The World Bank’s metals and minerals price index rose 10 percent in the first quarter of 2023. Price increases reflected positive sentiment about stronger demand amid supply disruptions for some key metals. Metal prices are expected to fall this year as supply recovers amid weak demand in advanced economies and China. A stronger-than-expected recovery in China’s real estate sector and supply disruptions are key upside risks to the price forecast.

Metal supply is set to recover following disruptions in 2022. The supply outlook for 2023 is more favorable due to lower energy prices and as temporary production and supply bottlenecks are resolved. Coal prices dropped by 52% from their peak in August 2022 to April 2023, while Europe and U.S. natural gas prices fell by 81% and 75%, respectively, during the same period. On the supply side, most aluminum and zinc smelters in Europe have restarted operations, and new supply capacity is expected to come online this year for several metals, including aluminum in China, copper in South America, and nickel in China and Indonesia. The current improved environment follows various supply disruptions for several metals last year, caused by logistical problems, plant maintenance, power shortages, social unrest, adverse weather conditions, and high energy prices. 

Slower global activity and a services-oriented recovery in China are expected to dampen metal demand. The surge in metal prices at the start of the year reflected optimism for a robust recovery in China as well as improved global growth prospects. However, this optimism faded in 2023Q1 as China’s growth was mainly driven by consumer spending in the services sector—a trend that is expected to persist for the remainder of 2023. Although China’s property sector has begun to stabilize, its recovery remains subdued due to high debt levels. Persistent high inflation, tight monetary policy, and concerns about credit constraints following recent banking sector stress in advanced economies will likely dampen consumer demand. 

Metal prices are forecast to fall by 8 percent in 2023 and a further 3 percent in 2024. The largest price declines are forecast for tin and zinc, with drops of 23% and 20%, respectively, in 2023. Aluminum and nickel prices are forecast to decline by 11% and 15%, respectively, while copper, lead, and nickel are expected to fall by less than 5%. Most metal prices are expected to fall further in 2024, with price declines ranging from 3% for zinc to 9% for nickel.

The price outlook faces several upside risks. A stronger-than-expected recovery of China’s real estate sector could boost prices for metals used in construction—such as aluminum, copper, iron ore, and zinc. Disruptions at mines due to weather, technical operating issues, labor disputes, and power/water constraints, could adversely affect raw material supplies for metals. Trade restrictions could tighten supplies, including export taxes or outright export bans. Other policy interventions, such as further sanctions on Russia and China’s rapidly approaching aluminum production cap, could also limit supply. In the longer term, however, the energy transition could significantly lift the demand for some metals, notably lithium, copper, and nickel.