Metals & Mining



This forecast has been drawn up in accordance with the General Principles of Socioeconomic Indicators Forecasting.

  • Global aluminum and zinc markets will experience shortage until 2019–2020, nickel market — until 2021. Low prices seen in 2013–2016 have led to lower capacity utilization and shutdown of inefficient production facilities in the industry. Minimum surplus will remain in the copper market, but the outrunning consumption growth rates may result in a shortage after 2021. According to ACRA estimates, the average prices in 2018–2019 will be: 2,050–2,150 USD/t for aluminum, 6,200–6,300 USD/t for copper, 12,000–12,500 USD/t for nickel, and about 3,000 USD/t for zinc. Metal prices are also supported by a 7.5% decline of the Broad Dollar Index in the first eight months of 2017, as well as by growing investments of Chinese banks into commodities.
  • Recovering prices for non-ferrous metals will exercise pressure on the Russia’s imports of rolled products. The share of imports in the domestic consumption of aluminum and copper is 25–30% (value-added products), zinc — 15% (primary metal). According to ACRA estimates, localizing the production of rolled aluminum and copper may cause a 10–15% growth of EBITDA of Russian producers. Low utilization of Russian zinc production capacities is conducive for primary metal import substitution in the local market, which may result in over 15% growth in earnings.
  • Creditworthiness of Russian non-ferrous metal producers will improve following the recovering prices for core products and the decreasing exchange rate of the Russian currency down to 65–68 RUB/USD. According to ACRA estimates, the average growth rate of EBITDA margin of the largest Russian non-ferrous metals producers will be not less than 5–10 pps, with the most prominent growth (+10–15 pps) to be demonstrated by zinc producers.

Table 1. Forecasted Russian and global non-ferrous metals industry indicators

Source: data: Bloomberg, RF Ministry of Industry and Trade, IMF; forecast: ACRA

Aluminum market not to regain a surplus until 2020

Favorable price conditions will stimulate utilization of existing manufacturing capacities and re-introduction of suspended inefficient capacities (in China, Russia).

The global shortage that emerged in the primary aluminum market in 2016 have increased substantially in 2017 and, according to ACRA estimates, it may reach about 1.5 million tons by the end-2017. The shortage is caused by the shrinking output in China (connected with environmental issues), which declined faster than expected. ACRA believes that the 2018 shortage will be not more than 1 million tons, and the market may regain its equilibrium by 2019–2020.

Figure 1. Primary aluminum: global market balance

Source: Bloomberg, IMF, ACRA forecast

Declining stocks of primary aluminum at the key world commodity exchanges expected in 2017–2019 will support prices for aluminum. According to ACRA estimates, the average price for aluminum will range within 2,050–2,150 USD/t in 2018–2019. The price may be supported further by the expected growth of the prime costs in China, where up to 60% of the world aluminum output is produced.

Growing prices for energy coal resulted in a substantial growth in prime costs in China, caused by the increased prices for electric power.

RUSAL’s ambitious plans to increase production capacity (Boguchansk and Khakas projects, resumption of construction of the Taishet smelter) indicate an optimistic attitude in the domestic industry. At the same time, in ACRA’s opinion, the expected price growth rate in the aluminum market may not be high enough to implement all the projects in full.

Figure 2. Primary aluminum: Russian market balance

Source: RF Ministry of Industry and Trade, ACRA forecast

Localizing the manufacture of rolled aluminum may result in a 10–15% growth of EBITDA in the industry.

Russia is a net exporter of aluminum. Nevertheless, in 2016, Russia imported 264 thousand tons of aluminum and aluminum products, which is about 30% of the domestic aluminum consumption. According to ACRA estimates, the value of imports amounted to RUB 46 billion, and the lost income of Russian producers amounted to RUB 16 billion. In ACRA’s opinion, the main imported aluminum products (about 40% of the total imports), which may be produced locally, include sheets, plates, bars, extrusions, foil and consumer products.

Copper prices will see a correction to 6,200 USD/t

Shortage seen recently on the market was caused by short-term supply problems (strikes at Escondida in Chile and Grasberg in Indonesia), but the market has regained equilibrium by now.

After the shortage seen in 2016, the copper market have found an insignificant surplus (about 300 thousand tons annually) in 2017, which, according to ACRA estimates, will remain until 2021. China will remain the main driver of world demand for copper, despite the slowing down consumption growth rate. A significant increase in demand is also expected from electric vehicle manufacturers. The supply growth, in turn, will be slightly behind the demand due to insufficient investments in the development of new deposits amid low prices observed in previous periods. This fact can lead to a shortage after 2021.

Figure 3. Copper: global market balance

Source: Bloomberg, IMF, ACRA forecast

According to ACRA estimates, the copper price growth up to 6,600 USD/t observed in 3Q2017 is speculative, and a minor correction is possible in 4Q2017. ACRA expects that the average copper price will be about 6,200 USD/t in 2018 and it may grow up to 6,600 USD/t by 2021.

The load ratio of the largest Russian copper producers has been stably above 95% and will remain high in the forecast period.

Figure 4. Copper: Russian market balance

Source: RF Ministry of Industry and Trade, ACRA forecast

Extending copper production in Russia may increase EBITDA of Russian producers by RUB 5 billion.

In 2016, Russia imported 70 thousand tons of copper and copper products, which is about 25% of the domestic consumption. The value of imports is estimated by ACRA at RUB 30 billion. Given the growing price trend, there is a potential for import substitution, mainly copper pipes and fittings, whose share in imports is about 16% and 18%, respectively.

