The IMF annual base metal price index is projected to increase by 0.8% on an annual average basis in 2020 and by a further 3% in 2021 on concerns surrounding the long-term impact of the pandemic. The possibility of a second wave of COVID-19, the sustainability of strong China demand, and tensions between China and the United States are the major risks to metal prices falling. These more than offset the risk of supply disruptions in major metal-producing countries. The precious metals index is expected to increase by 28.4% in 2020 and by 10.4% in 2021 due to the effects of heightened global uncertainty and continued accommodative monetary policies.
Among base metals, iron ore prices increased the most between February and August, by 37%, reaching a year high, while copper prices increased by 14.4% amid growing optimism over China’s economic recovery, falling inventories, and supply disruptions in key producing countries (Chile and Peru). Aluminum (+3%), whose supply has been more insulated from the pandemic as it is mostly sourced domestically, did not rally as global automotive sales slumped. The price of nickel and cobalt, key inputs for stainless steel and batteries in electric vehicles, increased by 14.6% and fell by 1.9%, respectively.
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