Jan 3, 2023 . Read 5 min
Metals Outlook in 2023
Rakhi Majumdar, Senior Consultant, Vedanta
2023 is anticipated to be a crucial year for the metals sector mainly due to fears of an economic recession in advanced economies and the rate of economic recovery in China following its Covid restrictions. According to some of the investment banks who have commented on the emerging scenario, China's growth expectations appear tepid, mostly due to the impact of Covid and a sluggish real-estate market.
As a result, while gold and silver may be hit in the next year by China's weak economic outlook, even base metals such as copper and iron ore are likely to be pulled down. There is also speculation of China and other countries like the US starting to pull back the Covid-19 stimulus packages. This is likely to lead the global economy into recession, and thus impact the metals sector further. However, some encouraging signs are also emerging out of China, with several districts preparing to remove zero-Covid restrictions amidst widespread protests. These have gone a long way in giving investors some hope about the prospect of recovery of the Chinese economy. The likes of Goldman Sachs is cautiously optimistic about the same in anticipation of a 'meaningful reopening growth boost in H2, which will likely extend into 2024.'
Commodity markets specialist Wood Mackenzie has said mining, particularly battery metals, will receive a boost if there is higher sales of electric vehicles and recovery in US solar installations. However, softening demand amid stronger supplies could lead to a year-on-year decline in average prices across the metals and mining industries in 2023, it cautioned. The construction sector, a key user for iron & steel and base metals, will be a drag on global demand, with the Chinese real estate market in particular, remaining sluggish.
Meanwhile, supplies of copper, aluminium, lead, zinc, iron ore and steel, among others are expected to post higher growth rates than in 2022. The production of battery materials - nickel, cobalt and lithium - will continue to rise on top of double digit-growth in 2022.
Inflationary pressures are showing signs of easing, and so are supply-chain constraints. That could mean the global economic slowdown is less severe than expected, the commodity research firm predicted. A recovery in the automotive sector and in low-carbon energy could help offset some of the demand weakness in other consumer-led segments, it added.
