Latin America Biannual Construction Market Report 3Q/4Q 2024

Global tensions/commodities

Metals

Copper

In our previous report, we noted the rally of copper prices reaching a two-year high. Since then, a new record London Metal Exchange (LME) official settlement price of $10,857/t was set on 20 May 2024, with COMEX trading even higher. Copper production in Chile, the world’s biggest supplier of the wiring metal, is showing signs of recovering from 20-year lows.

Demand for copper continues from growth in developing countries for household items such as the growing use of air conditioners. The switch to renewable energy and net zero targets are also driving demand. Electric vehicles, for instance, are three times as copper-intensive as internal combustion engine vehicles.

According to estimates by BHP, the world will require about 10 million metric tonnes per year (mtpa) of copper supply over the next 10 years, including mine life extensions and replacement for depletions. The world’s largest mining company, though, is staying cautious in the short term, adjusting its forecast for Chinese demand and predicting a slight surplus through late 2025.

Indeed, in September, Goldman Sachs slashed its 2025 forecast for copper pricing by a third, as the fall in Chinese demand clouds the profit outlook for leading miners.

The US bank cautioned that any hopes of a rally in the copper market would not materialise as China’s real estate woes depress demand for commodities. It now expects copper to average $10,100/t next year, significantly lower than its prediction earlier this year that it would hit an all-time high of $15,000.

Zinc

According to a mid-term report by the International Lead and Zinc Study Group (ILZSG), global zinc mine production fell by 3.4% year-on-year in the first half of 2024. This is largely attributed to lower output in Canada, China and Peru, where production at the large Antamina mine declined during the first six months of the year.

Consequently, Reuters notes that this year is expected to be the third consecutive year of decline. A lack of raw materials has constrained smelter production in key producers such as China.

Despite the squeeze on raw materials, a surplus of Zinc supply continues. LME stocks of zinc grew by 132,000 tonnes from January to June 2024.

While pricing remains up on the start of the year — partly driven by investor narrative on raw materials supply — current weak demand levels from the construction industry in Europe and China could well curtail price growth.

Gold

Gold’s surge in pricing shows no signs of abating this year. ING believes upward momentum will continue with the right foundations in place, such as a weaker dollar and September's long-waited rate cut by the US Federal Reserve.

Indeed, amid concerns about weak US job openings data, a slowing economy could lend itself to a further cut. Bullion tends to thrive in a low-interest-rate environment, as it offers no interest of its own and is free from credit risk.

A notable trend this year is the volume of gold purchased by central banks globally — a record amount throughout the first half of the year, according to the World Gold Council.

November will be keenly anticipated by investors, as the US election result could accelerate gold's upward momentum as the year draws to a close. Analysts expect gold prices to trade above USD 2,500/oz by mid-2025.

Silver

As with gold, silver pricing is set to benefit from lower interest rates set by the US Fed, which tend to reduce the opportunity cost of holding non-yield-bearing bullion assets. Silver typically follows any rises in the price of gold, as their status as safe-haven assets is similar.

Demand for silver is expected to grow as the world shifts to renewable energy. According to the University of New South Wales, solar manufacturers will need more than 20% of the annual silver supply by 2027. It expects 2050 solar panel production to comprise 85%–98% of global silver reserves.

This comes against the backdrop of production levels falling in Mexico — the world’s largest silver producer. Environmental, labour and political activism are taking a toll and the Mexican government recently overhauled mining laws. Consequently, shorter concessions and tighter rules for permits are causing silver reserves to dwindle.

Another supply concern to watch is the rising influence of China in South America. Peru’s trade with China has doubled over the last decade, reaching $33 billion in 2022 — primarily driven by rising copper exports, but additionally silver as a by-product at the Antamina mine.

Oil

Oil prices are likely to remain under pressure amid concerns about a weak global economy and soft data from China — the world's biggest oil importer. Consequently, the balance of oil is set to remain in surplus throughout 2025.

All eyes will be on the US election in November, as a Trump victory could result in the US taking a more hawkish view against Iran once again, leading to stricter enforcement of oil sanctions. ING notes that this could potentially see as much as 1.3 million barrels per day of Iranian supply impacted, which would allow other OPEC+ members to unwind their additional voluntary cuts.

Indeed, last month OPEC+ members agreed to delay increasing outputs after crude prices hit their lowest level in nine months. The voluntary production cuts of 2.2 million barrels per day will now extend until the end of November 2024.

Last month’s Oil Market Report by the International Energy Agency underlines general oversupply fears and a rapid deceleration in demand. Gains of 800 kb/d year-on-year in the first six months of 2024 are the lowest levels since 2020. China’s reduced demand and “surging” EV sales are highlighted as primary headwinds.

Impacts of conflicts

Just under a quarter of our survey respondents said they had experienced impacts on their projects from conflicts outside of Latin America in the last six months. Issues reported include freight price increases and some product availability problems.

There are concerns that an escalation of tensions in the Middle East could impact oil and liquified natural gas (LNG) pricing as a fifth of global oil passes through the Strait of Hormuz, along with a similar percentage of global LNG.

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