GLOBAL ECONOMY 2026: THREE SCENARIOS AND THE OUTLOOK FOR INDUSTRIAL METAL PRICES

As the world enters 2026, the global economy stands at a critical crossroads. After more than three consecutive years marked by high inflation, aggressive monetary tightening, and repeated geopolitical shocks, the global landscape is gradually shifting from a state of “crisis management” toward one of “adaptation.” Yet this adaptation is uneven across regions and far from forming a straight-line recovery. For investors, particularly those closely following commodities and industrial metals, 2026 is not simply a story of rising or falling prices, but fundamentally a story of scenarios.

Three broad scenarios dominate discussions among international institutions, investment banks, and market analysts. The first is a baseline scenario of moderate growth with slowly easing inflation. The second is an upside scenario in which geopolitical tensions cool and the global industrial cycle gains renewed momentum. The third is a downside scenario where geopolitical escalation triggers renewed cost shocks and raises the specter of stagflation. Across all three, industrial metals such as copper, aluminum, steel, and zinc act as economic barometers, reflecting growth expectations, supply–demand dynamics, and the degree of global instability.

The Baseline Scenario: A Soft Landing and a Cautious Growth Cycle

The scenario currently considered most likely is one in which the global economy achieves a soft landing after a prolonged period of monetary tightening. According to medium-term forecasts by institutions such as the IMF and the OECD, global growth in 2026 could hover slightly above 3% below long term averages but sufficient to avoid a broad based recession. Inflation, while past its peak, has not fully disappeared, especially in advanced economies where services costs and wage pressures remain persistent.

In this environment, major central banks such as the Federal Reserve and the European Central Bank are expected to continue easing policy gradually, but with caution. Interest rates may decline, yet they are unlikely to return to the ultra-low levels seen before the pandemic. This creates a financial backdrop that is more accommodating for businesses, but not one that ignites an investment boom comparable to the period from 2010 to 2019.

For industrial metals, this baseline scenario produces clear differentiation. Copper, closely tied to electrification, renewable energy, and digital infrastructure, continues to benefit from structurally strong demand. The rapid expansion of artificial intelligence, data centers, smart grids, and electric vehicles makes copper a near-irreplaceable material. At the same time, copper supply remains vulnerable, facing declining ore grades and recurring disruptions at major mines in Latin America and Africa. As a result, even under moderate global growth, copper prices are likely to remain elevated and highly sensitive to any signals of supply tightening.

Aluminum also enjoys a relatively constructive outlook, though its bullish case is less pronounced than copper’s. Aluminum production is highly energy-intensive, making prices strongly dependent on electricity costs and environmental regulations. As many countries tighten emissions standards and restructure global aluminum supply chains, the risk of localized shortages increases. Under the baseline scenario, with energy prices broadly stable and industrial demand intact, aluminum prices are supported by a combination of structural constraints and steady consumption.

Steel and zinc, by contrast, reflect the more cautious side of the economic cycle. Steel demand remains heavily dependent on construction and traditional infrastructure investment, particularly in China. Although global steel demand is expected to recover modestly in 2026, persistent overcapacity and fierce export competition limit the scope for sustained price increases. Zinc, primarily used for galvanizing steel and in construction-related applications, faces additional pressure from expectations of surplus supply, making its price outlook comparatively less attractive in the baseline case.

The Upside Scenario: De-escalation, Recovery, and a New Commodity Cycle

The upside scenario, while less probable, is the one most eagerly anticipated by commodity investors. In this case, global geopolitical tensions ease meaningfully. The conflict between Russia and Ukraine either de-escalates or becomes a long-term frozen conflict, the Middle East avoids regional escalation, and political stability improves across parts of Latin America. These developments would significantly reduce geopolitical risk premiums embedded in energy, freight, and raw material prices.

Crucially, China, the world’s largest consumer of industrial metals, would experience a clearer economic rebound. Fiscal and monetary stimulus measures gain traction, business and consumer confidence improve, and manufacturing and investment activity regain momentum. A stronger China would generate powerful spillover effects across emerging Asia, Latin America, and Africa.

Under this scenario, copper would almost certainly emerge as the star performer among industrial metals. Demand would rise simultaneously from traditional infrastructure and high-tech sectors, while supply remains constrained by structural challenges. This combination could push copper prices into new highs. Aluminum would also benefit on two fronts: rising industrial demand and the ongoing shift toward lightweight, recyclable, and environmentally friendly materials.

Steel, often undervalued in the baseline scenario, would see more meaningful improvement in this upside case. A revival in construction and infrastructure spending in China, India, and other developing economies could lift steel demand beyond conservative forecasts. Even so, structural overcapacity and policy constraints on exports would likely prevent steel prices from surging uncontrollably.

Zinc, typically lagging copper and aluminum, could find an opportunity to escape the shadow of surplus supply if construction and automotive demand recover more strongly than expected. Nevertheless, zinc would likely remain less attractive than copper in a long-term investment context.

The Downside Scenario: Geopolitical Shocks and the Return of Stagflation Fears

The most adverse scenario, though not the base case, cannot be ignored by policymakers or investors. In this scenario, one or more geopolitical flashpoints escalate simultaneously. The Middle East descends into a broader regional conflict threatening oil shipments through the Strait of Hormuz; fighting between Russia and Ukraine intensifies; or political instability spreads across Latin America, disrupting supplies of oil and key metals.

The immediate consequence would be a global cost shock. Energy prices surge, transport costs rise sharply, and supply chains are once again disrupted. Inflation resurfaces at a time when economic growth is already weakening, forcing central banks to keep interest rates higher than desired. This is the classic environment for “mild stagflation,” particularly dangerous for advanced economies.

Industrial metals would react in uneven ways. Copper could experience a two-phase response: an initial surge driven by supply disruption risks and a flight to tangible assets, followed by a sharp correction if global growth deteriorates significantly. Aluminum would face conflicting forces, with rising energy costs supporting prices while weakening demand exerts downward pressure. Steel and zinc would be the most vulnerable, given their strong dependence on construction and investment cycles that tend to stall when interest rates remain high and confidence erodes.

2026 Is a Year of Strategy, Not Simple Forecasts

The common thread across all three scenarios is elevated uncertainty. The year 2026 is unlikely to follow a linear path; instead, it will be shaped by sudden shifts and competing forces. For investors and businesses in the industrial metals sector, the key challenge is not merely predicting prices, but building flexible strategies that can adapt to different outcomes.

In the baseline scenario, copper and aluminum remain core holdings due to their structural demand drivers. In the upside scenario, they become the main beneficiaries of a renewed global commodity cycle. In the downside scenario, defensive positioning and risk management take precedence, especially for cyclical metals such as steel and zinc.

Ultimately, 2026 poses a larger question than where metal prices will go. It asks whether the global economy will move toward stability, recovery, or renewed turbulence. The answer to that question will shape not only the trajectory of industrial metals, but the future of the global industrial value chain itself.

Sources: Financial Times, Reuters, IMF, IEA, and compiled from the internet.