset lower consumption elsewhere in Asia and in Europe. On balance, we expect
the El Niño to increase demand, as it makes extreme weather events more likely, pushing up demand for natural
gas for both heating and cooling.
European gas demand will rise in 2024-25, but remain far below 2021 levels
We expect European demand to grow by 3.4% on average in 2024-25, helped by lower prices and the start-up of
new LNG import terminals in northern Europe. The chemical and fertiliser industries will make an important

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contribution as production resumes at units idled during the gas price surge in 2022. Nevertheless, after contractions
of 12.5% in 2022 and a forecast 8.1% in 2023, European demand in 2025 will remain about 10% below its average
level in the five-year period before Russia's invasion of Ukraine. The 2022 price surge has accelerated the shift
away from natural gas-powered electricity generation in Europe, facilitated by a more rapid renewable capacity
expansion. Nuclear power generation in France will also recover after a weak 2022. Natural gas demand from
industry will also fail to recover to pre-2021 levels. European industry implemented new energy efficiency measures
and shifted some energy-intensive processes offshore in 2022, and we do not expect firms to fully unwind these
measures.
Russian gas demand will continue to fall
Domestic demand in Russia fell by 13.6% in 2022, reflecting the impact that the punitive sanctions imposed by
Europe and the US have had on economic activity. We expect further declines of 5.4% in 2023 and 1.7% in 2024,
before a weak recovery to 2.6% growth in 2025.
US natural gas demand will be stable in 2023 and 2024
Gas consumption in the US is likely to be flat in the forecast period, as a likely recovery in residential and
commercial demand will be offset by weaker demand from the power sector. We expect US natural gas demand to
grow by 0.7% in 2023, following a 5.4% increase in 2022. A weather-related slump in residential heating demand in
the first half of 2023 was offset by a strong rise in gas use in the power sector, reflecting the fall in prices. According
to the EIA, power-related gas demand rose by 9.7% year on year in January-June, while coal use fell by 25%.
Natural gas-fired capacity (mainly highly efficient combined cycle units) grew by 9.1%. Natural gas will continue to
make gains in the power sector as coal-fired stations are retired, but there will also be strong growth in renewable
capacity and output. The EIA forecasts that solar and battery storage projects will account for 61% of the 78 GW of
additional generating capacity that will be installed in the US over the next two years, compared with 14% for wind
and 21% for natural gas.
China's natural gas demand will be stronger in late 2023 and in 2024
In China, we expect natural gas demand to grow by about 8% on average in 2024-25. This follows a 1.2% decline in
2022, the first contraction in demand in decades, and a relatively weak 6.1% recovery in 2023. In 2023 industrial and
commercial gas demand rebounded after the coronavirus-related restrictions on the broader economy were lifted at
the end of 2022. However, this growth will be constrained in 2024-25 by a renewed promotion of coal for power
generation in order to support energy security, an accelerated rollout of rooftop solar capacity and a slowdown in
economic growth compared with the past decade.
Japan and South Korea shift towards nuclear power
The sharp rise in global natural gas prices has prompted Japan to step up efforts to bring more nuclear power
stations back online as a means to enhance energy self-sufficiency. The government is also proposing legislation to
allow the life of nuclear reactors to be extended beyond 60 years. We have revised our forecast for the contraction in
Japan's demand in 2023 to 9.5%, as consumption fell by more than 10% in the first half of the year. We expect
demand to fall by 1.7% in 2024 and 1.3% in 2025 as the growth in nuclear power output slows.
In South Korea, there has been a similar policy shift in favour of nuclear power. However, the government is also
committed to phasing out coal-fired power generation, which will lend some support to natural gas demand.
The sharp fall in spot prices for LNG imports will stimulate a recovery in natural gas demand in India, Pakistan and
Bangladesh. These countries typically rely heavily on the spot LNG market rather than long-term supply contracts.
As a result, LNG buyers were highly exposed to surging spot prices in 2022, and demand contracted. As spot LNG
prices moderate in 2023 and beyond, demand from India, Pakistan and Bangladesh will recover steadily.

PDF GENERATED BY PROQUEST.COM Page 63 of 106

 (bn cu
metres
Natural gas: consumption unless 2021 2022 2023
otherwise
indicated)

2024 2025 US 851.2 897.1 903.4

OECD
898.0 910.6 533.8 467.1 429.3
Europe

440.4 458.5 Russia 474.7 410.1 388.0

381.4 391.3 China 378.3 373.7 396.5

425.5 465.5 Iran 236.7 230.1 238.6

Saudi
249.1 256.8 104.0 102.1 92.4
Arabia

90.8 89.7 Canada 117.3 120.1 124.4

129.7 133.9 Japan 115.5 120.0 119.0

120.8 121.3 Mexico 90.6 88.5 87.5

United
89.1 91.5 Arab 70.8 69.8 67.8
Emirates

67.1 68.1 Others 1,041.6 1,020.5 1,040.9

1,088.3 1,142.3 World total 4,014.4 3,899.2 3,887.9

3,980.1 4,129.4 % change 5.0 -2.9 -0.3

Supply
We expect global natural gas production to rise by 2.8% on average in 2024-25 as high prices and EU efforts to
replace Russian supply stimulate global upstream gas investment. Global natural gas production declined by 0.4%
in 2022, mainly owing to Russian production contracting after pipeline exports to Europe were shut off. We estimate
that production will increase by 1.8% in 2023, mainly owing to strong US output. The main sources of increased
production over 2023-25 will be North America, Norway, the Middle East, North Africa, Azerbaijan, Turkmenistan,
China, Australia and Mozambique.
US output will continue to grow in 2023-24
In the US, producers have been ramping up output to meet resurgent demand from domestic LNG exporters. US
production increased by more than 6% year on year in the first half of 2023. The volume of natural gas needed to
supply existing LNG plants operating at full capacity is about 135bn cu metres/year, which represents 14% of total

PDF GENERATED BY PROQUEST.COM Page 64 of 106

output. US producers will need to increase output further from 2025, when a new wave of LNG projects will come on
stream. We expect production to increase by 2% per year on average in 2024-25.
Australian supply will rise as exports pick up
We expect production in Australia to increase only marginally until planned new upstream developments are
completed in the second half of the current decade. Major operators off the west coast, such as Woodside, had
deferred investments in new projects, but they have been encouraged by the strong recovery in LNG demand
recently. However, producers have expressed concern about a government proposal to reform the tax regime for
upstream gas, which, in its current form, is highly attractive to operators.
Russian production will begin to pick up slightly in 2024
Russia is seeking to offset the drop in its exports to northern Europe by increasing the volumes pumped through the
Power of Siberia pipeline to China and boosting LNG sales. However, the pipeline to China has a relatively limited
capacity of 38bn cu metres/year, which will not be reached until 2025, compared with pre-war pipeline exports to
Europe of about 170bn cu metres/year. Russia has proposed to add 50bn cu metres/year of pipeline capacity to
China through the Power of Siberia 2 project, which would bring gas from the northern Yamal peninsula. However,
China has yet to agree on commercial terms. We expect Russian output to fall by 7.4% in 2023, after contracting by
12% in 2022. Production should grow by 2.5% in 2024-25, mainly driven by demand from LNG exporters.
Qatar's LNG projects will come online in the mid-2020s
In the Middle East and Africa, we expect production to increase by about 5% on average in 2024-25, including
higher output from Israel. LNG-focused developments in Mozambique, Mauritania and Senegal will boost African
output. The rise will be significant in the mid-2020s, when Qatar's LNG expansion projects come on stream. The
UAE is also increasing its natural gas output capacity, spurred by creating a new gas-focused entity, ADNOC Gas,
and investing in an LNG export project. The UAE is also using much less gas for electricity generation owing to the
start-up of the Barakah nuclear power station. We expect Algeria's production to be boosted in late 2023 and 2024
by the fast-track development of a major new natural gas discovery in the Hassi R'Mel area.
Saudi Arabia will continue to increase output in 2023-24
Saudi Arabia's natural gas production will grow by about 3% per year in 2023-25. Although the country is the ninth-
largest gas producer in the world, it does not have a major impact on global trade flows, as all of its gas is consumed
locally. Iraqi production prospects have also improved following the signature in April 2023 of an agreement with
France's TotalEnergies and QatarEnergy for a US$27bn associated gas and renewable energy project. This will be
mainly for local use, but it will affect regional supply, as it will reduce Iraq's dependence on imports from Iran.
In Iran, production will continue to increase by 3-4% per year. Progress has been slow on projects like South Pars
11 and 14, on which Iranian contractors have replaced international firms. However, South Pars 14 is now on
stream, and South Pars 11 was inaugurated in August 2023, with initial capacity of 5.5bn cu metres/year, according
to the National Iranian Oil Company.
Turkey's Sakarya field in the Black Sea started production in April. The field could eventually supply up to one-third
of Turkey's natural gas needs. This would have implications for the regional market, as Turkey is currently a major
importer and an important corridor for gas from Russia and Azerbaijan to southern Europe.

(bn cu
metres
Natural gas: production unless 2021 2022 2023
otherwise
indicated)

2024 2025 US 931.1 965.6 1,016.7

PDF GENERATED BY PROQUEST.COM Page 65 of 106

 1,028.9 1,057.7 Russia 701.6 618.1 572.3

583.2 601.3 Iran 256.7 259.5 271.0

282.1 290.0 China 177.2 178.7 183.3

189.5 199.2 Qatar 172.3 183.4 188.3

191.3 192.9 Canada 209.2 221.8 233.5

244.5 257.2 Australia 145.4 151.8 154.2

157.2 158.3 Norway 117.2 125.8 126.3

Saudi
127.7 128.7 114.8 120.6 124.6
Arabia

126.9 131.7 Algeria 101.1 98.2 100.2

102.0 103.3 Others 1,119.4 1,106.2 1,131.1

1,166.4 1,215.2 World total 4,046.1 4,029.6 4,101.7

4,199.6 4,335.4 % change 5.1 -0.4 1.8

Enlarge this image.

Natural rubberStocks and prices
EIU forecasts that natural rubber (NR) prices will edge slightly higher in Q4 2023. Nonetheless, we forecast that
prices will average 10.8% lower year on year over 2023 as a whole. Although production growth will be weak in
2023, demand will also be subdued, keeping the market well supplied. Global real GDP growth is forecast to slow

PDF GENERATED BY PROQUEST.COM Page 66 of 106

significantly, to 2.3% in 2023, from 3.1% in 2022. Demand in China, which accounts for roughly 40% of annual
consumption, will be stagnant owing to a lacklustre economic rebound in the country. Looking at 2024, the demand
outlook is more positive both in China and more generally. The start of global monetary easing from mid-2024
should contribute to a modest recovery in demand. On the supply side, adverse weather (mainly drought in South-
east Asia) means that we forecast no production growth in 2023. Output will grow only slightly in 2024, as the
2023/24 El Niño weather phenomenon is likely to restrict rainfall in key growing areas. Overall, we expect that
slightly stronger demand and still-weak production growth will tighten the NR market and push prices higher in 2024
and 2025 compared with 2023.
After a relatively weak year, NR prices started to edge higher in August in response to supportive developments in
the market. On the demand side, higher oil prices are encouraging substitution away from synthetic rubber to NR. As
synthetic rubber is produced as a derivative of oil, higher oil prices increase production costs for the material. While
not a perfect substitute, NR and synthetic rubber can be used for many of the same applications. Elsewhere,
expectations are growing for the government of China to implement stronger economic stimulus over Q4 2023.
Although stocks on the Shanghai Futures Exchange (SHFE) have been building steadily since early July, rubber on
cancelled warrants (stocks booked for removal) also ticked up to just over 12% of total stocks at the start of
September (from 3.4% at end-June), pointing to stronger demand.
El Niño poses a downside risk to natural rubber production in South-east Asia
The supply-side picture for rubber is deteriorating. NR producers in South-east Asia are facing the prospect of an El
Niño weather event. In July 2023 the World Meteorological Organisation (WMO) confirmed that El Niño conditions
had developed. It forecast a 90% probability of the weather event continuing through to the end of 2023, bringing
reduced rainfall to Thailand, Indonesia and Vietnam. It comes at a time of already low water tables in Thailand,
Cambodia, Laos, India and China. Nonetheless, only a prolonged, severe El Niño is likely to have a major negative
influence on production, as NR is a relatively resilient crop.

