Metals and Minerals Perfomance Review

Despite market volatility due to numerous geopolitical events, the Metals and Minerals division recorded a robust performance in 2022.



Performance overview

Demand from China was subdued for a number of metals compared to prior years due to successive and prolonged shutdowns as the government sought to contain rising cases of COVID-19. This was, however, partially offset by strong demand from western economies driven by the acceleration of the energy transition, namely investment in renewable energy and electric vehicles.

Despite the broadly positive fundamentals of underlying supply and demand for metals and minerals, London Metal Exchange (LME) prices were weighed down, in particular in the second half of our financial year. The key drivers for weaker prices include a strong US dollar and macroeconomic concerns as central banks increased interest rates to combat inflation and fears grew of recession in major economies.

Volumes remained broadly consistent with the prior year, with concentrates up eight percent and refined metals down by six percent. During the year we were alert for opportunities to expand our business and started to explore investment in lithium, a key battery metal.

For some of our metals, inventories were and remain at record lows, while the power crisis in Europe has forced many smelters to curtail production, further tightening markets. Amid rising geopolitical tensions, there is also a sharper focus on security of supply, particularly around key energy transition metals such as copper, nickel and cobalt.

This was highlighted by the US Inflation Reduction Act, a USD369 billion flagship package to spur investment in green technologies. It was also evident in the EU’s decision to increase its renewable energy production target to 45 percent by 2030 as the region seeks to wean itself off Russian fossil fuels. Ultimately, these policies and others are highly metals intensive. However, a lack of investment in new supply means large deficits could emerge in a number of the products we trade between now and the end of the decade.

Looking forward, we expect macro economic factors to continue to influence metals prices into 2023, albeit with the potential for greater supply disruptions as consumers become more selective about the origin and carbon footprint of the metal they consume.

Non-ferrous concentrates and refined metals


For the copper market, 2022 started brightly with prices pushing steadily higher in a tight stock environment. Copper went on to hit a record high, at above USD10,600 per metric tonne, amid fears that Russia’s invasion of Ukraine could curtail supplies.

The concerns proved to be misplaced but sentiment remained positive, with copper viewed by many investors as a beneficiary of the accelerating decarbonisation agenda in the US and Europe.

However, as attention shifted to aggressive monetary tightening, China’s property market and increasing COVID-19 cases in the country’s major cities, prices plunged, falling briefly below USD7,000. A strong US dollar also weighed on copper, which continued to trade at a narrow range to the year-end although it has since rallied to around USD8,500 per metric tonne at financial year end.

For most of the year, copper demand remained robust. Investment in energy infrastructure in Europe continued. The same was true in China after a third year of summer power shortages. Combined with another year of spectacular growth in electric vehicle output, that provided enough demand to more than offset the loss of activity in the property sector.

On the supply side, we have seen a year of heightened disruptions, with many mines forced to lower production forecasts as a result of operational problems related to COVID-19 and local community issues.

These factors, combined with a drought in Chile, the world’s largest copper producer, left the copper market running close to the disruption levels seen during the height of the pandemic in 2020. As we head into 2023, we expect to see a change in the traditional physical flows on the back of further self-sanctioning of Russian metal.

Despite this turbulence, the Copper team delivered a solid performance as we continued to reap the benefits of an integrated approach across refined copper and concentrates. Volumes were broadly stable and we continued to actively engage with our customers, helping them to determine the carbon footprint of the cargoes they are buying through cutting edge digital technology.

As financial conditions continue to tighten, we expect the market to further consolidate as clients recognise the value in dealing with counterparties that have the scale and financial strength to cope with increasingly volatile markets while delivering first-class customer service.

Even after several new projects come online in 2023, we expect to see increasingly large supply deficits and for a tight market to become the new normal for copper.

Alumina and aluminium

The aluminium market experienced unprecedented volatility in 2022, reflected by extreme price movements on the London Metal Exchange. In the space of three months between December 2021 and the start of March 2022 – the benchmark aluminium price rose 60 percent to a record high above USD4,000 per tonne as a result of strong demand and concerns over disruptions to Russian supply.

