Metals Newsletter Q2 2023

After a brief uptick in Q1 2023, metal prices are witnessing a decline due to increasing supply amid lackluster demand, particularly from China. The rebound in metal prices was largely attributed to optimism surrounding China’s reopening post abandonment of COVID-19 controls late in 2022. However, the impact of China’s efforts has been muted primarily due to a patchy recovery in areas such as real estate and manufacturing. China, the world’s largest producer and consumer of steel, is experiencing weakened domestic demand for the metal due to suppressed activity in the steel-intensive construction sector.

Furthermore, a persistent mix of elevated interest rates, recessionary concerns, and the ongoing Russia-Ukraine war continues to exert pressure on the global economic environment – impacting the supply-demand equilibrium of the international metals market.

Despite the prevailing macroeconomic and geopolitical uncertainties, the Federal government’s policy support for infrastructure, reshoring, and green energy development is expected to bode well for the U.S. metals sector.

Additionally, the market is set to benefit in the long term from companies progressively embracing low carbon metal. The North American region, with its high concentration in scrap-fed electric arc furnace (EAF) mills, is well-positioned to benefit from the increased domestic demand for secondary metal.

Near term, the Automotive sector is expected to be the front runner in fueling metals’ growth trajectory. Auto production is ramping up, mainly driven by latent consumer demand and improving semiconductor supply.

Aluminum, both lightweight and highly recyclable, is well-positioned to register strong growth across markets seeking a sustainable, high-performing metal. The green metal with its solid long-term demand fundamentals is garnering increased interest from dealmakers, including both strategic buyers and financial sponsors. In the second quarter, Apollo Global announced a $5.2 billion acquisition of Arconic, a leading provider of aluminum sheet, plate, and extrusions.