Natural rubber: stocks and prices 2021 2022 2023 2024

Stock
2025
sa

1 Qtr 3,600 4,200 4,200 4,400

4,800 2 Qtr 3,500 3,600 4,000 4,200

4,000 3 Qtr 4,000 3,700 4,400 4,500

4,200 4 Qtr 3,938 4,109 4,263 4,250

%
4,300 chang -6.2 4.3 3.8 -0.3
e

Price
1.2
s

Thaila
ndb

PDF GENERATED BY PROQUEST.COM Page 67 of 106

 1 Qtr 1,937 1,803 1,376 1,525

1,600 2 Qtr 1,947 1,875 1,375 1,495

1,625 3 Qtr 1,541 1,410 1,300 1,550

1,650 4 Qtr 1,604 1,264 1,400 1,600

1,725 Year 1,757 1,588 1,363 1,543

%
1,650 chang 17.7 -9.6 -14.2 13.2
e

Malay
7.0
siac

1 Qtr 6,685 7,314 5,969 6,300

6,700 2 Qtr 6,747 7,101 6,000 6,200

6,600 3 Qtr 6,881 6,492 5,825 6,400

7,000 4 Qtr 7,164 5,887 6,100 6,500

7,100 Year 6,869 6,699 5,973 6,350

%
6,850 chang 25.5 -2.5 -10.8 6.3
e

Relatively high stockpiles should prevent a supply squeeze

NR consumption grew by 1.7% year on year in 2022, and production increased by 4.8%, which pushed the market
into a large surplus. This surplus will persist over 2023, as both demand and production will remain stagnant over
the year. Given deteriorating supply-side conditions, we now forecast small market deficits in 2024 and 2025,
compared with our previous forecast of a slight surplus. Although this will reduce stockpiles, we forecast the stocks-
to-consumption ratio to remain at a relatively high 14.5 weeks of consumption in 2025 compared with the 2013-22
average of 14.4 weeks.

('000
tonnes
Natural rubber: supply and demand unless 2021 2022 2023
otherwise
indicated)

2024 2025 Supply 13,809.3 14,476.6 14,481.5

PDF GENERATED BY PROQUEST.COM Page 68 of 106

 14,651.9 15,015.2 Demand 14,068.5 14,305.8 14,327.4

14,664.8 15,057.4 Balance -259.2 170.8 154.1

-12.9 -42.2 Stocksa 3,938.2 4,109.0 4,263.1

Weeks'
4,250.2 4,207.9 consumpti 14.6 14.9 15.5
on

Demand
We have revised down our forecast for growth in global demand to just 0.2% in 2023 (1% previously). This
downward revision reflects the weakness in global manufacturing activity, a slump in Malaysia's rubber glove sector,
subdued economic activity in China and sharply lower exports according to producers' trade data. For context, the
International Rubber Study Group (IRSG) estimated a 2.8% year-on-year contraction in NR use in Q1 2023. Rubber
demand growth will accelerate in 2024 and 2025 as most advanced economies start to loosen monetary policy,
economic growth in China strengthens and NR production growth remains weak.
Strong growth in vehicle exports will bolster China's NR demand
Despite a muted recovery in China's manufacturing activity so far, the country's auto sector has been one area of
relative strength. The IRSG estimates a 0.4% year-on-year contraction in China's consumption in the first quarter,
but auto sector activity and exports have picked up since then, and we forecast that NR use in China will rise by
1.5% in 2023. After a slow start to the year, car manufacturing was up by 7.4% year on year in January-July, while
production of more NR-intensive commercial vehicles grew by 17% year on year. Nonetheless, there was a low
base of comparison in April, given the lockdown in Shanghai a year earlier. There has been strong growth in China's
vehicle exports, mostly due to the post-covid-19 backlog of orders. Sales of electric vehicles to Europe and South-
east Asia have been particularly strong. Tyre production increased by a robust 13.5% year on year in January-July,
and imports were also up, albeit by a more modest 3.9% year on year. The Chinese Ministry of Commerce has
announced an Automobile Purchase Promotion initiative, which will support NR consumption for the remainder of
2023.
We believe that the outlook for NR demand in China in 2024-25 is positive, as we expect persistent strength in
export demand for cars, particularly electric vehicles. This will more than offset the negative impact of a sluggish
domestic economy, and we forecast NR demand to grow at an annual average rate of 2%.
India's domestic economy provides solid support for NR demand
India's NR demand grew by 7% year on year in the first quarter of 2023, and we expect growth of 4% in the year as
a whole. Although vehicle sales have been growing strongly, production has lagged and grew by only 0.1% year on
year in January-July. Commercial vehicle production has also been subdued, contracting by 1.4% year on year in
the second quarter of 2023. For these reasons, we suspect that growth in NR consumption slowed sharply in the
second quarter. We expect NR consumption to pick up again in 2024-25, in tandem with a rebound in wider
economic activity. Faster growth in NR consumption in the coming years will result from high levels of investment in
tyre manufacturing facilities in the country, especially in the light of recent announcements from Hyundai (South
Korea) and Tesla (US). We forecast an increased reliance on imports as domestic NR production lags consumption
growth.
A slump in demand for rubber gloves will weaken NR demand in Malaysia
We forecast that Malaysia's NR consumption will fall sharply in 2023 owing to weaker demand from the rubber glove
sector. The latest data from Malaysia's Department of Statistics (DoS) show a 35.6% year-on-year slump in

PDF GENERATED BY PROQUEST.COM Page 69 of 106

domestic rubber consumption in the second quarter. Malaysia is the world's leading producer of rubber gloves, but
corporate profitability is under severe pressure, with competition from lower-priced Chinese products and a collapse
in coronavirus-related demand. The recent removal of the US import ban on two rubber glove manufacturers, Top
Glove and Smart Glove, has been overshadowed by a rising number of US states-including Illinois, California and
Hawaii-prohibiting the use of latex gloves for fear of allergic reactions.
The plunge in Malaysia's consumption this year will weigh on regional "Other Asia" consumption, which we expect to
contract by 3%. However, growth should resume in 2024-25, as the pandemic-related drop in Malaysia's NR use this
year will prove to be a one-off occurrence.
Growth in US demand for NR will be slow in 2023 and 2024
After strong growth of 4.3% in 2022, NR use in North America stagnated in Q1 2023 in year-on-year terms. US
vehicle production is resilient, with car production rising by 11.6% year on year and commercial vehicle output
expanding by 10.6% in January-July. This pace of growth is likely to slow in Q4 2023 owing to high interest rates
and slowing economic growth weighing on vehicle demand. We forecast that NR consumption in the US will grow by
just 1% over 2023 as a whole. Consumption growth should accelerate to 1.5% in 2024 and 2.5% in 2025 as
monetary policy is loosened in the second half of 2024.
A resilient auto sector is supporting EU demand
The auto sector is one bright spot in the otherwise struggling EU economy in 2023. Pent-up demand created by the
coronavirus-related supply-chain problems in 2021-22 has meant that vehicle production has grown even while
broader economic growth has been weak. This was reflected in the 2.6% year-on-year rise in NR consumption in
January-March reported by the IRSG. However, we expect the major European economies to stagnate or grow
slowly in 2023, which, coupled with higher interest rates, will start to weigh on auto demand, and therefore on NR
use later in the year. All told, given the strong start to 2023, we still expect a 1% increase in regional NR
consumption this year. Growth in NR use should pick up in 2024 owing to a rebound in Germany's industrial sector
and falling interest rates. We forecast growth in NR consumption of 2% in 2025.

('000
tonnes
unless
Natural rubber: consumption otherwi 2021 2022 2023
se
indicate
d)

2024 2025 China 5,665.4 5,707.9 5,793.5

5,909.4 6,027.6 India 1,256.5 1,325.0 1,378.0

1,440.0 1,512.0 Japan 677.9 681.4 681.4

Other
681.4 681.4 2,980.4 3,132.5 3,038.5
Asiaa

3,129.7 3,239.2 EUb 1,166.5 1,159.2 1,170.8

Other
1,188.4 1,212.1 Europe 513.3 458.9 445.1
c

PDF GENERATED BY PROQUEST.COM Page 70 of 106

 North
458.5 472.2 Americ 1,086.0 1,129.0 1,140.3
ad

Latin
1,157.4 1,186.3 Americ 660.2 635.8 604.0
a

622.1 647.0 Africa 66.2 75.7 75.7

14,068. 14,305. 14,327.

78.0 79.5 Worlde
5 8 4

15,057. %
14,664.8 10.9 1.7 0.2
4 change

Supply
We have revised down our forecast for global supply in 2023 and now forecast that it will be unchanged from 2022
(1.4% growth previously). Adverse weather will curb production in South-east Asia, with particularly weak supply in
Malaysia. The IRSG reported a 2.5% year-on-year contraction in global NR supply in January-March, but tapping
(the extraction of natural rubber from trees) is erratic in these months and we think that supply will pick up.
Nonetheless, lower yields in Asia and inflation in many of the major producing nations will continue to undermine
producer margins. Given generally unfavourable growing conditions, we expect only a 1% increase in supply in
2024, before higher prices encourage more tapping in 2025.
We believe that the risks to our supply forecasts lie to the downside. The costs and complexity of compliance with
the EU Deforestation Regulation are already weighing heavily on the smallholders who produce the bulk of NR,
which could lead to lower production in the medium term if farmers switch to alternative crops.
Thai output growth will slow after a strong 2022
Production in Thailand-the world's largest exporter, with only one-third of production retained for domestic use-
increased by 9.6% in 2022 owing to improved productivity. Momentum was maintained in the first quarter of 2023,
with 3.1% year-on-year supply growth. However, we expect output growth to be slower over the year as a whole due
to subdued prices and weak export demand. Thai trade data showed a 23% year-on-year decline in Thailand's NR
export volumes in January-July. Production growth will be steady over the medium term and we forecast average
annual expansion of 2.5% in 2024-25.
Indian production is on a steady growth path
We forecast that rubber production in India will rise by 4% in 2023, despite a weak start to the year. Production fell
by 1.7% year-on-year in January-March. India's Rubber Board has pledged US$48/hectare in grants for rain-
guarding rubber trees and disease control. The All India Rubber Industry Association expects a 5% rise in output in
fiscal year 2023/24 (April-March). In the longer term the Rubber Board has announced that the so far successful
expansion of productive capacity in north-east India may be replicated in Bastar, Chhattisgarh state.
An almost 16% year-on-year reduction in imports in the first quarter of 2023 suggests that Indian tyre manufacturers
are supporting the government's Make in India initiative by buying domestic, rather than cheaper, international,
supply.
Côte d'Ivoire will continue to gain market share
We expect production in Côte d'Ivoire to expand by 15% in 2023, after a 13% year-on-year rise in the first quarter.
This will enable the country to continue gaining market share in Asia, as Ivorian rubber is cheaper than Asian rubber.
The US and Europe were traditionally the country's main export markets, but Asia has become the main destination

PDF GENERATED BY PROQUEST.COM Page 71 of 106

since 2019, and the decline in shipping costs to pre-covid levels will boost the price competitiveness of Ivorian
rubber in Asian markets. Chinese factories that opened in the past two years now process more than 20% of Côte
d'Ivoire's annual output. In June 2023 Thailand's largest producer of rubber gloves, Sri Trang Agro-Industry, opened
its first procurement centre in Cote d'Ivoire, and plans four more in the next five years.
Indonesian and Malaysian output will continue to decline
Indonesia's output has fallen by 25% since it peaked in 2017, and the country appears to be following a similar path
to that of Malaysia, which produced nearly 15% of global supply in 2004 but now produces less than 3%. Indonesian
and Malaysian production declined by 8.4% and 19.7% respectively in 2022, and by about 20% year on year in both
countries in the first quarter of 2023, according to the IRSG. Meanwhile, the latest data from Malaysia's DoS show a
29.4% year-on-year decline in production in the first half of the year. We have revised down our production forecast
and now expect a 20% contraction in Malaysia's output in 2023 (-5% previously) as the country continues to struggle
with labour shortages.
In Indonesia, farmers have been switching to higher-value palm oil. Leaf fall disease is also a persistent problem in
Indonesia, generally reducing yields and supply. Labour shortages are also a problem, as in Malaysia. Rubber
processing factories have been closing in Indonesia amid the reduced availability of local raw materials, high input
costs and scant profit margins. Indonesia's processed rubber is undercut by exports from Côte d'Ivoire, particularly
in the price-sensitive Indian market. Without a sustained rebound in the price of NR, Indonesia's production will
continue to decline. We expect output in both Malaysia and Indonesia to fall further in 2023-24. This will be notable
in Indonesia, where rubber production is typically significantly affected by El Niño-related weather events.

