The Global Base Metals Market is projected to register a CAGR of around 5% during the forecast period (2021-2026).
Metals production has been impacted by the COVID-19 pandemic and its disruption of industrial production due to lockdown regulations, shortage of workers, and raw material supply. Since the beginning of the year 2020, the base metals have all seen significant price drops as the pandemic's economic impact has reduced consumption across the metals and mining industry and created a great deal of uncertainty. According to the 15th China International Copper Industry Chain Conference, the global copper mine production shrinked by 0.3% in 2020, and China's nickel ore imports dropped 70% y-o-y in April 2020, according to Shanghai Metals Market. The major end-user industries of base metals such as construction, automobile, and transportation were also negatively impacted by the lockdown regulations due to COVID-19 thus negatively impacting the market studied. Global automotive industry wintnessed a decline in sales in 2020 which was appromixately 78 million units, much below 90.4 million units sold in 2019. Additionally, reduced demand from construction industry owning to work stoppages and labour shortages, has impacted the demand of base metals. However, the condition is expected to recover in 2021, which will restore the growth trajectory of market studied over the forecast period.
- Over the medium term, the major factor driving the growth of the market studied is the increasing demand from the construction industry.
- On the flip side, stringent regulations associated with mining and negative impact of COVID-19 pandemic are hindering the market's growth.
- Increasing demand from the electric vehicle (EV) production sector can offer various opportunities for the market's growth.
- The Asia-Pacific region is expected to dominate the market, with the largest consumption from China.
Key Market Trends
Growing Demand from the Construction Industry
- Chosen for their durability and strength, base metals used in the construction industry serve a wide range of functions. The most common of them are aluminum and copper.
- Aluminum is commonly used in the construction industry because it is resistant to corrosion, highly conductive, and ductile. Due to its resistance to harsh weather, the metal is used in windows, doors, and wire, as well as outdoor signage and street lights. The metal is processed into sheets, tubes, and castings. HVAC ducts, roofs, walling, and handles are made of aluminum. Furthermore, they are frequently found in the construction industry.
- Copper-based tubing is often used to construct pipes in buildings. Copper is a ductile and malleable metal, and it is resistant to corrosion from water and soil. It is also recyclable. Copper tubing is easily soldered, forming lasting bonds. All of these properties make this metal ideal for piping and tubing. Rigid copper tubing is ideal for hot and cold tap water pipes in buildings, while soft copper tubing is frequently used to make refrigerant lines in HVAC systems and heat pumps.
- The Asia-Pacific region will continue to account for the largest share of the global construction industry, indicating the largest consuming region for base metals. However, the pace of growth will slow, given the slowdown due to the COVID-19 pandemic.
- China is in the midst of a construction mega-boom. The country has the largest building market in the world, making up 20% of all construction investment globally. The country alone is expected to spend nearly USD 13 trillion on buildings by 2030.
- In India, Foreign Direct Investment (FDI) received in the construction development sector (townships, housing, built-up infrastructure, and construction development projects) from April 2000 to December 2019 stood at USD 25.37 billion, according to the Department for Promotion of Industry and Internal Trade (DPIIT).
- The North American construction industry will be driven by activities in the United States. Major infrastructure projects in the United States that are expected to be completed over the forecast period include Baltimore-Washington Airport, Dallas Fort Worth Airport, Columbus Airport, Dreamport Villages Amusement Park, TSX Broadway, etc.
- In Canada, Various government projects, such as the New Building Canada Plan (NBCP) and Affordable Housing Initiative (AHI), are supporting the sector's growth. The construction industry in Canada is expected to recover by Q4 2021, and it is estimated to post moderate growth over the forecast period, which is likely to create the demand for base metals over the forecast period. As a part of the 'Investing in Canada Plan', the government is in plans to make an investment of nearly USD 140 billion for major infrastructure developments in the country by 2028. In 2019-20, the government was in plans to approve investments valuing USD 5.6 billion for new infrastructure projects in the country.
- The Middle East and African region are projected to be the fastest-growing region. Countries in the Gulf Cooperation Council (GCC) have suffered from the weakness in oil prices in recent years, greatly reducing government revenues. As oil prices pick up, large-scale investments in infrastructure projects will be a key driving force behind the construction sector's growth in the region.
- Owing to all above mentioned factors, the demand for base metals is expected to surge during the forecast period.
Asia-Pacific Region to Dominate the Market
- The Asia-Pacific region is projected to be the largest market for base metals during the forecast period. The increasing investments in the construction industry, rising electrical and electronics production, and surging demand for heavy equipment, with multinational companies investing in the industrial sector, are some of the major factors driving the demand for base metals in the region.
- China emerged as the largest construction market in the world. As the government planned to focus on improving the infrastructure in small and medium-sized cities, the construction industry was projected to maintain a continuous growth of around 5%, annually. The country is investing USD 1.43 trillion in the next five year till 2025, in major construction projects. According to National Development and Reform Commission (NDRC), Shanghai plan includes the investment of USD 38.7 billion in next three years, whereas Guangzhou has signed 16 new infrastructure projects with and investment of USD 8.09 billion.
- Demographics in China is expected to continue to spur the growth in residential construction. Rising household income levels combined with population migrating from rural to urban areas is expected to continue to drive demand for residential construction sector in the country.
- China is also the largest manufacturer of automobiles in the world. Even though the Chinese automotive market declined in 2019, the electric vehicle segment witnessed huge growth. In April 2020, the Ministry of Finance of the People's Republic of China has issued a notice on ways to promote financial subsidies for new electric vehicles. It stated that new EVs purchased between January 1, 2021, and December 31, 2022, would be exempted from vehicle purchase tax.
- India, has been largest market for automobile industry. However, the recent decline in the automotive industry may hinder the market in the country. According to OICA, in India, the total number of vehicles produced in the year 2019 was around 4.5 million and the total number of vehicles sold was around 3.8 million. In 2020, the production declined abot 25% to 3.4 million. Simiraly, sales declined about 23% to 2.9 million over previous year.
- Furthermore, Indian Railways operates one of the world's largest rail networks, with a route length of 1,23,236 kilometres and 13,523 passenger trains and 9,146 freight trains transporting 23 million passengers and 3 million tonnes of freight per day from 7,349 stations. Recent developments and government initiatives in railways in India may boost the market studied. As per Union Budget 2020-21, Ministry of Railways have been allocated INR 72,216 crore (USD 10.33 billion). Thus boosting the base metals market in automobile and transportation.
- Copper, tin, nickel, and aluminum are some common metals used by the electronics industry. The Asian region is the largest producer of electrical & electronics across the globe with countries such as China, Japan, South Korea, Singapore, and Malaysia dominating at the global level.
- In the electronics segment, China generated the highest revenue globally which was around USD 173 billion, and the total revenue of the region amounted to USD 227 billion by 2019 and is expected to reach more the USD 260 billion by 2024.
- In Japan, total sales of electronic devices in 2019 were about 253.6 million units generating revenue of USD 43.38 billion. According to JEITA (Japan Electronics and Information Technology Association), despite a strong performance by telecommunications infrastructure equipment in 2020, Japanese electronics industry domestic production fell 5% year on year to YEN 9,789.6 billion due to a slump in electronic components and devices for domestically produced equipment and automobiles as a result of COVID-19.
- Hence, all such favorable trends and investments in the region are expected to drive the demand for base metals during the forecast period.
The global base metals market is fragmented. The major companies in the market studied include Glencore, Freeport-McMoRan, Alcoa Corporation, Lundin Mining Corporation, and BHP, among others.
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