China’s Infrastructure Spending To Push Prices Of Base Metals Higher In 2021

China’s Infrastructure Spending To Push Prices Of Base Metals Higher In 2021Shanghai Smart Cities (Lucas Schifres/Getty images)

Robust demand recovery amid gradual supply increase is expected to push base metal prices higher on a year-on-year basis in 2021.

However, increasing environmental concerns and emission targets are likely to lift the global cost curves across metals.

"Geo-political relations and currency movements are also likely to be the key drivers for metal prices," India Ratings and Research (Ind-Ra) said in a report.

"The current strong global commodity demand is stemming from a continued strong Chinese demand while other economies are also making a comeback from the pandemic-related impacts."

Notably, China, which has a lion's share of global consumption of key commodities, is likely to witness a strong demand over 2021 on the back of a continued government-led infrastructure spending.

"The global commodity demand improvement will be balanced by gradual capacity additions, although intermittent lockdowns in certain producing nations would cause temporary disruptions."

"Also, sustainability and decarbonisation efforts are likely to lead to capacity curtailments."

In addition, it said that logistical and supply chain management remains an issue and also supports cost inflation.

"However, the tight demand-supply equation in 1H21 is likely to ease in 2H21."

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