However, prices quickly reversed course as a deteriorating macroeconomic outlook and rising inflationary pressures weighed on the market. While demand fears persist, Europe’s energy crisis and the war in Ukraine have exposed serious fault lines in the supply chain both for aluminium and its key ingredient alumina.

These risks were particularly noticeable in Europe in 2022, with soaring gas prices increasing aluminium production costs to more than USD15,000 a tonne at certain points of the year. This is because of the large amounts of electricity needed to transform alumina into refined metal. We estimate that a third of European aluminium production is now curtailed, and that further closure risks remain.

In China, which is the world’s biggest producer of aluminium, lower-than-expected rainfall in the south-west forced further capacity cuts. The war in Ukraine also caused production disruptions, with one of the largest alumina refineries in the world curtailed because of its proximity to the conflict.

Our Alumina and Aluminium team was able to successfully meet these challenges in 2022, drawing on our long-established position in the physical market to serve our customers and expand our trading book. As the largest independent global alumina and aluminium trader by volume, our focus going forward will be on helping our customers manage these volatile and unpredictable market conditions. For 2023, the outlook hinges how producers and consumers adapt to less stability and more complicated logistics.

Nickel and cobalt

The nickel market was challenging in 2022, caused by the technical squeeze on the London Metal Exchange in March, which saw prices hit USD100,000 per metric tonne. This further exaggerated the disconnect between prices in the physical and futures markets.

Fundamentally, the market remained well supplied during the year thanks in large part to increased production capacity in Indonesia and new facilities capable of converting nickel pig iron into battery grade metal. If plans for further expansions are realised, it could see Indonesia’s share of global nickel supply rise to more than 50 percent next year.

On the demand side, there was healthy demand for battery grade nickel as global electric vehicle sales continued to grow rapidly, led by China but weaker for lower purity metal used by the stainless steel industry.

The outlook for the nickel market in 2023 is one of oversupply, driven by production growth in Indonesia and the ongoing weakness of the Chinese property sector, which is affecting stainless steel demand. Set against this, demand for battery-grade nickel is likely to remain robust although consumers are becoming more selective about the volumes they are prepared to buy, seeking assurance on sustainability, origin and carbon intensity.

Despite these volatile market conditions, the nickel team supplied record volumes to our customers, boosted by increased supply from Terrafame and Prony Resources. As a result, we are able to meet the needs of our growing customer base in both stainless steel and battery metals while also developing new products, such as lithium and other key battery metals, to meet the future needs of the market.

For cobalt, COVID-19 outbreaks and flooding in Durban, South Africa, created huge logistical challenges exporting material from the Democratic Republic of the Congo (DRC), in the first half of the financial year. This boosted prices that in turn incentivised higher output from small scale or individual mines, also in the DRC. This artisanal production doubled year-on-year to account for 20 percent of primary supply.

Despite a mild recovery in demand from the aerospace industry, sales of portable electronics dropped, while car manufacturers continued efforts to reduce cobalt in the batteries that power electric vehicles. Together, these factors lead to a significant market surplus that started to materialise by the end of our financial year in September and weighed on prices.

The highlight of the year was completing the largest prefinancing on record for a mine in the DRC. The USD600 million facility will allow our long-standing partner Shalina Resources to complete the Mutoshi mine in Kolwezi. This is expected to come online in 2023 and has the potential to provide a new source of supply of cobalt hydroxide for refiners around the world.

Overall, the demand profile for cobalt remains attractive due to the rising popularity of electric vehicles. However, as with nickel, the provenance of material is becoming increasingly important. While supply is sufficient to meet demand over the coming years, certain volumes may not be accepted by consumers. As a result, prices could diverge between responsibly sourced metal and metal that fails to meet industry standards.

Zinc and lead

Throughout the 2022 financial year, the zinc market experienced periods of extreme tightness in the physical market and declines in London Metal Exchange stocks to historically low levels.