('000
tonnes
Natural rubber: production unless 2021 2022 2023
otherwise
indicated)

2024 2025 Thailand 4,801.0 5,262.8 5,368.1

5,475.4 5,639.7 Indonesia 2,836.0 2,599.0 2,339.1

2,198.8 2,198.8 Vietnam 1,271.0 1,336.0 1,349.4

Côte
1,335.9 1,362.6 1,047.0 1,286.0 1,478.9
d'Ivoire

1,597.2 1,677.1 China 749.0 753.0 730.4

730.4 741.4 India 757.0 843.2 876.9

920.8 957.6 Malaysia 469.7 377.3 301.8

313.9 313.9 Cambodia 374.3 394.7 375.0

375.0 384.3 Myanmar 281.8 299.6 314.6

320.9 320.9 Brazil 200.0 204.0 204.0

PDF GENERATED BY PROQUEST.COM Page 72 of 106

 206.0 206.0 Others 1,022.5 1,121.0 1,143.4

1,177.7 1,213.0 Worlda 13,809.3 14,476.6 14,481.5

14,651.9 15,015.2 % change 5.6 4.8 0.0

Enlarge this image.

NickelStocks and prices
EIU maintains its view that rising demand for nickel from newly established integrated steel mills in Indonesia and
from battery-makers globally will help to sustain nickel prices in the long term. However, ongoing headwinds for the
Chinese construction sector, coupled with rapidly expanding nickel production capacity in Indonesia, will generate
short-term volatility. The London Metal Exchange (LME) cash price declined to a one-year low of US$19,100/tonne
on July 1st, from US$33,575/tonne on December 8th 2022. Broader upside risks to our price forecasts are tied to the
availability of class 1 material as nickel supply chains continue to adjust to the self-imposed decision by many
Western banks and end-users to avoid using Russian material. To the downside, inflationary pressures will continue
to weigh on consumer spending in 2023, and various expansion projects will support rapid supply growth. The
resumption of LME trading in Asian hours on March 27th, which had been suspended since the short squeeze in
March 2022, should improve market liquidity. Nonetheless, we believe that softer underlying fundamentals will lead
the LME cash price to average US$23,593/tonne in 2023, from an average of US$25,834/tonne in 2022.

Refined nickel: stocks and prices 2021 2022 2023 2024

2025 Stocksa

1 Qtr 329.8 115.0 75.0 220.1

366.8 2 Qtr 289.1 100.8 110.3 259.2

396.3 3 Qtr 199.2 91.1 145.7 298.3

PDF GENERATED BY PROQUEST.COM Page 73 of 106

 425.7 4 Qtr 138.0 76.3 181.0 337.4

%
455.2 -58.1 -44.7 137.3 86.4
change

34.9 Pricesb

17,618. 26,765. 26,070. 22,800.

1 Qtr
1 0 4 0

17,359. 28,951. 22,366. 22,500.

21,000.0 2 Qtr
3 3 1 0

19,112. 22,104. 20,600. 21,250.

22,000.0 3 Qtr
2 4 0 0

19,770. 25,514. 25,336. 21,300.

22,600.0 4 Qtr
3 1 4 0

18,465. 25,833. 23,593. 21,962.

22,900.0 Year
0 7 2 5

%
22,125.0 33.9 39.9 -8.7 -6.9
change

The underlying fundamentals will remain in flux, as we forecast that the global nickel market will enter a period of
modest oversupply this year and in the 2024-25 forecast period. We continue to forecast rapid demand growth from
downstream applications-particularly stainless steel production and new energy vehicle (NEV) batteries. Onshore
production in Indonesia is set to enter a period of rapid growth, with various traditional nickel-mining companies
currently expanding their operations. In the long term, demand for nickel will primarily reflect rising consumption by
electric-vehicle (EV) battery producers. There is a risk that demand will rise more quickly than total output, and the
change in the pattern of grades required in the market may also result in sectoral shortages, which would boost
prices considerably.

('000
tonnes
nickel
content
Refined nickel: supply and demand unless 2021 2022 2023
otherwis
e
indicated
)

PDF GENERATED BY PROQUEST.COM Page 74 of 106

 Global
2024 2025 producti 2,784.7 2,948.6 3,250.4
on

Global
3,479.3 3,703.1 consump 2,962.2 3,007.9 3,109.0
tion

3,322.9 3,585.3 Balance -177.5 -59.3 141.4

Stocks
(reported
156.4 117.8 &estimat 138.0 76.3 181.0
ed; year-
end)

Weeks'
337.4 455.2 consump 2.4 1.3 3.0
tion

Demand
We expect global demand for nickel to continue to record robust growth this year and in the 2024-25 forecast period,
at an annual average rate of 6%, after rising by an estimated 1.5% in 2022. This will be supported by investment in
Indonesia's stainless steel capacity, designed to increase the value of the country's domestic mine production.
Despite increasing competition from alternative battery chemistries, the electrification of the global automotive fleet
will boost nickel demand for use in batteries. Increased supply-chain integration and government policies to support
sustainable access to battery raw materials will support demand in the long term.
Demand from the EV battery sector will keep consumption high
There are also signs of increasing supply-chain integration by battery and EV manufacturers. Vehicle-makers such
as Volkswagen (Germany) and Ford (US) have announced plans to invest in mines and in battery precursor and
cathode material projects to secure nickel supplies. Various vehicle-makers have committed to building EV factories
in Indonesia, according to the Indonesian Investment Co-ordinating Board; however, tight environmental, social and
governance (ESG) standards in Western jurisdictions could limit future investments. Investment by battery
manufacturers such as South Korea's LG, the world's second-largest maker of EV batteries, will support increasing
demand for nickel during our forecast period, as Indonesia aims to produce 140 GWh of annual capacity by 2030.
Technical problems will continue to pose downside risks during our forecast period. The growing use of non-nickel-
containing chemistries such as sodium-ion and lithium iron phosphate batteries in entry-level models is a reminder
that battery chemistries will continue to evolve, as will the demand for nickel.
Proposed emission standards could accelerate US fleet electrification
The outlook for US nickel consumption this year and in our 2024-25 forecast period remains strong and could be
further bolstered by emissions standards announced by the Environmental Protection Agency (EPA). The proposal,
announced in April 2023, in effect requires that about two-thirds of all new vehicles sold in the US be electric by
2032, and the EPA could impose penalties on companies that fail to comply. EV-related investments by vehicle- and
battery-makers are already accelerating following the passing of the US Inflation Reduction Act (IRA) in August
2022. The act, which includes tax credits for green energy production and electricity storage (batteries), facilitates

PDF GENERATED BY PROQUEST.COM Page 75 of 106

major investments in clean energy over the next decade. It also includes US$7.5bn in funding to build a nationwide
network of EV charging stations to support proposed plans for zero-emission vehicles (including battery electric,
hybrid or fuel-cell EVs). These plans include a US$3.1bn investment to support domestic production of advanced
batteries and EV battery-recycling capabilities. Vehicle-makers in the region are embracing the electrification of the
automotive fleet, but it remains unclear whether this will lead to a meaningful increase in demand for nickel sulphate.
The US battery supply-chain blueprint published in June 2021 calls for a transition away from using cobalt and nickel
in lithium-ion batteries by the end of this decade.
Aside from the growth in EV-related investment, nickel demand from traditional sectors will remain satisfactory
during our forecast period. Spending under the US$1.2trn infrastructure investment bill passed in early November
2021 will support demand for stainless steel. Despite some modest adjustments by the Biden administration,
domestic steelmakers will continue to benefit from protectionist policies in the forecast period. Modest capacity
addition will also support increased nickel demand. However, near-term economic headwinds remain owing to still-
high inflation and aggressive monetary policy tightening by the Federal Reserve (the US central bank), and we
expect US GDP growth to slow to 1.8% in 2023 and just 0.9% in 2024. We expect only a modest recovery in
demand for US nickel in 2023-24 which will pick up in 2025, assuming a gradual easing of monetary policy and as
investment in EV-related battery capacity feeds through.
Economic activity in Europe will pick up gradually in 2024
Economic activity in Europe will be subdued in 2023 and will pick up gradually in 2024-25. Easing supply-side
conditions will drive disinflation in the second half of 2023 and into 2024. Although we believe that interest rates set
by the European Central Bank (ECB) have now peaked, we expect the ECB to start easing monetary policy
gradually only from the second half of 2024. China's decision to lift its zero-covid policy last December is easing
global supply-chain frictions, but external trade remains subdued. The likelihood of an energy crunch in the 2023-24
winter has fallen significantly, on the back of comfortable gas reserves and declining gas prices; neverthless, risks
remain, as an especially cold winter could also cause the gas market to tighten.
Investment in major infrastructure will continue to support strong demand for stainless steel, particularly as the EU
accelerates its RePowerEU initiative to improve energy security and greening the bloc's power source following
Russia's invasion of Ukraine. Steelmakers in the region will continue to benefit, as import safeguard measures will
continue to limit imports into the region until mid-2024. Nonetheless, inflationary pressures have a detrimental effect
on consumer and business spending, and we believe that energy-intensive industrial sectors such as steel will lose
global market share owing to energy supply uncertainties and elevated prices, particularly as the region advances its
long-term plan to become carbon neutral by 2050.
The EU's Critical Raw Materials Act will boost battery supply-chain development
In March 2023 the European Commission unveiled its Critical Raw Materials Act, the region's response to the IRA in
the US. Along with aiming to lessen its dependence on third countries for raw materials, which is deemed
indispensable for the green and digital transitions, the act sets targets for mining, processing and recycling the
critical raw materials that it consumes. In addition, the proposed act now lists battery-grade nickel as a "strategic"
material for the first time to support the development of EV battery capacity ahead of the ban on sales of new
internal combustion engine vehicles from 2035. Government incentives such as the Commission's European Battery
Innovation project will continue to support EV battery supply chains in the region.
Infrastructure investment counters China's weak construction sector
China's post-covid recovery in consumer spending has lost momentum owing to weaknesses in the labour market
and the absence of fiscal measures to support household income. We now expect growth to average 5.2% per year
in 2023-24, before slowing to 4.4% in 2025. Despite modest support, the property market continues to struggle. That
said, state-led investment on infrastructure and energy projects continues to support demand for stainless steel. As
a result, we expect Chinese demand for nickel to rise by 4.5% in 2023 and by an average of 3.2% per year in 2024-
25.
Despite the removal of government subsidies for EVs at the start of this year, increasing price competition by

PDF GENERATED BY PROQUEST.COM Page 76 of 106

automakers continues to support robust growth, as China remains on course to achieve the government's target to
have EVs account for 20% of all automobiles on China's roads by 2025. China's goal of becoming carbon neutral by
2060 will continue to support rapid progress in EV development, including battery technology and production. This
will raise demand for high-purity nickel and nickel chemicals sooner than we had expected, mitigating slow-growing
or even falling demand from the steel industry.

('000
tonnes
nickel
content
Refined nickel: consumption unless 2021 2022 2023
otherwis
e
indicated
)

2024 2025 China 1,651.3 1,746.4 1,825.0

1,883.4 1,943.6 EU 270.0 263.7 247.9

255.3 263.2 US 99.0 115.5 117.3

115.0 118.4 Japan 168.0 181.9 180.5

South
184.3 188.1 110.9 96.8 94.9
Korea

95.8 100.6 Taiwan 72.8 47.4 40.0

65.0 66.0 Others 590.1 556.2 603.5

World
724.2 905.3 2,962.2 3,007.9 3,109.0
total

%
3,322.9 3,585.3 21.1 1.5 3.4
change

Supply
We expect that global refined nickel production will continue to grow at a strong pace of 10.2% in 2023 and an
average of 6.7% a year in 2024-25 as producers respond to capacity additions in the stainless steel and lithium-ion
battery sectors. The Indonesian export ban on nickel ore introduced at the start of 2020 will raise local processing
capacity in that country, including conventional (mainly ferronickel) and unconventional projects such as nickel pig
iron (NPI), during our forecast period. Although some producers are experiencing a number of technical difficulties,
investment in high-pressure acid-leaching (HPAL) projects in Indonesia will boost production in 2023-25. Mining
output is set to stay strong in the Philippines as producers seek to boost exports to China to fill the void left by
Indonesia.
Investment in battery-grade nickel will continue to rise

