Barrelled over: Can the world cope without Russia’s huge commodity stash? (The Economist – March 12, 2022)

https://www.economist.com/

High prices will outlast the war

In 1866 nikolai nekrasov, a Russian author, started publishing “Who is happy in Russia”, a four-part poem describing how the abolition of serfdom, enacted a few years before, had failed to enrich most peasants. “The chain has been broken,” its first chapter concludes, and the recoiling ends have hit both sides at once.

A century and a half later his verses are a parable for the ostracism of Russia—and its likely fallout. Crushing the world’s 11th-largest economy, comparable in size to Australia, should not necessarily cause global mayhem. But since Nekrasov’s time, and further still since the Soviet Union collapsed, the chain of dependence linking Russia to the world economy has strengthened and grown more complex.

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Lessons from the 1970s: war in Ukraine to ‘reshape commodity markets for years to come’ – Capital Economics – by Anna Golubova (Kitco News – March 29, 2022)

https://www.kitco.com/

(Kitco News) If the lessons of the 1970s were to be applied to the current geopolitical situation, the commodity markets could be transformed by the war in Ukraine, according to Capital Economics.

“The experience of the 1970s suggests that the ongoing war in Ukraine and its effects on commodity prices will reshape commodity markets for years to come,” said Capital Economics commodities economist Kieran Clancy said in a report published Tuesday. The long-term consequences that stand out include demand destruction and new energy independence goals.

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Full metal jackpot: The transition to clean energy will mint new commodity superpowers (The Economist – March 26, 2022)

https://www.economist.com/

We look at who wins and loses

In mid-february Russia seemed on the verge of a revolution with a distinctly reddish tint. Alisher Usmanov, an oligarch, was developing Udokan, a copper mine in Siberia that required removing an entire mountain top. In the Arctic tundra Kaz Minerals, a mining firm, had raised enough cash to build Baimskaya, a rival mine so remote that it needed its own port, icebreaker and floating nuclear plant.

For years the projects had been put on hold because of their immense costs. But expectations of soaring demand for copper, used in everything from grids to turbines, had boosted prices of the auburn metal, making the mines viable.

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War Sparks Wall Street’s Rush to Commodity-Rich Emerging Markets – by Sydney Maki and Netty Ismail (Bloomberg News – March 27, 2022)

https://www.bnnbloomberg.ca/

(Bloomberg) — As the worst quarter for emerging-market dollar bonds in 24 years comes to an end, a deep divide is opening up as investors focus their hopes on commodity exporters in the Middle East and Latin America.

The rapid rise in energy and food costs as the war drags on is weighing on the more vulnerable markets, becoming the latest surprise for money managers who went into 2022 expecting inflation to peak as the Federal Reserve embarked on its tightening cycle.

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War and sanctions have caused commodities chaos (The Economist – March 12, 2022)

https://www.economist.com/

Global commodity crises tend to cause severe economic damage and political upheaval. The oil shocks of the 1970s left Western economies with runaway inflation and deep recessions.

Oil revenues also helped prop up the Soviet Union and fuelled the export of Saudi extremism. Soaring grain prices in 2010 and 2011 were a trigger for the street protests that led to the Arab spring and the toppling of dictators.

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Is there a new supercycle in metals and minerals? – by Neil Hume (Financial Times – February 2022)

https://www.ft.com/

Low-carbon policies stoke demand for lithium, cobalt and copper, but investors must judge whether the boom will last

For years BHP has focused on investing in safe and stable countries such as Australia, Chile and Canada. But faced with the challenge of supplying the metals and minerals that will be needed in the shift to the low-carbon economy, the world’s biggest mining company is starting to take on more risk.

It has already taken a stake in SolGold, a London-listed explorer seeking to develop a huge underground copper deposit in Ecuador and last month threw its considerable weight behind a huge nickel project in a remote part of Tanzania as part of a strategy to “capture opportunities in future-facing commodities”.

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Miners Are Scouring the Earth Again as Reserves Dwindle – by David Fickling (Washington Post/Bloomberg – February 16, 2022)

https://www.washingtonpost.com/

Think your life has been unadventurous over the past few years, as the pandemic and closed borders have kept you bottled up at home? Spare a thought for the mining sector.

An industry built on the romance and horror of finding riches on the wild frontier — from the Klondike to Kimberley, Kolyma and Katanga — has for years barely needed to get out its passport.

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COLUMN-LME warehousers slash capacity as metal stocks drain away – by Andy Home (Reuters – February 17, 2022)

https://www.reuters.com/

LONDON, Feb 17 (Reuters) – Glencore’s decision to sell its warehousing and logistics business looks like a well-timed call on the metals storage market.