A key driver of these trends was surging gas and power prices. A number of zinc smelters in Western Europe were placed on care and maintenance, including Nyrstar’s Budel plant in the Netherlands. These closures and rising freight costs drove up premiums outside China for refined zinc.

In China, rolling lockdowns hit demand and the market was weaker. In zinc concentrates, mine supply was stable year on year and treatment charges trended higher.

The lead market was more subdued in 2022. There was continued strong demand for the metal outside China but inside the country demand and production dynamics were greatly affected by reduced mobility from the COVID-19 lockdowns. The concentrates market has seen strong continued demand from Chinese smelters and mine supply remained stable. The refined and concentrates markets are both expected to be balanced this year with low stocks of both globally.

The Zinc and Lead team responded well to these market conditions, drawing on its global reach to meet the evolving needs of its client base. In terms of volumes, we maintained our market position over the year.

We expect similar conditions in 2023 financial year with European power prices, demand growth in China and recession fears the key factors that will influence zinc and lead markets. Against that backdrop, our strategy will be to remain agile and respond to the changing needs of our customers.

Bulk minerals


Coal prices scaled new heights during the 2022 financial year as record gas prices and sanctions against Russia boosted demand. Thermal coal, which is burned in power stations to generate electricity, rose as high as over USD400 per metric tonne for some brands as buyers in Asia and Europe scrambled for material in a market where there has been an almost total absence of investment in new mines outside of China.

Metallurgical coal, used to produce steel, had a more turbulent year, with prices pulling back from record levels of USD660 per metric tonne in early 2022 as mills in Europe cut production in response to slowing demand.

Against this backdrop, our global Coal Trading team performed strongly with volumes steady year on year and robust financial results.

There was strong demand for the team's services throughout the year, both from customers looking to replace expensive gas with cheaper coal and from those seeking an alternative to sanctioned Russian output.

The Coal team was able to respond rapidly to these changing requirements drawing on its strong relationships with producers around the world. On the demand side, we saw increased volumes being delivered to Europe as utility companies restarted mothballed power stations in response to an unprecedented energy crisis in the region.

Over the next 12 months, we expect thermal coal prices to remain at elevated levels because of the lack of new supply and the ongoing energy gas crisis in Europe, while metallurgical coal will be more subdued as recession fears mount. We will continue to meet the fuel requirements of our customers globally, whilst providing support for their energy transition goals.

Iron ore

The iron ore market traded in a wide range in the 2022 financial year, between USD87 and USD163 per tonne as optimism about the outlook for the global economy and Chinese policy stimulus gave way to pessimism as central banks rapidly raised interest rates and China persisted with its zero-COVID-19 policy.

Prices briefly rose above USD160 per metric tonne in March based on anticipation of easing lock-down restrictions in China and the likelihood of even more stimulus to fight the slump of the property market. As these expectations fell short in July, the steel making commodity moved steadily lower and ended September at below USD100 per metric tonne – roughly where it had been a year earlier.

The 2022 financial year saw bleaker demand in Europe, where soaring energy prices have forced steel mills to curtail production, weighed on the market in the latter months of the financial year although it displayed less volatility than other commodities.

On the supply side, output from Australia and Brazil was weaker than expected amid logistics-related challenges, but not enough to impact prices, while China continued to buy iron ore at roughly the rate predicted by forecasters despite weakness in the property market, as infrastructure and manufacturing activities expanded.

For our Iron ore team, it was another year of expanding trading volumes. We saw increased shipments from Porto Sudeste, our Brazilian iron ore terminal, a trend that will continue next year with the commissioning of the Tico-Tico mine in the south-eastern state of Minas Gerais. We also increased other export volumes through deals with the industry’s major producers.

Looking forward, we expect iron ore to remain in a tight range until there is more certainty around the outlook for the global economy.

Gonzalo De Olazaval

Head of Zinc and Lead

Ken Loughnan

Head of Bulk Minerals

Metals and Minerals
Metals and Minerals

Metals and Minerals