PDF GENERATED BY PROQUEST.COM Page 77 of 106

Broader concerns about availability of battery-grade material have also led to a sharp rise in investment in the nickel
supply chain by battery and EV manufacturers, and we expect this to continue and to spur more acquisitions.
Tsingshan Holding Group has reportedly begun producing nickel plate in China, using nickel sulphate as a feed
material, which will improve availability of class 1 material. The threat of harsher official and self-imposed sanctions
by Western countries vis-à-vis the use of Russian material remains. Additionally, nickel prices have yet to reach
levels that will incentivise producers to boost expansion projects, despite the excitement surrounding the EV
revolution and the requirements from growth in battery-grade nickel production.
We expect global nickel-mine production to continue to grow strongly during our forecast period as stronger prices
encourage producers to maximise output and restart previously idled mines. However, risks remain, as updated
production guidance show that production by four of the world's largest nickel-mining companies (Norilsk Nickel of
Russia, Vale of Brazil, Glencore of Switzerland and Anglo American of the UK account for one-fifth of global
production) will flatten in 2023, compared with a previously forecast 10% rise.
The threat of a ban on Russian nickel will remain as long as the war continues
The UK's ban on imports of Russian-origin nickel announced at the May 2023 G7 summit was a reminder of the
possiblility of further sanctions against Russia, which accounts for 6% of global metal production. However, the UK
ban will have a minimal impact, as supply chains have largely adjusted to self-imposed sanctions on Russian
material by some banks and consumers.
LME approves Chinese nickel brands
Meanwhile, the LME has approved several Chinese nickel brands for delivery into its warehouse network as the
exchange seeks to streamline the approval process for new brands and improve liquidity. Additionally, Singapore-
based Abaxx Commodities Exchange is the first exchange to receive regulatory approval to launch a nickel sulphate
futures contract.
Resource nationalism is increasing across the mining sector
Developments in Indonesia continue to generate volatility in nickel prices as the country seeks to increase the value
of its commodities resources. The latest is centred on reports that the country is planning to limit future smelter
capacity to produce higher-grade material, powered by green energy. Although more aligned with the ESG supply-
chain standards of Western nations, such a decision could have significant implications for NPI and ferronickel
capacity expansions, and especially for the highest grade nickel matte and intermediate products. Nevertheless, we
believe that production at nickel matte, ferronickel and NPI smelting facilities in Indonesia will continue to rise in
2023-24, amid strong investment by Chinese companies following the export ban imposed on nickel ore at the start
of 2020; we do not expect the November 2022 ruling of the World Trade Organisation-that Indonesia's export ban
and domestic processing requirement on nickel ore violated its rules-to change Indonesia's export policy
significantly.
Indonesian authorities continue to make progress with their proposal to create an OPEC-style group for nickel
producers, with three major nickel-producing nations in discussion, according to a briefing in July 2023 by
Indonesia's investment minister, Bahlil Lahadalia. The proposal reflects the broader trend in resource nationalism
within the mining sector.
Firms and companies are accelerating investment in closed-loop recycling
Nickel supplies from end-of-life power battery recycling are likely to become an increasingly important supply source
as authorities push to mirror the closed-loop recycling chain for lead-acid batteries. Authorities in the US, the EU and
China have announced legislation covering areas such as requirements for repurposing batteries, recovering
materials, increasing traceability and recycling service networks. This is not without difficulty, as manufacturers want
to protect technical information and poor handling increases environmental pollution risks.

Nickel: production 2021 2022 2023 2024

PDF GENERATED BY PROQUEST.COM Page 78 of 106

 Mine
output
2025 Philippines 387.1 340.1 346.9
('000 nickel
contained)

370.0 366.3 Indonesia 1,042.8 1,605.4 1,958.6

New
1,994.0 2,185.4 186.3 200.0 218.0
Caledonia

236.0 238.4 Canada 116.2 93.6 112.4

169.0 170.7 Russia 190.0 218.7 225.3

230.0 226.8 Australia 150.9 154.9 170.4

228.0 241.7 Others 603.1 606.4 626.0

641.0 673.1 World total 2,676.3 3,219.1 3,657.5

3,868.0 4,102.3 % change 9.5 20.3 13.6

Refined
production
5.8 6.1 China 813.8 758.4
('000
tonnes)

864.5 899.1 908.1 Japan 180.7 165.1

163.5 165.1 170.1 Canada 119.0 90.6

91.5 96.1 100.9 Russia 121.1 149.3

147.8 158.0 160.0 EU 62.5 78.7

81.9 144.0 151.0 Australia 99.0 96.5

106.2 133.0 149.0 Norway 91.2 81.9

83.5 88.0 90.0 Others 1,297.5 1,528.1

1,711.5 1,796.0 1,974.0 World total 2,784.7 2,948.6

3,250.4 3,479.3 3,703.1 % change 10.1 5.9

PDF GENERATED BY PROQUEST.COM Page 79 of 106

Enlarge this image.
SteelStocks and prices
EIU estimates lower average steel prices in 2023 than in 2022, mainly because of weak demand over the year. We
expect a limited rebound in world crude steel consumption from the four-year low set in 2022. Prices will rise in 2024
and 2025 as more robust economic growth, particularly in the global industrial sector, boosts demand.
After China's government abruptly abandoned its zero-covid policy in December 2022, the market broadly
anticipated a strong economic recovery and a concurrent rebound in steel demand. Yet the government set only a
modest GDP growth target of 5% for 2023, and the economy actually slowed significantly in the second quarter,
largely owing to a downturn in the country's residential property market. As a result, the recovery in the steel-
intensive construction and manufacturing sectors has been lacklustre. We expect China's government to enact
targeted monetary and fiscal stimulus measures to support the economy in in the fourth quarter of 2023 and early
2024, given statements from senior policymakers. Accordingly, we expect moderately stronger economic growth and
steel consumption in late 2023 and 2024.

Steel: prices 2021 2022 2023 2024

2025 Pricesa

1 Qtr 686.0 796.0 641.0 590.0

645.0 2 Qtr 924.0 776.0 578.0 625.0

665.0 3 Qtr 933.0 598.0 560.0 615.0

640.0 4 Qtr 827.0 550.0 575.0 640.0

655.0 Year 842.5 680.0 589.0 618.0

PDF GENERATED BY PROQUEST.COM Page 80 of 106

 %
651.0 73.2 -19.3 -13.4 4.9
change

Outside China, economic growth and steel demand remain subdued. This is largely due to rising interest rates in
major economies to combat high inflation, which has caused a slowdown in steel-intensive construction and
manufacturing. OECD real GDP growth came in at 1.5% year-on-year in the second quarter of this year, down from
1.6% in the first. Inflation is still higher than central bank targets in the US and Europe, meaning that although
interest rate rises have peaked, monetary easing is unlikely in 2023. We expect this to act as a drag on economic
growth and associated steel demand over the rest of this year before an anticipated pivot in monetary policy
contributes to an upturn in the economic cycle and in steel demand in 2024, continuing into 2025.

('000 tonnes
Crude steel: supply and demand 2020 2021 2022
)

2023 2024 Production 1,881.2 1,958.5 1,880.3

Consumptio
1,900.1 1,935.7 1,895.2 1,956.2 1,879.3
n

1,897.7 1,938.2 Balance -14.0 2.3 1.0

Demand
We estimate that world crude steel consumption will rise by 1% to 1.9bn tonnes in 2023. The pace of demand
growth will be similar in China and ex-China as a whole. In ex-China, demand will be particularly strong in India and
the US, offsetting declines elsewhere, notably in Europe. We forecast that consumption growth will accelerate to
more than 2% in 2024-25, buoyed by monetary policy easing and stronger economic activity. This will bring global
steel consumption to a new record of almost 2bn tonnes in 2025.
China's steel demand will continue to shape the global market
China accounts for the largest share of global steel consumption (50% in 2022), so the country is the main
determinant of global steel market trends. In particular, China's construction sector accounts for about 55% of the
country's finished steel consumption, according to the China Iron and Steel Association (CISA).
Economic growth will disappoint in China over 2023. After the government abruptly abandoned its zero-covid policy
in December 2022, the market broadly expected a strong rebound in economic growth and steel demand. Although
growth accelerated in the first quarter, it slowed again in the second and has so far remained subdued in the second
half of the year. Total fixed asset investment increased by more than 5% year on year in the first quarter, but by July
the cumulative increase compared with the same period of last year had slowed towards 3%. Private fixed asset
investment declined over January-July, which was only the second ever negative reading, the first being during the
outbreak of the covid-19 pandemic in early 2020. In July the Rmb528bn of total social financing in July, a measure of
funds supplied by the financial system to the real economy, was near the lowest monthly level over the past decade,
within which new loans were at the lowest level since late 2009, reflecting a dearth of credit demand from
households and firms. Moreover, the purchasing managers' indices (PMIs) for July, which are forward-looking
surveys of business conditions, pointed to an ongoing contraction in manufacturing output and a slowdown in non-
manufacturing activities, including construction.
China's beleaguered real estate sector will be the main drag on economic growth and steel demand in 2023. Growth
in property prices and construction starts have turned negative, and financial conditions in the sector suggest that

PDF GENERATED BY PROQUEST.COM Page 81 of 106

any recovery will be slow. In particular, several large real estate firms, including Evergrande and Country Garden
Holdings, are now reliant on state support. The severity of the country's economic slowdown has encouraged some
monetary and fiscal stimulus since the start of 2023, and we expect this support to be enhanced over the remainder
of the year. We expect increased investment in green energy and transport infrastructure in particular, as well as
targeted support for consumer spending. Yet we also expect stimulus to be smaller than in recent downturns over
the past decade given the balance-sheet risks facing China's real estate sector, and that stimulus will take time to
rebuild confidence in the residential property market. At a mid-year meeting of CISA China's leading steelmakers
cautioned that the market outlook for the second half of 2023 remained challenging.
China's real estate sector will drag on steel demand growth in 2023 and 2024
Accordingly, we forecast that China's annual crude steel consumption will grow by just 1% in 2023 and accelerate
modestly over the subsequent two years. Growth of 1% in 2024 and 1.2% in 2025 should lift China's consumption to
983m tonnes in 2025. Although this would be about 3% higher than the four-year low of 2022, it would still be about
6% lower than the all-time high of 1.05bn tonnes in 2020.
The recovery in Europe's steel demand will begin in 2024
Taken as a single entity, the EU is the world's second-largest market for steel, albeit a distant second to China,
accounting for about 8% of global consumption in 2022. The European Steel Association (Eurofer) estimates that
construction consumes 35% of the region's steel, automotive output 20% and engineering and metalware about
15%. The fallout from Russia's invasion of Ukraine, especially the surge in energy prices, caused Europe's economy
to slow sharply in the second half of last year, leading to an estimated contraction in EU steel consumption of about
9% over the full year. ArcelorMittal, the world's second-largest steelmaker, which sells more than 50% of its
European output, reported in its results for the first six months of 2023 that regional demand had continued to
decline, mainly owing to the contraction of the construction sector. We forecast that EU consumption will fall further
in 2023, by about 3%, before rebounding by almost 8% in 2024-25 owing to lower regional energy prices and
stronger economic growth.
US steel consumption will rise by an average of 2% in 2023-24
The US is the world's third-largest national steel market after China and India. It accounts for about 70% of North
American steel consumption, of which about 45% is used in construction and 30% in the automotive industry,
according to the American Iron and Steel Institute. The US economy has outperformed expectations in 2023,
including non-residential construction activity, buoyed by provisions supporting steel-intensive infrastructure and
industrial investment in cornerstone legislation enacted by the administration of the president, Joe Biden, including
the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. Accordingly, we forecast that US steel
consumption will increase by about 1.5% in 2023, accelerating further to an average of 2.5% per year in 2024-25.

