Theme of the Day: Metal prices surge as supply pressures intensify – World Bank

Metal prices are surging again. The World Bank Group’s metals and minerals price index has jumped by about 20% since the start of the year, reaching a record monthly nominal high in May. The surge has been driven by intensifying supply pressures amid resilient demand. Disruptions linked to the conflict in the Middle East, operational setbacks, and policy-driven output limits in major producing countries have raised concerns about near-term supply shortfalls. The base metal price index is projected to reach all-time highs in 2026, led by aluminium, copper, and tin, before easing in 2027 while remaining near record levels. Iron ore is an exception: its price is expected to fall below its 2020 level in 2026–27, reflecting ample supply. Risks to the baseline forecast are tilted to the upside. Fresh production disruptions, new trade restrictions, or stronger-than-anticipated growth in data centre demand could push prices above baseline projections, while weaker growth in major economies remains the main drag on demand. Supply constraints have become more pronounced. Base metal production contracted YoY in Q126, as the conflict in the Middle East compounded operational disruptions and policy constraints in key producing countries. Aluminium has been particularly affected, given that the Middle East accounts for about 7% of aluminium seaborne trade and the sector’s high energy intensity. Meanwhile, China - which accounts for about 60% of global output - is nearing its self-imposed 45Mt annual production ceiling intended to curb emissions. If maintained, the cap would limit further growth in global aluminium production. Copper supply growth has also been constrained by disruptions at major mines, including Indonesia’s Grasberg mine, where output is expected to recover only gradually through late 2027. Tin supply faces similar headwinds, reflecting regulatory and operational challenges in major producing countries and limited new mining capacity. Supply conditions are expected to be more favourable for lead, zinc, nickel, and iron ore. Lead and zinc supply are projected to expand modestly over 2026–27, while nickel continues to benefit from rising production in Indonesia, which accounts for about 60% of global mine output. Iron ore remains the clearest exception to broader supply tightness, with ample availability supported by rising output in major exporters and new capacity from the Simandou mine in Guinea. Demand has remained resilient despite slowing global growth. Demand growth for base metals is expected to remain solid, particularly for aluminium and copper, which are widely used in clean energy technologies and digital infrastructure. This resilience partly reflects rising investment in renewable energy and power grids, as well as the rapid expansion of other metal-intensive end uses, including EVs, AI-related data centres, and defence-related manufacturing. These sources of demand have helped to partly offset weak construction-related demand, especially from China’s property sector downturn and subdued residential construction in several advanced economies. Base metal prices are set to reach record highs. The World Bank’s metals and minerals price index is projected to rise by 17% in 2026 - well above the increase of less than 1% expected in Jan - and reach an all-time high, before declining by 7% in 2027 as supply conditions gradually normalize. Aluminium, copper, and tin prices are all expected to hit record annual highs in 2026, each rising by about 20%, supported by resilient demand and persistent supply constraints. Nickel prices are forecast to increase by 12% and zinc prices by about 5%, while lead prices are expected to decline slightly. By contrast, iron ore prices are projected to fall in both 2026 and 2027, dropping below their 2020 levels as ample supply continues to outpace weak demand. Risks to the price outlook are tilted to the upside. Further supply disruptions linked to the conflict in the Middle East - including through higher energy costs - along with mining setbacks or new trade restrictions, could push prices above baseline projections. Aluminium is particularly exposed, given the Middle East’s role as an important supplier and the sector’s high energy intensity. Copper and nickel could also face pressure from disruptions to key processing inputs, including sulphur/sulfuric acid, amid Middle East supply disruptions and China’s restrictions on sulfuric acid exports. Stronger-than-expected investment in AI-related data centres would further lift demand for aluminium, copper, and other metals. The main downside risk is weaker-than-expected global growth, especially in China, which accounts for ~half of global base metal consumption.