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Commodity Super-Cycle and Decline

Metals are the new oil — with all the geopolitical and environmental complications – by Daniel F. Runde (The Hill – February 11, 2023)

https://thehill.com/

For good or for ill, metals are the new oil. We need more “rare earths” and “everyday earths” to build the technologies of the future and make real a carbon transition. The geopolitics around mines, minerals, and the processing of metals are heating up. For that reason, the U.S. needs a more sophisticated strategy to ensure that the U.S. and our allies have access to mines and minerals.

The amount of minerals needed for a carbon transition will require a vast expansion of mining and the processing of minerals. For example, given current technologies and techniques, we will need to increase the production of cobalt and lithium by 40 times for the electric batteries needed to move from internal combustion engines to electric vehicles.

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Investors Face Growing Commodities Risk Lurking in ESG Funds – by Alastair Marsh (Bloomberg News – February 12, 2023)

https://www.bnnbloomberg.ca/

(Bloomberg) — The dark side of ESG investing has the potential to undermine a whole generation of clean-tech strategies.

Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, said the risks posed to the renewables boom via the mining industry aren’t getting nearly enough attention. The upshot, according to the 47-year-old, is that portfolios intended to uphold environmental, social or good governance principles may end up being exposed to human-rights abuses and environmental damage via supply chains.

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Column: Analysts wary of base metals after China recovery rally – by Andy Home (Reuters – February 1, 2023)

https://www.reuters.com/

LONDON, Feb 1 (Reuters) – Base metals have enjoyed a strong start to the year, the London Metal Exchange (LME) index rising by 9.4% over the course of January on high hopes for China’s post-COVID reopening.

However, analysts are cautious that China’s recovery may not live up to bullish expectations and that prices have got ahead of themselves, judging by the latest Reuters base metals poll.

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Mega Miners Are Hunting for Deals After Decade on the Sidelines – by Thomas Biesheuvel, Dinesh Nair and Jack Farchy (Bloomberg News – January 17, 2023)

https://www.bnnbloomberg.ca/

(Bloomberg) — In the rush of the 2000s commodities boom, the world’s biggest miners earned a reputation as swashbuckling dealmakers, taking on rivals in an onslaught of hostile offers, massive mergers and vicious bidding wars.

Then it all fell apart. A series of disastrous transactions meant balance sheets got shredded, bosses got fired and investors were furious. And so, for the past decade, miners have focused on mining and the mega deals mostly dried up. But now their penitence is over.

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The commodity supercycle is already crashing, blunting Canada’s growth and bruising the TSX – by Tim Kiladze and Niall McGee (Globe and Mail – July 22, 2022)

https://www.theglobeandmail.com/

A sharp reversal in commodity prices – hitting everything from copper, to crude oil, to wheat – is sapping investor enthusiasm for the resource sector and dismantling predictions of a supercycle that would immediately reshape the global economy.

As in many speculative booms, rising interest rates are largely to blame for the pullback. But investors are equally culpable, after they fell for age-old commodity price hype – no matter how many times they’ve already been burned.

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Explainer: Price surge prompts regulators to peer into commodity hinterland – by Huw Jones and Pratima Desai (Reuters – July 18, 2022)

https://www.reuters.com/

LONDON, July 18 (Reuters) – Spikes in energy and grain prices following Russia’s invasion of Ukraine in February, coupled with the suspension of nickel trading on the London Metal Exchange in March due to a disorderly market have prompted regulators to take a closer look at the commodities sector.

WHAT ARE THE CONCERNS?

There are many. A surge in food and energy prices has pushed inflation to the highest levels in decades, piling financial strain on households and political pressure on regulators.

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Column: China’s sluggish commodity imports set to improve, but risks abound – by Clyde Russell (Reuters – July 14, 2022)

https://www.reuters.com/

LAUNCESTON, Australia, July 14 (Reuters) – China’s imports of most major commodities were unabashedly weak in June, but the soft outcome is more of a history lesson than a pointer to future demand in the world’s biggest buyer of natural resources.

Crude oil imports slumped to a near four-year low in June, coming in at 8.72 million barrels per day (bpd), down 19% from May and 11% below the level in June last year, according to data released on Wednesday by the General Administration of Customs.

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White-hot metal market cools in warning for global economy – by Archie Hunter and Mark Burton (Bloomberg News – July 6, 2022)

https://www.bnnbloomberg.ca/

A white-hot corner of the aluminum market that for months defied a broader slide in metal prices is finally slumping, flashing a warning that major industrial economies are stumbling toward a recession.