(m tonnes
unless
Crude steel equivalent consumption 2021 2022 2023
otherwise
indicated)

2024 2025 China 994.6 951.8 961.3

Other
970.9 982.6 364.4 363.7 375.7
Asia

391.9 412.7 EU 167.7 152.9 147.9

PDF GENERATED BY PROQUEST.COM Page 82 of 106

 North
156.2 159.0 152.5 147.8 150.2
Americaa

Middle
153.7 158.0 89.1 78.2 75.5
East

Latin
72.3 72.4 62.4 63.8 65.8
America

68.6 70.5 Africa 41.9 43.7 43.6

Common
wealth of
44.9 46.3 Independ 56.5 50.9 51.6
ent States
(CIS)

Other
52.7 53.0 19.0 18.7 18.1
Europe

Australia
18.9 19.2 &New 8.1 7.8 8.0
Zealand

World
8.1 8.4 1,956.2 1,879.3 1,897.7
total

%
1,938.2 1,982.1 3.2 -3.9 1.0
change

Supply
World crude steel production fell by 4% in 2022, from a record-high 1.96bn tonnes in 2021. The Commonwealth of
Independent States (CIS) and the EU accounted for almost half of this drop in tonnage owing to Russia's invasion of
Ukraine and the resulting economic fallout. However, output fell in in all regions. Ex-China crude steel production fell
by 6% to 866m tonnes, or 46% of the world's total. China's steel mills also reduced output in response to
government policy and a domestic economic slowdown, but limited the decline to 2% by increasing exports.
We expect world crude steel production to rise by about 1% this year, broadly in line with consumption, led by China,
where output was up by about 2.5% year on year in January-July and net steel exports reached a seven-year high.
Ex-China, we expect crude steel production to increase by about 0.5% to 871m tonnes, with increases in India and
some other Asia countries partly offset by lower output in Europe and the CIS. We forecast further increases in world
crude steel production of about 2% per year in 2024-25 to meet rising demand from an upturn in the economic cycle,
pushing total output to a new high of almost 2bn tonnes.
The dynamics driving steel output in China are changing
China is by far the world's largest steel producer. In 2020 its record output of 1.06bn tonnes was 40% higher than
ten years before, but production growth is now entering a far slower phase.
In 2021 the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information
Technology launched a review to ensure that "illegal" (meaning unlicensed or substandard) steelmaking capacity

PDF GENERATED BY PROQUEST.COM Page 83 of 106

had been shut and old-for-new "capacity swaps" properly implemented. In 2022 the NDRC added that private steel
companies should not add capacity during the current five-year plan (2021-25), and in February 2023 it reiterated
that it would work closely with other government departments to consolidate reductions in steelmaking capacity and
output over 2023-24. In July 2023 it was reported that several of the major steelmakers in the country had been
instructed to ensure that output did not exceed 2022 levels in 2023. Chinese government policies to control
steelmaking capacity and output appear to be prompted, in part at least, by an intention to reduce the energy
intensity of economic activity and curb carbon emissions (environmental standards matter more to an increasingly
affluent population). The real estate crisis of 2022-23 has also highlighted that China's construction sector will grow
more slowly in the coming years than it did over the previous decade, which will slow growth in the country's steel
requirements significantly. Without concurrent curbs on steel production growth in China, this would result in the
creation of vast domestic overcapacity and exports. As a result, we expect the government to continue with such
policies and forecast that the country's crude steel production will remain flat in 2024-25.
China's net steel exports are changing, with important implications
With China's crude steel production facing policy constraints and likely to rise more slowly than domestic
consumption, we expect China's net steel exports to fall over time, notwithstanding an increase in 2023. The
government has implemented policies to this end; in 2021, the Ministry of Finance repealed value-added tax (VAT)
rebates of 13% on exports of many steel products. As China's net steel exports (57m tonnes in 2022) are more than
Germany's total output, any significant swing in China's future steel trade balance will significantly affect global
supply.
In the longer term, China's policy of cutting emissions from steelmaking could be assisted by switching some output
from blast furnace/basic oxygen furnaces (BF/BOFs), which are supplied by iron ore, to electric arc furnaces (EAFs),
which are supplied by steel scrap or direct reduced iron (DRI). The China Association of Metal Scrap has set a
target to raise the scrap ratio in the country's steelmaking from about 20% in 2021 to 30% by 2025. We expect EAF-
based steelmaking to increase market share accordingly, with important implications for demand, balance and
pricing in world markets for steelmaking raw materials.
European steel output will begin to recover in 2024
In Europe, after a 10% drop in crude steel output in 2022 due to the economic impact of Russia's invasion of
Ukraine, we expect a slower but still-sharp decline of 8% to 127m tonnes in 2023. The previous surge in energy
prices has receded, and producers are restarting some idled capacity. ArcelorMittal, for example, resumed
operations at one of the blast furnaces at its Asturias steelworks in Spain in February 2023, albeit at a rate below full
capacity, and the EAF at its Sestao plant (also in Spain) in May. These operations had been suspended in
September 2022. We expect further restarts in 2023, supported by an eventual upturn in consumption and prices.
We forecast that crude steel production will grow by 6% in 2024 and 2% in 2025 to reach 136m tonnes in 2025.
Although this would be a steady recovery, it would still leave annual output in 2025 more than 10% below its most
recent peak in 2021.

(m tonnes
unless
Crude steel production 2020 2021 2022
otherwise
indicated)

2023 2024 China 1,064.7 1,032.8 1,013.9

1,029.1 1,029.1 Other Asia 327.6 375.4 365.8

383.9 404.6 EU 132.2 152.8 138.1

PDF GENERATED BY PROQUEST.COM Page 84 of 106

 North
126.8 133.9 100.5 117.2 110.8
Americaa

Commonw
ealth of
109.9 113.7 Independe 100.2 86.4 84.0
nt States
(CIS)

Latin
86.0 89.7 39.0 107.1 85.8
America

Other
84.3 82.5 11.0 46.2 43.8
Europe

Middle
41.8 42.7 82.0 22.3 21.2
East

22.2 22.9 Africa 18.0 11.9 10.7

Australia
9.7 10.1 &New 6.0 6.4 6.2
Zealand

6.4 6.5 World total 1,881.2 1,958.5 1,880.3

1,900.1 1,935.7 % change 0.4 4.1 -4.0

India will be the primary driver of new steelmaking capacity

India is now the world's second-largest steel-producing country, having overtaken Japan in 2018, but it is still far
behind China. In 2022 output increased by about 6%, to a record 125m tonnes, and the country appears likely to be
the world leader in adding new capacity (even though some existing plants are currently underused) and raising
steel production in the coming years. JSW Steel, which acquired Bhushan Power &Steel in March 2021 (creating
India's largest steelmaker and continuing to consolidate the country's steel industry), is in the process of
commissioning 5m tonnes/year (t/y) of new capacity at its US$2bn Dolvi expansion project in Maharashtra.
Meanwhile, an Indian joint-venture between ArcelorMittal and Japan's Nippon Steel has secured approval from the
Odisha state government to build a US$4.7bn, 7m-t/y greenfield steel plant in the state, in addition to funding from a
US$5bn loan agreement with the Japan Bank for International Co-operation, which the Japanese government backs,
and a consortium of Japanese lenders. However, this plant will not be completed for several years.
Steel production in the US will continue to rise in 2023-24
The US, where the steel industry is also undergoing corporate restructuring with Cleveland Cliffs' US$7.5bn
takeover bid for US Steel in August the latest development, is also adding new steelmaking capacity. Both Nucor,
the country's largest steel producer, and Steel Dynamics have recently commissioned new scrap-fed EAF steel
mills. Meanwhile, ArcelorMittal, is building a 1.5m-t/y EAF-based steel facility in a joint-venture with Nippon Steel at
the AM/NS Calvert plant in Calvert City, Kentucky, which will come on stream in 2024 (AM/NS Calvert was originally
built for US$4bn by Germany's ThyssenKrupp and was acquired by the partners in 2014). Elsewhere, Nucor is
investing US$2.7bn in a greenfield 3m-t/y EAF-based steel mill in West Virginia, and US Steel is spending US$3bn

PDF GENERATED BY PROQUEST.COM Page 85 of 106

to build another 3m-t/y EAF-based steel mill in Arkansas, both of which are scheduled to start up in the second half
of 2024. These expansion projects will partially be offset by closures of some existing BF/BOF-based steelmaking
capacity. US Steel is also restarting BF capacity at its Pennsylvania plant in response to improved market
conditions. We expect US crude steel production to fall by 1% in 2023, before rising by 4% in 2024 and a further 4%
in 2025.
US-based steelmaking expansion has been encouraged, at least in part, by government policy. This has included
the imposition of Section 232 "safeguarding" tariffs on all steel imports in March 2018, at a rate of 25% (some
exemptions have since been granted), as well as the Biden administration's Infrastructure Investment and Jobs Act
and Inflation Reduction Act.
Steel production will remain below pre-pandemic levels in many regions
However, not all leading steelmaking countries and regions appear likely to return to past production levels. Japan's
crude steel production fell by 7% to less than 90m tonnes in 2022, and we expect it to fall further in 2023-25. In
March 2021 Nippon Steel announced its current five-year plan, which will cut its domestic steelmaking capacity by
20% (or 10m tonnes) by 2024. This included closing another BF, this time at its East Nippon Works facility, with the
company having shut three BFs at its Kansai and Setouchi Works in 2020. This will leave the firm with ten operating
BFs-down from 14 at the start of the decade. Nippon Steel has explained its action as a necessary response to a
structural decline in Japan's steel demand, pressure to curb carbon emissions at home and greater competition in
export markets (Japanese steelmakers rely more on export sales than other Asian producers). Nonetheless, Nippon
Steel is still expanding overseas, having acquired steelmaking capacity in Thailand in 2022 and planning the
construction of a greenfield integrated steelworks facility in India in a joint venture with ArcelorMittal. In August 2022
JFE Steel (Japan) announced plans to close one of three BFs at its Okayama works in southern Japan, to be
replaced by a new EAF, and reduce its carbon footprint.

Enlarge this image.

TinStocks and prices
EIU estimates that average tin prices will fall by about 18% to a three-year low averaging US$25,980/tonne (cash
basis) in 2023 as slower global economic growth dampens demand. Tin prices began the year rallying on hopes that
China's economy would recover rapidly after the country abruptly abandoned its zero-covid policy in December, but
those expectations have not been met. As China's recovery disappointed, prices for tin (and other metals) trended
downwards from February into the second quarter of the year. This was compounded by selling pressure prompted
by worries about the impact of rising interest rates in the US and the EU.
Tin prices jumped again in April after an armed ethnic-minority group, the self-styled United Wa State Army (USWA),

PDF GENERATED BY PROQUEST.COM Page 86 of 106

threatened to suspend from August all tin mining operations in the area of Myanmar that it controls bordering
China's Yunnan province, which is the source of most of Myanmar's mine output. Myanmar ranks third in the world
in tin mining and is a significant supplier to tin smelters in China. Prices continued to rise into mid-year, but may now
have peaked. Any disruptions to Myanmar's tin output will probably be limited; tin mining is reported to be a
significant source of funds for the UWSA, and any protracted outage would appear to run counter to its interests.
Demand will be subdued in the short term
We estimate that the tin metal market balance will swing from a moderate deficit in 2022 to a small surplus this year
as consumption growth slows. Evidence of easing in the tin metal market balance can be gleaned from a range of
market observations. Benchmark London Metal Exchange (LME) cash-to-three-month price spreads traded on
average in contango (where shorter-dated contracts price below longer-dated contracts), which suggests no urgent
demand for metal, in the first quarter of this year-only the third such occurrence over the past eight years. After
flipping to backwardation (where shorter-dated contracts price above longer-dated contracts) from April-July,
spreads returned to contango in August. Meanwhile, Shanghai Futures Exchange (SHFE) first-to-fourth month
spreads have traded in contango for much of this year, following protracted backwardations over 2020-22.

Refined tin: stocks and prices 2021 2022 2023 2024

2025 Stocksa

1 Qtr 35.8 30.3 25.7 26.6

25.2 2 Qtr 31.1 33.1 26.1 26.4

24.5 3 Qtr 28.2 32.1 26.5 26.2

23.8 4 Qtr 29.1 25.3 26.8 25.9

%
22.9 -13.4 -13.1 5.9 -3.4
change

-11.6 Pricesb

25,099. 43,241. 26,339. 25,500.

1 Qtr
0 6 0 0

31,025. 36,773. 26,181. 27,500.

27,750.0 2 Qtr
7 3 4 0

34,643. 23,722. 26,800. 27,000.

28,500.0 3 Qtr
8 4 0 0

38,768. 21,604. 24,598. 28,000.

27,500.0 4 Qtr
0 3 0 0

32,384. 31,800. 25,979. 27,000.

28,250.0 Year
1 0 6 0

PDF GENERATED BY PROQUEST.COM Page 87 of 106

 %
28,000.0 89.1 -1.8 -18.3 3.9
change

Meanwhile, physical tin premiums (the amount that consumers pay in addition to exchange prices to take delivery of
metal) have been falling over recent months in most regional markets. In August US and European premiums were
at around two-and-a-half-year lows of about 70 US cents/lb (US$1,500/tonne) delivered and US$900/tonne in-
warehouse respectively, according to Fastmarkets, a price reporting agency, although these levels were still above
long-run averages.
LME and SHFE tin stocks are the most visible and widely tracked tin industry stock-holdings, and changes in their
levels can give a guide to the metal market balance. Over 2022 the tin metal market deficit narrowed and more
stocks were delivered on to both exchanges, and this has continued into 2023 with the market moving into surplus.
LME tin stocks had topped 5,000 tonnes in September 2022. After drawing back down to about 1,500 tonnes by
April, they built back up to above 6,000 tonnes by late August, encouraged by the temporary backwardation in
nearby spreads. This also demonstrated that the market had been carrying more tin stocks than reported. SHFE
stocks, which had surpassed 4,000 tonnes by mid-2022, after a brief dip, continued rising to reach more than 9,000
tonnes by April and have since broadly maintained this level, which was last seen in October 2017. With the tin
metal market moving into a small surplus this year, we expect stocks to end 2023 higher than last year, before
declining again as the market moves into deficit once more in 2024-25, supporting higher prices.

