The Bounce Back of Base Metals in 2020

As the base metals markets collapsed and subsequently rebounded in 2020, BNP Paribas was able to support its clients navigate the turbulent conditions.

As the base metals markets collapsed and subsequently rebounded in 2020, BNP Paribas supported its clients navigate the turbulent conditions. For its dominance and expertise in this market, BNP Paribas was awarded Base Metals House of the Year.

Base Metals House
Base Metals House

The year 2020 was an exceptional one for financial markets given the global effects of the pandemic. Rising trade tensions and concerns surrounding weaker global growth weighed on base metals at the start of the year. The market saw a sharp risk-off move and flight to safety as lock-downs begun and manufacturing activity halted. This resulted in a collapse to multi-year lows by the end of the first quarter.

The super-charged v-shaped recovery that followed was spear-headed by China. Its stimulus package with a focus on construction and infrastructure channels led the strong rebound in activity and consumption. The speed of China’s recovery versus the world saw the economy turn to the international market for supply. The country imported record amounts of copper and reverted to net aluminium importer for the first time in over a decade. The accelerated recovery continued throughout the second half of 2020, with a cocktail of Central Bank stimulus support, positive vaccine news and optimism around the reopening of the global economy all boosting base metals prices higher.

All this lead to an extraordinary year for the base metals market. BNP Paribas is a dominant player in base metals markets and was able to support clients across the board. The bank was able to provide clients with a wide-ranging suite of products and bespoke solutions to its clients globally. This proved invaluable to clients in one of the most turbulent years in recent history, as noted by Energy Risk.

Transitioning to a greener economy

Since the outbreak, Governments globally have rolled out unprecedented fiscal stimulus packages, many, tied to infrastructure spending and green investment. Their commitment to the energy transition and carbon neutrality is evident. Post-pandemic infrastructure demand, driven by investment in renewable energy and cleaner technologies, is likely to continue to underpin base metals demand and prices. As a leading player in sustainability, BNP Paribas meets this growing trend and supports clients with their energy transition strategies.

In 2020, BNP Paribas continued to serve the automotive industry in managing their price risk on electric vehicle (EV) batteries, notably on longer-dated nickel. In addition, BNP Paribas has been working with renewable energy providers. The bank brings together Credit, Coverage and product teams to approve longer-dated credit facilities to those companies working with hydro and wind powered generators. The bank has also been able to effectively risk-manage these longer-dated aluminium programmes, both via swaps and options for over 5000 lots of aluminium.

China fuelling the metals market

China remains one of the key hubs for metals markets. The increase in China’s infrastructure sector is driving rising demand for base metals. BNP Paribas continues to invest in China and over the last year has made a transformational shift in its offering. BNP Paribas’ China entity has introduced seven new metals products. As a result, the bank has been able to support its base metals clients on a global scale. Furthermore, BNP Paribas is one of the few banks that can trade both the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) metals markets both in derivatives as well as in physical. This capability positions BNP Paribas well when it comes to high-touch transactions that require knowledge and expertise across various product types and jurisdictions.

Read all of BNP Paribas’ awards wins at the Energy Risk Awards 2021.

Related solutions

Commodity Derivatives

With a global footprint and over 30 years of expertise in the commodities market, we are one of the few banks in the world with a long term commitment to the growth of our commodity derivatives franchise bringing innovative and ground breaking solutions to clients worldwide.

Global Macro

Global Macro offers the full spectrum of products across FX, Rates and Commodities in both developed and emerging markets, from millisecond electronic trading supported by the most advanced AI platforms, through to long dated, high touch solutions.