Zinc market may regain equilibrium not earlier than by 2019

Century mine in Australia and Lisheen mine in Ireland with the total capacity of 675 thousand tons were closed in 2015.

Since 2016, the zinc market has been experiencing a significant shortage of supply (about 300 thousand tons in 2016). In ACRA’s opinion, the shortage may reach 700 thousand tons in 2017, or over 5% of the world consumption. The shortage is caused by the closures of unprofitable enterprises in 2015 (more than 5% of the market) against the backdrop of the growing demand for galvanized steel in China. ACRA expects that the shortage of about 300 thousand tons will continue in 2018, but the market may reach an equilibrium as early as in 2019. The main supply drivers may include an increased load of production capacities against the backdrop of a favorable price environment, and the expected introduction of new projects (for example, the Ozernoye zinc deposit with a capacity of up to 350 thousand tons).

Figure 5. Zinc: global market balance

Source: Bloomberg, IMF, ACRA forecast

ACRA expects that the zinc price will stabilize at the current level of about 3,000 USD/t in 2018-2019, with a potential minor correction after 2019.

The Russian zinc industry may benefit from the supply shortage seen in the world market, since the current average load ratio of production capacities is about 80%. ACRA expects that the capacity utilization in the industry could increase to 90-95% in 2018-2021.

Figure 6. Zinc: Russian market balance

Source: RF Ministry of Industry and Trade, ACRA forecast

Import substitution in the domestic market may result in a 15% growth in earnings of Russian enterprises.

In 2016, Russia imported about 37 thousand tons of zinc and related products, or 15% of domestic consumption, while the share of raw zinc accounted for 92% in the total imports. For comparison, exports amounted to 58 thousand tons. Therefore, there are certain opportunities for import substitution, especially given the incomplete utilization of zinc production capacities in Russia.

Supply shortage in the nickel market to continue until 2021

ACRA expects that the supply shortage seen in the nickel market in 2016 will remain until 2021. According to ACRA estimates, the shortage will be driven by closures of unprofitable enterprises, primarily in China, and closures of existing production facilities for environmental reasons. Consumption, in turn, will grow steadily, in particular, the growing demand is expected from manufacturers of stainless steel and batteries used in the fast-growing sector of electric vehicles.

Figure 7. Nickel: global market balance

Source: Bloomberg, IMF, ACRA forecast

According to ACRA estimates, prices for coking coal will be 140–150 USD/t in 2018–2019. See the ACRA November 7, 2016 forecast titled Commodity prices recovery to shore up Russia’s metals & mining industry.

Nickel supply shortage will drive a moderate increase in prices, which, according to ACRA estimates, will be 12,000 USD/t in 2018 and may increase up to 13,500-14,000 USD/t by 2021. Nickel prices may also be supported by rising prices for coking coal, which will sustain costs of nickel producers for coke at the level of 10-11 thousand USD/t. Other factors that could affect nickel prices may include further restrictions on ore production in the Philippines for environmental reasons (nickel ore production in the country declined by 20% in 1H2017).

According to ACRA estimates, nickel stocks at the main commodity exchanges, having reached a historic high in 2014-2015, will decline by 3-5% annually in 2017-2021.

Figure 8. Nickel: Russian market balance

Source: RF Ministry of Industry and Trade, ACRA forecast

The Russian domestic nickel market is self-sufficient, as the 2016 imports of nickel and nickel products amounted to only 1.8 thousand tons or about 7% of the domestic consumption. In turn, the 2016 exports amounted to 230 thousand tons.

Creditworthiness of Russian non-ferrous metal producers will improve

In ACRA’s opinion, the current forecast for the Russian non-ferrous metals sector is moderately positive. Recovering metal prices will have a positive impact on the profitability and ability to generate cash flows in the industry. According to ACRA estimates, the EBITDA margin in the aluminum, copper and nickel segments may grow by 5–10 pps and in the zinc segment — by 10–15 pps. The industry may get an additional support from a weakening ruble as, in ACRA’s opinion, the exchange rate will reach 68 RUB/USD by 2021. With that in mind, ACRA expects a significant improvement in the leverage demonstrated by the non-ferrous metals industry. Expanding import substitution will allow aluminum, zinc and copper producers to get higher revenues.


This overview was drawn up using the scenario-based model developed by ACRA for the non-ferrous metals market. The model includes both the fundamental factors impacting the market supply/demand balance and developments and other factors reflecting the subjective opinion of ACRA.

In ACRA’s opinion, pricing in the non-ferrous metals market is driven by not only the supply/demand balance and the volatility of metal stocks at major world commodity exchanges, but also by the rate of US dollar, which determines the speculative demand for commodities. The consumption amounts were projected on the basis of the expected growth of the world economy, while the production outputs were estimated by ACRA depending on the expected commissioning/closure of production facilities for each of the above mentioned metal.

Print version
Download PDF


Natalia Porokhova
Senior Director, Head of Sovereign Ratings and Forecasting Group
+7 (495) 139 04 90
Maxim Khudalov
Head of the Sustainable Development Risk Assessment Group
+7 (495) 139 04 96
Evgeny Obydov
Director, Corporate Ratings Group
+7 (495) 139 04 88
Maria Mukhina
Operating Director
+7 (495) 139 04 80, ext. 107
We protect the personal data of users and process cookies only to personalize services. You can prevent the processing of cookies in your browser settings. Please read the terms of use of cookies on this website by clicking on more information.