('000
tonnes
unless
Refined tin: supply and demand otherwis 2021 2022 2023
e
indicated
)

Global
refined
2024 2025 351.5 367.0 374.0
productio
n

Global
refined
378.0 386.0 365.3 371.0 372.5
consump
tion

379.0 389.0 Balance -13.8 -4.0 1.5

-1.0 -3.0 Stocksa 29.1 25.3 26.8

Weeks'
25.9 22.9 consump 4.1 3.5 3.7
tion

Demand

PDF GENERATED BY PROQUEST.COM Page 88 of 106

We estimate that world tin consumption growth slowed sharply to about 1.6% in 2022, although this was still above
its average for the past ten years of just 1% annually. This can be attributed to the impacts (direct and indirect) of
Russia's invasion of Ukraine and the Chinese government's zero-covid policy, as well as ongoing efforts to engineer
a deleveraging of the country's residential property market. These impacts included a surge in energy prices
(especially in Europe) and sharply increased inflation ex-China, which prompted central banks to raise interest rates,
dampening consumer confidence and squeezing discretionary consumer spending.
Meanwhile, in China, covid-19 control lockdowns and a residential property market slump contributed substantially to
the slowest growth in the country's economy in recent decades. China's government has since abandoned its zero-
covid policy, eased financing constraints on property construction companies and set an official GDP growth target
of 5% for 2023 (we estimate growth of 5.2%, compared with 3% in 2022). Ex-China, headline inflation is slowing and
energy prices have dropped sharply from their peaks. However, the lagged effect of tighter monetary policy to tame
high inflation, coupled with the fallout from banking upheaval in early 2023, means that many economies will
probably grow more slowly this year than last, more than offsetting the anticipated upturn in China. Accordingly, we
anticipate world tin consumption growth slowing to less than 0.5% in 2023, before recovering to 1.7% in 2024 and
2.6% in 2025, bringing demand to a new record of almost 390,000 tonnes.
Tin's main market is solder for use in electronics manufacturing
According to the International Tin Association (ITA), almost half of global tin output goes into making solder alloys for
the electronics industry. Global semiconductor shipments (a proxy for output by the electronics manufacturing
industry, giving a guide to tin in solder use) increased by 17% year on year by value in the first half of 2022, but
started to fall in July, and in January-June 2023 shipments were 19% lower than in 2022. This reflects the recent
slowdown in tin consumption in its main end-use market, which is also reflected in recent results from leading
electronics manufacturers. South Korea's Samsung, one of the world's largest, reported a 22% year-on-year decline
in revenue in the second quarter of 2023, and previous guidance on the outlook for this year had pointed to a likely
drop in demand for display panels and smartphones, among other downside risks. Similarly, Element Solutions, one
of the world's largest producers of solder alloys, reported market weakness in its second-quarter results and guided
for soft conditions over the remainder of the year, but with an upturn expected to begin in the second half.
After soldermaking, the second-largest use for tin is in the production of stannous chemicals, mainly stabilisers used
in making polyvinyl chloride, accounting for about 17% of the world tin market. Production of tinplate (steel sheet
electrolytically coated with a thin layer of tin for use in packaging) accounts for about 12% of total tin use. World
output of tin mill products, including tinplate, ticked up by about 2% to a new record of 18m tonnes in 2022, led by
China.
Growth in the electronics markets will add to demand
There are several structural upsides in the longer-term outlook for tin demand. The underlying trend in sales of
consumer electronics remains positive, with a move towards ownership of multiple devices in high-income markets
and rising usage in emerging markets. Smartphones and tablets, for example, typically contain about 1.5% of tin by
total device weight. Concurrently, the electronics content of cars is increasing, driven by demands on manufacturers
to meet higher environmental and safety standards, and provide greater consumer comfort and automation.
Moreover, electric vehicles (EVs), which are expected to replace internal combustion engine (ICE) cars at an
accelerating rate in the coming years, typically contain two to three times more tin, mainly in soldering of electronic
components. Rising solar panel production for use in renewable electricity generation and reduction of carbon
emissions is also likely to add materially to tin demand in the coming years.
However, use of solder alloys in electronics manufacturing also faces challenges. One is the trend towards
miniaturisation of consumer electronics due to preferences for lighter and sometimes smaller devices that use less
solder for assembly. However, this trend is ultimately limited, and we expect its drag on tin demand to fade in the
future. Another challenge is solder-free electronics assembly methods.
The chemicals sector should increase demand for tin, but not tinplate
The chemicals sector will also contribute to increased tin demand in the coming years, although environmental

PDF GENERATED BY PROQUEST.COM Page 89 of 106

concerns about plastics may curb long-term demand for PVC. However, tinplate output is unlikely to add much in
tonnage terms at a global level, as it faces stiff competition from other packaging products, including aluminium,
glass and plastics. This is amplified by a shift in consumer preferences towards healthier foods and beverages that
are typically packaged in non-metal materials (although again use of plastics may be tempered by environmental
pressures in the future). Moreover, the long-running trend of down-gauging tinplate (rolling thinner sheets to reduce
weight and material usage, such that a given tonnage spans a larger surface area, which determines the amount of
tin needed for the coating) is ultimately limited.
The US-China trade war could hurt Chinese demand for tin
China, the world's largest tin consumer, accounts for almost 50% of total demand on a first-use basis. China's
government has now abandoned its zero-covid policy and eased financing for property construction companies,
following which we expect stronger economic growth in the second half of this year. We estimate that China's tin
consumption will increase by 2.5% in 2023, about double its average rate over the past ten years. Tin consumption
will rise by almost 2% in 2024 and 2.6% in 2025.
One longer-term risk to China's tin demand is that some electronics and other manufacturing may relocate to other
countries as a result of rising trade tensions (especially with the US), reviews of global industrial supply chains
following the covid-19 pandemic and rising wages for local workers. However, such moves should not affect global
tin demand (except indirectly by way of any negative effect of more restricted trade on global economic growth).
European demand will remain firm
Europe remains the world's second-largest market for tin after China, accounting for about 13% of total consumption
in 2022, despite some structural decline in demand over the past two decades, due in part to migration of electronics
manufacturing to Asia. We expect a decline in tin consumption of about 0.4% in 2023. Consumption will then grow
by about 1.2% in 2024, and then by about 2.6% in 2025.

('000
tonne
s
unles
Refined tin: consumption s 2021 2022 2023
other
wise
indica
ted)

2024 2025 China 179.0 181.5 186.0

Europ
189.5 194.4 49.3 50.3 50.1
e

50.7 52.0 US 34.6 35.1 34.9

35.0 35.9 Japan 28.2 28.0 28.2

South
28.5 29.2 14.5 14.5 14.3
Korea

14.7 15.1 Brazil 2.5 2.5 2.5

PDF GENERATED BY PROQUEST.COM Page 90 of 106

 Taiwa
2.5 2.5 8.8 8.9 8.8
n

Russi
8.9 9.1 2.0 2.0 2.0
a

Other
2.0 2.0 46.6 48.2 45.7
s

World
47.2 48.8 365.3 371.0 372.5
total

%
379.0 389.0 chang 10.2 1.6 0.4
e

Supply
We expect lower consumption growth and average prices to lead to slower growth in refined tin output, of about 2%
in 2023, less than half its rate of last year. Although we forecast that consumption and prices will recover with the
economic cycle in 2024-25, we expect refined tin output to lag to some extent owing to limitations in mine output,
leading to (small) deficits in the tin market.
China is ramping up its domestic mining operations
In China, the world's largest refined tin-producing country, mine output was almost flat in 2022, but we estimate that
smelters were still able to raise refined metal output by more than 3% to about 178,000 tonnes on increased imports
of tin-in-concentrates, mainly from Myanmar, despite temporarily reduced output by several plants around the middle
of the year in response to a sharp drop in prices. In the absence of any major new projects known to be going
ahead, we expect that tin mine output in China will dip marginally in 2023-25, in line with its long-term underlying
trend. As a result, any sustained rise in refined metal production would require more imports of tin-in-concentrates,
although there may be some stocks available to draw down to support higher metal output in 2023. With no basis on
which to forecast an increase in imports the following year, we expect metal output to then dip in 2024, before
recovering in 2025.
Myanmar's tin mine output is likely to have peaked
Incentivised by high tin prices in the first half of 2022, which made the mining and processing of lower-grade ores
viable, we estimate that Myanmar's tin mine output increased by about 40% to a four-year high of 46,000 tonnes in
2022, feeding into higher refined metal production in China. However, with tin prices now much lower, we expect
Myanmar's tin mine output to dip again in 2023-24 as recovery and processing of lower-grade ores become less
viable, before rising once more on higher prices in 2025. One major risk to monitor is a warning from the UWSA that
it will suspend tin mining from August for an audit of remaining ore resources to be carried out. However, we
consider a protracted drop in output unlikely, as tin mining is a significant source of funds for the group.

Tin: production 2021 2022 2023 2024

PDF GENERATED BY PROQUEST.COM Page 91 of 106

 Mine
output
('000
2025 tonnes China 79.7 79.5 79.0
tin
containe
d)

Indonesi
78.5 78.0 78.1 82.0 81.5
a

80.5 80.0 Myanmar 33.0 46.0 44.5

43.0 48.0 Peru 27.0 27.7 27.7

27.7 28.0 Bolivia 19.6 21.8 23.7

23.7 24.0 Brazil 12.6 12.6 12.6

12.6 12.5 Others 47.0 50.9 51.5

World
57.5 59.5 297.0 320.5 320.5
total

%
323.5 330.0 4.0 7.9 0.0
change

Refined
productio
0.9 2.0 China 172.0 177.5
n ('000
tonnes)

Indonesi
183.5 182.5 184.0 77.4 81.0
a

80.5 80.0 80.0 Malaysia 16.6 19.4

South
19.2 22.4 25.0 54.2 57.0
Americaa

58.8 58.8 60.0 Others 31.3 32.1

World
32.0 34.3 37.0 351.5 367.0
total

PDF GENERATED BY PROQUEST.COM Page 92 of 106

 %
374.0 378.0 386.0 4.9 4.4
change

Regulations and resource depletion are undermining Indonesia's tin sector

Indonesia is the world's second-largest tin miner and producer of refined tin. As domestic demand is limited, most of
the country's metal output is exported, and Indonesia is the leading supplier to the international metal market.
(Exports of tin ores and concentrates were banned in 2002, although some smuggling is said to continue; Indonesia
ranked only 68th out of 84 countries in our Global Illicit Trade Index in 2018.)
In 2022 state-controlled PT Timah, which has long been the country's leading tin producer, reported a fall in refined
metal output of 25% to just 19,825 tonnes, owing, in part at least, to reduced feed input from its mining operations.
However, this was more than made up for by private producers, incentivised by high prices.
In the longer term, Indonesia's tin mining and smelting industry faces challenges from resource depletion, and the
declining trend in output from the mid-2000s to the mid-2010s may resume in the coming years, at least in the
absence of new investment; this is reflected in our estimate for 2023 and forecasts for 2024-25. As higher-grade,
more accessible onshore and near-shore resources are depleted, miners may have to move further offshore. This
will increase operating costs, not only because of the challenges of operating in deeper waters, but also because
further offshore resources typically lie below thicker overburden material, and ores found there are often more
difficult to process.
Seven mines are expected to expand production in 2023-25
We estimate that new tin mines and expansions of existing operations added about 10,000 tonnes (tin contained) to
global output in 2021, and a further 7,000 tonnes (equal to about 6% of total output) in 2022. We have identified
seven tin mines that are planning to expand production in 2023-25.
From 2024 Canada-based Alphamin plans to start mining the Mpama South part of the orebody at its Bisie mine in
the Democratic Republic of Congo, producing an additional 7,000 tonnes/year of tin-in-concentrate for an investment
of about US$116m. Performance at Bisie will continue to have an important bearing on the world tin market balance
in 2023-25. In Bolivia, state-controlled Comibol is reportedly progressing expansion projects at the Colquiri and
Huanuni mines. The other projects are small in scale, and in the longer term major new investment will be needed in
tin mine supply to meet anticipated demand.

Enlarge this image.

