Base metals shine in wild 2021 as gold falters, iron ore sinks

Metals are heading for more drama after a tumultuous 2021 dominated by supply squeezes, China’s property-led economic slowdown, and a global energy crisis that hints at more disruptions to come.

This year saw copper hitting a record as the pandemic roiled supply and demand, but tin was the star performer as base metals marched higher.

Gold bulls were ultimately left disappointed even as inflation raged. And iron ore suffered a boom-to-bust collapse from above $200 a ton to below $100 on China’s waning appetite.  The contours of 2022’s other major drivers are already visible.  Dangerously low inventories was a theme across metals that will carry into next year - especially if the global economy continues to improve.

Beijing’s stimulus measures might put a floor under China’s steel woes, while US Federal Reserve (US Fed) tightening and stubborn inflation is a headwind elsewhere. Watch energy and the climate agenda, which should dominate aluminum in particular. 

“Base metals performed outstandingly well this year, which is not surprising as they effectively made up ground that was lost during 2020,” said Gavin Wendt, founding director at Mine Life Pty, adding, “Next year should see a continuation of overall positive demand, but with greater price volatility as the supply side recovers." 

Tin doesn’t normally get much attention, but it was the big winner and perhaps a poster-child for metals in 2021. Prices have nearly doubled from a year ago, with an electronics boom fuelling demand and Covid-19 disruptions crimping supply. The London Metal Exchange Index of six London-traded metals is heading for a seventh quarterly gain. Iron ore was among the big losers of 2021, with the apparent end to China’s era of frenzied construction dragging on prices.