While commodity-grade aluminum ingots have been tumbling since March on the London Metal Exchange, until recently the premiums paid for specialized products like billets remained sky-high.

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Russia targeting commodities in its war with Ukraine to create food shortages, break West’s resolve – by Mark MacKinnon (Globe and Mail – July 1, 2022)

https://www.theglobeandmail.com/

The day after a Russian missile struck a Canadian-owned vegetable oil terminal in this southern Ukrainian city, police sealed off the surrounding streets, fearing the Russians might strike it again.

Forty-eight hours after the June 22 attack, the police were gone, and local residents rushed to fill plastic jugs from the shallow stream of vegetable oil that was mixing with dirt and trash in a gutter behind the facility.

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Column: Metals melt down as recession fears overwhelm supply woes – by Andy Home (Reuters – July 4, 2022)

https://www.reuters.com/

LONDON, July 4 (Reuters) – Industrial metals have gone from boom to bust in the space of only three months. In March the London Metal Exchange (LME) suspended its nickel contract after the price spiked to more than $100,000 per tonne. Three-month nickel is now trading around $22,500, pretty much back where it was before the descent into chaos.

Copper, aluminium, zinc and tin all hit record price highs in March. Lead was the only LME base metal to miss out on the super-bull party. After the March melt-up, however, industrial metals are now in meltdown. The LME Index has just experienced its sharpest quarterly fall since the global financial crisis.

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Global recession fears wreak havoc on industrial metals, but industry better poised for long downturn, strategists say – by Nial McGee (Globe and Mail – June 27, 2022)

https://www.theglobeandmail.com/

Fears over a pending global recession are causing carnage in the industrial metals market, but the sector is better prepared than in the past to withstand a prolonged downturn, strategists at Morgan Stanley say.

Nickel, tin, zinc, and metallurgical coal and copper all tumbled last week and are trading far from their peaks. Copper is down 25 per cent from its all-time high of US$5.02 a pound reached in March. Tin has lost 44 per cent of its value in the same timeframe to trade at US$26,985 a ton.

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Mining Firms’ Cautious Spending Threatens Shift to Green Energy – by Amrith Ramkumar (Wall Street Journal – June 19, 2022)

https://www.wsj.com/

Metals prices are up, but mining companies aren’t spending. Their restraint could keep supplies tight and magnify shortages of raw materials such as copper and zinc that are critical for the transition away from fossil fuels.

Project spending by 10 large mining companies, including Rio Tinto PLC, RIO +1.29% BHP Group Ltd. and Glencore PLC, GLNCY 4.61% is expected to stay at roughly $40 billion this year and next year, according to figures compiled by Bank of America Corp. That would put capital expenditures well below a 2012 peak close to $80 billion, the bank’s figures show.

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World cannot allow Russia, China to dominate critical minerals market: Wilkinson – by Mia Rabson (Victoria Timines Colonist/Canadian Press – June 16, 2022)

https://www.timescolonist.com/

OTTAWA — The strategic mistake made in allowing Russia to have global dominance in oil and gas cannot be repeated as the world looks to massively ramp up production of critical minerals, Natural Resources Minister Jonathan Wilkinson asserted this week.

Demand for critical minerals and metals — such as lithium, graphite, nickel, cobalt and copper — is exploding as demand climbs for everything from smartphones and laptops to wind turbines, solar panels and electric cars.

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Plunging metals prices expected to rebound in H2 – report – by Henry Lazenby (Northern Miner – May 6, 2022)

Global mining news

Enduring Covid-19-linked lockdowns in the world’s largest metal consumer, China, are negatively impacting demand from end-use industries and sentiment towards the complex, resulting in lower metals prices, a new report by Fitch Solution Country Risk & Industry Research notes.

Nevertheless, market analysts at Fitch maintain their 2022 metal price forecasts as prices generally remain above levels seen before the Russia-Ukraine conflict. Fitch analysts also expect Chinese demand to eventually pick up in the second half, which will bring more stability to metals prices.

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Russia Struggles to Find New Buyers for Commodities as Europe Severs Links – by Georgi Kantchev (Wall Street Journal – May 5, 2022)

https://www.wsj.com/

With Europe weaning itself off Russian oil, natural gas and coal, President Vladimir Putin has ordered a full-scale reorientation of Russia’s commodity exports by shipping more cargoes to Asia, building new pipelines and expanding railroad links to the East.

But in redrawing its exports map, Moscow faces significant hurdles, putting its sanctions-stricken economy further at risk. European Union officials this week are preparing a sixth round of sanctions that aim to undercut Russia’s energy exports.

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