ZincStocks and prices
The London Metal Exchange (LME) zinc cash price stabilised in June, after falling to a two-year low of

PDF GENERATED BY PROQUEST.COM Page 93 of 106

US$2,200/tonne on May 25th. Despite signs of cost pressures on zinc miners stemming from higher energy prices,
tightening monetary policy and the ongoing malaise in the Chinese property market continue to put downward
pressure on zinc prices in the short term. EIU maintains that downstream supply chains in zinc-intensive sectors are
normalising; favourable margins and raw material supplies are incentivising Chinese smelters to run at high
utilisation rates, and previous restraint among European smelters is also fading. We therefore estimate that the LME
cash price will average US$2,552/tonne in 2023, a fall of about 27% from 2022. Beyond that, we expect improving
economic drivers to negate the impact of rising smelter production, which will lead the LME cash price to average
US$2,433/tonne in 2024 and US$2,425/tonne in 2025.

Slab zinc: stocks and prices 2021 2022 2023 2024

Stock
2025
sa

1 Qtr 1,128 887 747 942

1,281 2 Qtr 1,033 809 739 1,019

1,388 3 Qtr 859 665 802 1,096

1,495 4 Qtr 809 630 865 1,174

%
1,602 chang -18.2 -22.1 37.2 35.8
e

Price
36.5
sb

1 Qtr 2,750 3,753 3,123 2,240

2,520 2 Qtr 2,916 3,914 2,525 2,390

2,500 3 Qtr 2,991 3,271 2,360 2,520

2,410 4 Qtr 3,364 3,000 2,200 2,580

2,270 Year 3,005 3,484 2,552 2,433

%
2,425 chang 32.8 15.9 -26.8 -4.7
e

Spot treatment charges (TCs), the fees that smelters earn for converting mined concentrates into metal, remained in
flux, at US$140-170/tonne (cif) in late-August 2023, continuing a downward trend from US$270-290/tonne in mid-
December 2022. In early April 2023 annual benchmark treatment charges for the year were agreed between
Canada-based Teck Resources and a smelter, Korea Zinc, at US$274/tonne, compared with US$230/tonne in 2022.

PDF GENERATED BY PROQUEST.COM Page 94 of 106

Refined zinc production is set to outpace demand in 2024-25
Refined zinc fundamentals are set to enter a period of oversupply in 2024-25, from an estimated deficit in 2022.
However, this will depend on whether increasing cost pressure on zinc miners will result in further capacity closures,
limiting the supply of zinc concentrates to smelters.
Zinc stocks at the LME totalled 149,350 tonnes in late August, up from 15,600 tonnes on February 6th (the lowest
since 1988), following modest inflows into warehouses in Asia. Availability could tighten once again if authorities ban
all deliveries of Russian material, which they have resisted so far. Zinc stocks on the Shanghai Futures Exchange
(SHFE) totalled 43,054 tonnes on August 25th, easing from a peak of 123,676 tonnes on March 10th.

('000
tonnes
unless
Slab zinc: supply and demand otherwis 2021 2022 2023
e
indicated
)

Producti
2024 2025 13,873.2 13,341.5 13,945.4
on

Consum
14,269.3 14,726.2 14,061.9 13,591.1 13,694.3
ption

13,960.2 14,298.0 Balance -8.7 -249.6 251.0

309.1 428.3 Stocks 1,308.8 1,059.2 1,310.3

Weeks'
1,619.3 2,047.6 consum 4.8 4.1 5.0
ptiona

Demand
We expect that unprecedented levels of government spending on infrastructure, particularly in support of green and
renewable-energy projects, will continue to support global zinc consumption via galvanised steel. The global
economy has proven resilient so far this year, and we believe that there are a few indications of systemic strain in
debt markets that could pull the global economy into recession. However, the lagged impact of the rise in interest
rates will constrain activity in the remainder of 2023 and into 2024. In China, the strong initial rebound in consumer
activity after the end of its zero-covid policy has now fizzled, although state-led infrastructure investments and
modest support to property developers will keep zinc consumption respectable. The development of zinc-containing
energy storage systems, while still in its infancy, could support rising demand, although this is a long-term trend as
battery chemistries continue to evolve. Broader risks remain, however, notably ongoing trade tensions between the
US, the EU and China, which will persist throughout our forecast period. We forecast that global zinc consumption
will rise by an average of 1.4% in 2023-24, before accelerating to an estimated 2.4% in 2025 as a gradual reduction
in interest rates supports economic activity.

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China's economic momentum is dissipating after an initial rebound
We expect zinc consumption in China to continue to recover in 2024-25. Although China's economy rebounded
strongly initially, after it was shuttered for much of 2022 under the zero-covid policy, momentum is now dissipating;
we are estimating annual GDP growth of 5.2% in 2023, revised down from 6.1% at the start of this year. Despite
this, state-led investment in infrastructure and in energy projects has boosted demand for zinc from galvanised steel.
Recent policy measures to support the completion of previously started property developments are also feeding
through, and we believe that the main policy goal for this year is to avoid a hard landing in the property sector and
any related systematic risks. Although rebounding activity in the sector could boost demand for zinc from galvanised
steel, given that the sector accounts for about a third of the country's total steel demand, we estimate only a
marginal improvement in the sector this year. More broadly, investment in the property market remains lacklustre
and poses headwinds for zinc consumption towards the end of our forecast period.
Broader factors continue to pose downside risks over our forecast period. Despite fierce competition between the
US and China, the two countries will seek to prevent this from escalating into a conflict. However, with fundamental
differences regarding issues ranging from trade and economic policies to Taiwan's status and the invasion of
Ukraine, the risk of conflict remains high. Supply-side control measures to govern energy consumption and
environmental controls may restrict China's galvanised steel production as the authorities seek to reach a peak in
carbon emissions before 2030. As a result, we now estimate that Chinese consumption will rise by about 4% in
2023.
Europe's growth will pick up in 2024
Most European economies managed to avoid a recession in the first half of 2023, which was a better than expected
outturn. Despite this, tepid growth is expected in the second half of the year. Higher interest rates will exert a
stronger drag on consumption, and investment and external demand will remain subdued. We forecast GDP growth
of 0.8% for the EU as a whole in 2023, which is weaker than in 2022 but a reasonable outturn given the economic
headwinds. As a result, we believe that the European Central Bank (ECB) has halted its tightening cycle, and that it
will start easing monetary policy gradually from the second half of 2024. This is based on the assumption that annual
inflation-especially the core measure-will slow more significantly in 2024. However, risks remain, particularly the
threat of sticky core inflation, which would force the ECB to continue to tighten monetary policy in the remainder of
2023.
The likelihood of an energy crunch in the 2023-24 winter has fallen significantly, on the back of comfortable gas
reserves and declining gas prices. Despite this, investment in major infrastructure will continue to support strong
demand for galvanised steel, particularly as the EU accelerates its RePowerEU initiative to improve energy security
and green the bloc's power source following Russia's invasion of Ukraine. Steelmakers in the region will continue to
benefit, as import safeguard measures will continue to limit imports into the region until mid-2024. Nonetheless, we
believe that energy-intensive industrial sectors such as steel will lose global market share as a result of energy
supply uncertainties and elevated prices, particularly as the region advances towards its ambition of becoming
carbon-neutral by 2050. Inflationary pressures and tight monetary policy pose broader challenges for consumer and
business spending in our 2024-25 forecast period. EU passenger-vehicle sales have grown by 17.9% in the first half
of 2023, after they contracted for a third consecutive year in 2022. Despite the robust growth, we believe that sales
will remain below the pre-pandemic (2019) peak of 13m units throughout our forecast period. On balance, we
estimate that zinc demand in the EU will contract by 3% in 2023. There could be some upside towards the end of the
2024-25 forecast period amid efforts to meet the 2050 emissions target.
A US slowdown is on the horizon
We expect US economic growth to slow significantly in 2023-24 compared with 2022 as the sharp rise in interest
rates and still-high inflation weigh heavily on domestic demand. We revised up our 2023 demand estimate after a
better than anticipated second quarter, bringing full-year growth to 1.8% (revised from 1.3% previously). We forecast
growth of 0.9% in 2024, as activity remains weak in the first half, which will pick up up in the second half once
interest rates start to come down from their current highs, and average 2% in 2025. This is still a benign outcome for

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the US economy, following the most aggressive tightening cycle by the Federal Reserve (Fed, the US central bank)
in decades and strains in the banking sector. Although we think that the Fed is now at the end of its tightening cycle,
we maintain our view that the Fed will keep its policy rate at the peak level until mid-2024, with a series of gradual
rate cuts forecast to begin in the third quarter of that year. Beyond these factors, fiscal stimulus under the US$1trn
bipartisan infrastructure bill and the Inflation Reduction Act will support zinc consumption via infrastructure
investments in our 2024-25 forecast period. Furthermore, protectionist policies will continue to limit imports of hot-dip
galvanised steel. As a result, we expect US zinc demand to rebound by 2% in 2025, after essentially stagnating in
2024. This comes after strong estimated growth of 5% in 2023.

('000
tonnes
Refined zinc: consumption unless 2021 2022 2023
otherwise
indicated)

2024 2025 China 6,854.4 6,515.3 6,775.9

6,897.9 7,091.0 EU 1,979.0 1,925.0 1,867.3

1,943.8 1,974.9 US 920.0 950.0 997.5

995.5 1,015.4 India 643.0 644.0 657.5

South
669.4 685.4 468.0 428.0 398.0
Korea

400.0 402.0 Japan 431.0 396.0 393.6

399.1 415.1 Taiwan 209.0 188.0 169.2

170.9 181.2 Brazil 226.0 217.0 186.6

190.0 193.4 Others 2,331.5 2,327.8 2,248.7

2,293.7 2,339.5 World total 14,061.9 13,591.1 13,694.3

13,960.2 14,298.0 % change 5.8 -3.3 0.8

Supply
We forecast that global refined zinc production will expand by an annual average of about 2.8% in 2024-25.
Favourable treatment charges and ample raw materials continue to support high utilisation rates by smelters in
China. Various new and restarted mines and expansions that were delayed during the covid-19 pandemic will
provide additional supplies to support smelting capacity expansion in our 2024-25 forecast period, particularly in
China, India and Norway. However, downside risks remain. A number of European smelters remain idled or are
operating at reduced capacity owing to unfavourable margins. Smelters in parts of China have been forced to reduce
production owing to power restrictions, and will continue to face restrictions as authorities aim to reduce emissions,
notably of harmful heavy metals. Recent price pressure on zinc-as well as key by-products-will weigh heavily on

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producer margins; some high-cost capacity has already been suspended. More broadly, recently announced
restructuring, and increasing mergers and acquisitions in the mining sector could accelerate the development of
mine projects to support the energy transition.
Chinese smelters may face headwinds if power restrictions remain in place
China, which accounts for about half of the world's refined zinc production, remains pivotal to the global zinc market.
Favourable treatment charges and ample zinc concentrates are helping Chinese smelters to raise production.
However, smelters could face headwinds in the coming months if authorities again impose broad power restrictions
as below-average water levels continue to limit hydroelectric power generation. The pledge by the Ministry of
Ecology and Environment to cut emissions of heavy-metal pollutants in major industries will remain a broader
headwind towards the middle of this decade.
Zinc-smelter capacity will expand outside China in 2024-25
There will be some zinc-smelter capacity expansion outside China in 2024-25. In Norway, a Swedish metals
company, Boliden, is upgrading and expanding the Odda smelter, which is due to be completed in 2024 and will
raise capacity from 200,000 tonnes/year (t/y) to 350,000 t/y. In India, Hindustan Zinc Limited (owned by an Indian
multinational mining company, Vedanta International) is planning to construct a new smelter. This will supplement
capacity additions in Bulgaria, Canada, Indonesia, Russia and Spain. Projects under consideration in Africa could
provide additional supplies towards the end of our 2024-25 forecast period, as Vedanta is also considering re-
developing the Skorpion smelter in Namibia, as well as developing a new smelter plant in South Africa.
Smelter restarts will boost production in Europe
Smelting capacity operated by Belgian-based Nyrstar in France and the Netherlands has restarted after being
temporarily idled during the winter of 2022-23 amid elevated energy prices. Despite the recent weakness in the LME
zinc price, media reports in June suggested that the majority of the 300,000 t/y of smelting capacity currently
shuttered would restart shortly, further improving supply availability in the region.
Large-scale projects in Africa will boost mine production in 2024-25
The global zinc concentrate market is set to remain comfortably supplied in 2024-25. Large-scale projects in
Kazakhstan, Brazil and Portugal, with a combined capacity of 320,000 t/y, that started operations in 2021-22 will
continue to ramp up their capacity. Further capacity additions will support mine production during our 2024-25
forecast period. Grupo México will commission a new concentrator at the Buenavista mine in Mexico in 2023
(delayed from the second half of 2022), which we expect will double national zinc production to 160,000 t/y.
Additional supplies could come from Africa towards the end of our forecast period. Ivanhoe Mines and Gécamines,
the state-owned mining company of the Democratic Republic of Congo (DRC), are accelerating plans to restart the
Kipushi mine, which closed in 1993. Vedanta International is progressing with its Gamsberg Phase 2 expansion
project, which is designed to double capacity to about 500,000 t/y. The Asmara project in Eritrea is being developed
in a joint venture between Chinese company Sichuan Road and Bridge Mining Investment Development Corporation
(SRBM) and state-owned Eritrean National Mining Corporation (ENAMCO).
Falling prices have prompted mine closures in Ireland and Australia
However, downside risks to this outlook remain. Heavy rainfall has disrupted mine operations in Peru and Australia
so far in 2023, and weather-related disruptions could remain a feature during our forecast period. El Niño appears to
be almost certain, according to the US National Oceanic and Atmospheric Administration (NOAA), increasing the
risk of flooding in the Peruvian Andes and below-average rainfall in Australia and South-east Asia. Mine operator
margins have also been negatively affected by elevated treatment charges and falling prices for zinc and key by-
products such as sulphuric acid, increasing the risk that further high-cost capacity could be idled. For example, in
mid-June Sweden-based Boliden placed its 130,000-t/y Tara mine in Ireland on care and maintenance; several
mines in Australia have done the same. More broadly, factors such as tighter environmental oversight and resource
nationalism pose longer-term headwinds.
Mine closures will offset capacity additions in 2023-24
In our 2024-25 forecast period the various additions are likely to be offset by the closure of several major mines

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owned by Glencore; the Matagami mine in Canada closed in June 2022, and this will be followed by the closure of
the Lady Loretta mine in Australia and Kidd in Canada in 2023-24. These facilities have a combined mine capacity of
312,000 t/y, and losses stemming from their closure are likely to cause global mine production to plateau towards
the end of the forecast period. In China, strict rules governing capacity, safety and environmental-protection policies
will continue to limit the scale of capacity growth.

