Sluggishness in both the construction and manufacturing sectors is weighing on steel demand
Overall, sluggishness in the construction sector is negatively affecting the metallurgical industry, particularly steel. China has been a major driver of global construction activity in recent decades, but the country is currently experiencing a prolonged slowdown. The real estate climate index is at its lowest level, and construction starts in 2024 have halved since 2019. The Chinese government plans to reduce clinker production to 1.8 billion tons by 2025, anticipating a modest recovery. Consequently, the demand for steel will also be negatively affected.
In Europe, although housing demand is improving due to more a favourable interest-rate outlook, banks remain cautious owing to bankruptcies and doubtful receivables. Construction costs remain high, while labour shortages continue to curb activity. Demand for steel has weakened on back of sector morosity. In addition, the slowdown in manufacturing output is eroding demand for steel.
In the US, the expected recovery in housing demand should lead to an increase in building permits in 2025, supported by lower interest rates and rising housing prices. The construction of residential housing will increase the demand for building materials, including steel. Nevertheless, the Trump administration's recent customs barriers could have a negative impact on the metal sector, particularly by reducing steel imports.
Growing demand for minerals required for the energy transition and digital technologies is now inexorable. The electrification of vehicles, the expansion of renewable energy (wind, solar, storage), and the increase in data centres all represent key growth drivers for the demand for critical minerals (copper, aluminum, cobalt, etc.).
According to the International Energy Agency (IEA), depending on the scenarios put forward for greenhouse gas (GHG) emissions, the demand for strategic minerals is expected to double or triple by 2030, mainly on back of demand associated with energy transition technologies. Global copper demand is projected to grow by 40% by the end of the decade, with 120% of this demand coming from energy transition technologies (as traditional demand is expected to decline over the same period). The same applies to lithium, as the tripling of demand will be primarily driven by uses related to the energy transition.
As things stand, the international balance of power heavily favours China, which has firmly anchored its industrial strategy in controlling the mining and metallurgical value chain. Chinese companies are currently particularly dominant in the refining segment. For example, they account for nearly two-thirds of global refined lithium production, half of copper production, and more than 80% of rare earths.
The last two decades have seen few major copper discoveries, while exploration costs have skyrocketed, rising from USD91/ton in 2011 to USD802/ton in 2020. Mining companies are unable to meet the rapid growth in supply in the medium term. Miners' ability to replace operated mines is also stymied by a long production start-up schedule, with average lead times of 18 years for mines commissioned between 2020 and 2023 – a 40% increase over 20 years.
These processes are further extended by local socio-political issues such as environmental concerns, indigenous communities, and resource nationalisations, as well as rising production costs due to the increasing technical complexity of the deposits being exploited. Investments in brownfield projects and acquisitions remain a priority, but exploration and greenfield projects are lacking investment, which could lead to supply deficits in many raw material markets.
Mining companies must accelerate their growth while maintaining high levels of profitability. Restricted financing conditions and the macroeconomic context make funding more challenging. Market valuations are diverging on an increasing basis often due to portfolios focused on securing critical minerals for the energy transition, which is pushing companies to restructure their portfolios. As a result, we expect an increase in mergers and acquisitions aimed at refocusing on minerals essential to the energy transition. With a strong demand outlook for copper, further consolidation of copper assets is anticipated. This was demonstrated by the USD 3 billion acquisition last year of Filo Corp. in Argentina by BHP and Lundin Mining, following BHP's failed negotiations with Anglo-American. Mining companies are also divesting certain non-strategic or high-growth assets, such as Platinum Group Metals (PGMs).
Steel – We forecast steel production increase of less than 1% y-o-y in 2025 (+0.3% y-o-y in 2024). Steel production will remain resilient in certain developing economies such as India, which is the world's second-largest steel producer. However, risk factors prevail due to the softening of the macroeconomic context and key sectors (e.g., construction). The effects of the new US trade barriers are difficult to assess at the moment. We expect a further decline in global steel consumption of 1% y-o-y, following -0.2% y-o-y in 2024 and a contraction of 1% in 2023. As a result, we maintain our forecast at around USD 600 per ton for 2025, on average for the year, close to 2024 levels.
Aluminum – Global aluminum production is expected to increase by 2% y-o-y in 2025 to reach 74.5 million tons. In China, improved weather conditions in the Yunnan hydroelectric region should significantly boost global production capacity. Due to the energy transition, particularly the electrification of vehicles where aluminum is used as a lighter substitute for steel, demand is expected to grow by 3 to 4% y-o-y. Aluminum demand will also be supported by the packaging industry, where producers are seeking to use aluminum instead of more traditional packaging materials as part of a sustainability initiative. In 2025, we forecast a significantly smaller surplus compared to 2024, as supply tightens. We therefore expect prices to rise by 5% y-o-y in 2025.
Copper – In 2024-2025, the copper market will remain in surplus due to increased production in China and the Democratic Republic of Congo (DRC). Refined copper production is expected to grow by 3% annually in 2025 (vs. +3% annually in 2024). We forecast that global refined copper consumption will increase by 2.5% annually in 2025, respectively, but the increase will be curbed by the moderate outlook in major markets. Copper prices are expected to slightly exceed USD 10,000 per tonne on average in 2025, representing an 8% annual increase. First, demand forecasts related to the energy transition and the supply-demand imbalance will keep prices above this symbolic threshold. Second, the potential slowdown of the energy transition under a Trump 2.0 administration, the persistent fragility of the Chinese real estate market and the difficulties facing the European industry are expected to act as headwinds for stronger rise in copper prices.
Nickel – Global nickel ore production is expected to increase by 6.5% y-o-y to reach 3.9 million tons in 2025. We anticipate robust growth in refined nickel production, with a further increase of 10% y-o-y in 2025. Production growth in Indonesia, which is the leading producer, will offset declines in other key production regions, notably Australia, Europe and New Caledonia. Global nickel demand is expected to increase by 7% y-o-y in 2025, compared with 5.5% yo-y in 2024) on back of growth in the stainless steel and energy transition sectors. As a result, we forecast that the nickel market will remain in surplus in 2025. The global market is saturated by production. We are expecting prices to stabilise to +2% y-o-y after plunging in 2024.
Metals