Zinc: production 2021 2022 2023 2024

Mine output:
2025
('000 tonnes)

China 4,136.0 4,041.0 4,109.7 4,199.7

4,279.7 Peru 1,532.0 1,369.5 1,385.9 1,335.9

1,341.9 Australia 1,323.0 1,232.0 1,201.0 1,213.0

1,130.0 India 794.0 836.0 877.8 894.5

915.1 US 688.0 770.0 766.9 749.0

780.0 Others 4,323.8 4,204.3 4,104.3 4,344.3

4,744.3 World total 12,796.8 12,452.8 12,445.7 12,736.4

13,191.0 % change 4.2 -2.7 -0.1 2.3

Refined
3.6 output: ('000
tonnes)

China 6,408.0 6,358.0 6,777.6 6,743.7

7,033.7 EU 2,079.0 1,826.0 1,854.0 1,971.0

2,012.4 South Korea 840.0 880.0 871.2 862.5

879.7 India 779.0 838.0 854.8 871.9

880.6 Canada 643.0 471.0 464.0 528.0

554.0 Japan 517.0 518.0 515.0 516.0

511.0 Australia 463.0 358.0 420.0 420.4

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 437.0 Others 2,144.2 2,092.5 2,188.8 2,355.8

2,417.8 World total 13,873.2 13,341.5 13,945.4 14,269.3

14,726.2 % change 0.7 -3.8 4.5 2.3

Enlarge this image.

Statistical appendix: industrial raw materials

(19
90 20 20 20 20
EIU commodity price index
=1 22 23 24 25
00)

4 1 2 3 4 1 2 3 4 1 2
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr

US
4 $
3 Qtr
Qtr ind
ex

W 23 23 22 20 21 21 21 21 21 21 21
CF 3.7 1.1 0.6 9.8 2.9 3.9 6.6 7.0 8.4 6.6 4.7

21 IR 19 20 19 18 19 19 19 20 20 21 21
213.9
3.9 M 2.6 4.0 2.9 7.6 1.9 3.0 8.4 5.1 9.6 2.9 3.2

PDF GENERATED BY PROQUEST.COM Page 100 of 106

 Ba
se
21 21 23 22 21 21 22 22 23 24 25 25
217.1 me
9.4 8.4 6.2 0.4 3.3 9.3 0.5 9.2 9.1 6.3 0.8 1.7
tal
s

Fi
25 13 13 12 12 12 12 12 12 12 12 12
256.6 bre
9.8 3.1 1.5 8.2 7.3 6.3 5.9 5.9 4.9 3.3 3.3 3.3
s

R
12 18 18 18 18 19 19 19 20 20 21 20
122.3 ub
2.0 6.2 8.7 9.7 4.2 2.9 9.2 6.1 2.4 5.6 0.8 7.7
ber

Cr
22 ud 37 34 33 36 36 35 34 33 33 32 32
220.3
3.4 e 2.7 3.5 0.0 0.3 9.9 5.3 5.3 7.5 7.5 4.2 8.4
oil

%
ch
an
ge,
30
321.0 ye
8.3
ar
on
ye
ar

- - -
W - - - - -
14. 21. 11. 3.4 2.6 1.3
CF 3.0 8.9 7.4 1.8 0.9
1 1 4

- - -
- IR - - - 10.
-1.4 15. 18. 19. 2.9 9.3 9.2 7.5
2.1 M 5.2 0.4 5.4 3
7 4 9

Ba
se - - -
- - 12. 12. 13.
5.9 4.7 me 16. 18. 18. 0.5 4.0 9.8
1.7 6.7 1 3 7
tal 9 5 6
s

Fi - - - -
- - - - - - -
7.3 5.5 bre 10. 17. 26. 15.
5.1 4.2 1.8 1.8 2.4 2.1 2.1
s 1 7 6 4

PDF GENERATED BY PROQUEST.COM Page 101 of 106

 R - - - -
-
-2.1 ub 17. 18. 15. 10. 3.6 5.6 3.3 9.9 6.6 5.8 5.9
1.1
ber 8 4 5 3

Cr
- - -
ud 11. - - - - -
8.8 8.7 17. 30. 13. 3.4 4.6
e 0 0.8 6.3 8.8 8.8 4.9
7 6 9
oil

%
ch
an
ge,
qu
-
-4.9 art
8.6
er
on
qu
art
er

W - - - - - -
1.5 0.5 1.3 0.2 0.6
CF 1.3 1.1 4.5 4.9 0.8 0.9

IR - - -
-0.4 0.0 5.9 2.3 0.6 2.8 3.4 2.2 1.6 0.2
M 2.7 5.4 2.7

Ba
se
- -
1.8 1.0 me 0.6 8.2 2.8 0.5 3.9 4.3 3.0 1.8 0.4
6.7 3.2
tal
s

Fi -
- - - - - - -
2.0 1.3 bre 11. 0.0 0.0 0.0
1.2 2.5 0.8 0.8 0.3 0.8 1.3
s 6

R
- - - - -
-0.8 ub 1.4 0.5 4.7 3.3 3.2 1.6 2.6
0.3 9.3 2.9 1.6 1.5
ber

Cr
-
ud - - - - - -
6.1 1.4 10. 9.2 2.7 0.0 1.3
e 7.8 3.9 3.9 2.8 2.3 3.9
9
oil

PDF GENERATED BY PROQUEST.COM Page 102 of 106

 Ste
rlin
-
-2.3 g
3.9
ind
ex

W 35 35 34 31 29 29 29 29 29 29 29
CF 8.2 4.1 1.1 8.2 7.8 7.5 0.1 4.0 5.7 8.8 6.4

29 IR 29 29 30 27 26 26 26 26 27 28 29
293.7
2.6 M 9.5 1.8 1.1 8.2 6.3 8.1 1.7 9.3 9.5 6.8 1.3

Ba
se
29 32 33 34 31 30 30 29 31 32 33 34
291.7 me
7.1 8.4 0.9 8.6 7.9 2.8 6.4 9.0 1.1 5.9 7.1 3.1
tal
s

Fi
35 22 20 19 18 18 17 17 17 17 16 16
344.4 bre
1.1 7.7 1.6 4.1 5.0 0.6 6.4 0.8 0.9 0.3 8.7 8.7
s

R
16 31 28 27 27 26 26 27 26 27 28 28
168.7 ub
7.3 0.7 2.1 8.6 3.7 1.5 9.5 0.2 6.1 5.8 1.3 8.5
ber

Cr
30 ud 63 56 50 47 51 51 48 46 46 46 44
284.1
1.4 e 3.3 4.8 7.1 5.9 1.4 6.8 1.9 8.7 0.0 1.8 3.6
oil

%
ch
an
ge,
43
449.4 ye
9.2
ar
on
ye
ar

- - - -
W 22. 11. - - -
19. 16. 16. 15. 0.4 2.2
CF 9 3 4.4 7.6 0.7
7 9 0 0

PDF GENERATED BY PROQUEST.COM Page 103 of 106

 - - -
- IR - - - - 11.
-0.1 7.6 18. 11. 13. 5.0 7.0
1.0 M 3.2 9.2 8.1 3.2 3
5 1 1

Ba
se - -
- - - - - 10. 14.
8.3 6.3 me 1.7 17. 14. 7.6
4.5 9.3 7.8 7.4 2.2 0 8
tal 1 2
s

Fi - - - -
32. - - - - -
10.7 7.7 bre 3.2 25. 20. 12. 12.
3 8.4 7.6 5.7 4.4 1.2
s 3 7 5 0

R - -
- 10. - - - - -
-1.3 ub 14. 15. 5.5 4.4 6.8
1.7 5 5.6 9.2 4.5 3.0 2.7
ber 0 8

Cr
- - - -
ud 59. 27. - - - - -
6.8 9.3 29. 19. 10. 10.
e 2 5 8.4 8.5 5.0 1.5 7.9
4 3 0 6
oil

%
ch
an
ge,
qu
-
-4.1 art
4.5
er
on
qu
art
er

W - - - - - - - -
1.4 0.6 1.0
CF 9.6 1.1 3.7 6.7 6.4 0.1 2.5 0.8

-
- IR - - - -
-0.9 12. 3.2 0.7 2.9 3.8 2.6 1.6
0.4 M 2.6 7.6 4.3 2.4
2

Ba
se -
- - -
0.2 1.8 me 14. 0.8 5.4 1.2 4.0 4.8 3.4 1.8
8.8 4.7 2.4
tal 3
s

PDF GENERATED BY PROQUEST.COM Page 104 of 106

 Fi -
- - - - - - - -
0.4 2.0 bre 11. 0.1 0.0
8.1 3.7 4.7 2.4 2.3 3.2 0.4 0.9
s 4

R
- - - - - - -
0.0 ub 3.1 0.3 3.6 2.0 2.6
0.8 2.4 9.2 1.2 1.8 4.5 1.5
ber

Cr
- -
ud - - - - - -
-1.5 6.1 10. 10. 7.4 1.1 0.4
e 6.0 6.1 6.7 2.7 1.9 3.9
8 2
oil

DETAILS

Subject: Metals; Gasoline prices; Rubber; Natural gas prices; Crude oil; Copper; Iron ores;
Raw materials; Central banks; Commodities; Crude oil prices; Economic conditions;
Palladium; Natural gas; Petroleum; Economic development; Liquefied natural gas;
Commodity prices; Aluminum

Business indexing term: Subject: Gasoline prices Natural gas prices Central banks Crude oil prices Commodity
prices; Industry: 92812 : International Affairs 52111 : Monetary Authorities-Central
Bank

Location: Russia; Ukraine; Europe; United States--US; China

Company / organization: Name: Organization of Petroleum Exporting Countries--OPEC; NAICS: 813910;

Name: Organization for Economic Cooperation &Development; NAICS: 541720

Classification: 92812: International Affairs; 52111: Monetary Authorities-Central Bank

Publication title: World Commodity Forecasts. Industrial Raw Materials; New York

Publication year: 2023

Publication date: Oct 2023

Publisher: The Economist Intelligence Unit N.A., Incorporated

Place of publication: New York

Country of publication: United Kingdom, New York

Publication subject: Business And Economics

ISSN: 13518976

e-ISSN: 20479794

PDF GENERATED BY PROQUEST.COM Page 105 of 106

 Source type: Report

Language of publication: English

Document type: Industry Report, Statistics

Document feature: Industry financials

ProQuest document ID: 2867419508

Document URL: https://www.proquest.com/reports/world-commodity-forecasts-industrial-

raw/docview/2867419508/se-2?accountid=27541

Copyright: © 2023 The Economist Intelligence Unit Ltd. All rights reserved. Reproduced with
permission of the copyright owner. No further reproduction is permitted.

Last updated: 2024-03-13

Database: ABI/INFORM Collection

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