It bought Access World in 2010 in the wake of the financial crisis, which generated a surge of metal, particularly aluminium, into London Metal Exchange (LME) warehouses. Total LME inventory of all metals mushroomed from 3.41 million tonnes at the start of 2009 to a peak of 7.75 million in June 2013.

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Commodities traders brace for a war in Ukraine (The Economist – January 26, 2022)

https://www.economist.com/

Tight markets mean that prices are all too responsive to rising tensions

“IF RUSSIAN TANKS cross the border, markets will freak out.” That is the considered judgment of Helima Croft, head of commodity strategy at RBC Capital Markets, an investment bank, and a former analyst at America’s Central Intelligence Agency.

Were Russia to invade Ukraine, the biggest impact would first be felt on Europe’s gas markets. But Ms Croft is not alone in thinking that the shock waves would spread widely.

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Posthaste: ‘An impending supercycle’: Commodities are going gangbusters, but oil may sit out the big rally – by Yadullah Hussain (Financial Post – January 19, 2022)

https://financialpost.com/

Commodities were on fire in 2021 and there is no let-up this year amid low inventory levels, an investment squeeze hindering supply and soaring demand in emerging markets, according to a new report.

“We anticipate this demand leadership trend to continue over the next several years,” wrote Orest Wowkodaw, analyst at Scotiabank Global Equity Research, in a report titled ‘Tight commodity markets ahead of impending super cycle.’

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Metals Traders Brace for the Next Big Squeeze as Supply Dwindles – by Mark Burton (Bloomberg News – January 12, 2022)

https://www.bnnbloomberg.ca/

(Bloomberg) — Industrial metal markets are marching higher again, as production outages and shrinking inventories revive worries about global supplies of some of the key building blocks of the economy and the green-energy transition.

Metals from aluminum to zinc surged in 2021 after the pandemic hit production at mines and smelters, wreaked chaos in global logistics networks, and sparked a boom in demand. In both copper and tin, London Metal Exchange inventory levels collapsed in squeezes that drove spot prices to records in wild trading.

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Five charts ask if mining is in a supercycle, one screams no – by Frik Els (Mining.com – December 9, 2021)

https://www.mining.com/

COP26’s climate goals necessitate massive new investments in mining, but how does today’s boom stack up to the aughts? Supercycle or no? is a favourite parlour game in mining and there is no shortage of opinions and arguments on whether the industry can party like it’s the aughts or if the mid-2010 hangover is just around the corner.

The latest entry in the genre is by Julian Kettle, senior VP and vice chair of Woodmac’s metals and mining business (read it here). Kettle’s first exhibit in Supercycle demand. Are we there yet? would be rather dispiriting if you’re in the bull camp. (A bull? Me?)

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We can’t recycle our way to a green economy – by Alex Hamer (Investors Chronicle – December 7, 2021)

https://www.investorschronicle.co.uk/

The ‘green’ economy will need massive amounts of metals and while reusing materials such as copper, steel and aluminium are critical to global metals supply, there just isn’t enough scrap to keep up with demand. But there also aren’t a sufficient number of mines in development to keep up with forecast needs, especially as the metals-intensive energy transition ramps up.

One recently announced solar project in Australia demonstrates just how much copper the energy transition could need. Sun Cable plans to export electricity to Singapore from the Northern Territory through a 4,200km undersea cable.

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A new commodity squeeze could soon rival lumber’s recent historic shortage – by Mark Burton (Bloomburg News – December 1, 2021)

https://www.bnnbloomberg.ca/

Tin is in the grips of one of the longest-running squeezes ever seen in commodities markets, and there’s little sign of it letting up. A relatively small market — used mainly for soldering in electronics — tin is often overshadowed by metals like copper and aluminum that are more widely used in manufacturing, infrastructure and the green-energy transition.

This year, though, tin has been red hot. Demand is booming and supply is sputtering, creating a chronic shortage of metal that’s been exacerbated by global logistics snarl-ups.

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Faster decarbonisation: back to basics for the mining industry? – by Julian Kettle (Wood Mackenzie – November 2, 2021)

https://www.woodmac.com/news/

Julian Kettle is Senior Vice President, Vice Chair Metals and Mining at Wood Mackenzie.

To the uninitiated, rugby is a technical and complicated game. As young schoolboys it was all a wee bit confusing and we invariably ended up on the wrong side of the score line. However, we had a wonderful Welsh coach called Billy, who, when the chips were down, would always roll out his go-to phrase: “back to basics!”

These wise words seem quite pertinent right now. With COP26 underway, the world awaits tangible evidence that the huge expense and carbon footprint of the conference will be worthwhile. With that in mind, delegates do need to go back to basics in terms of what must be achieved: clear commitments that will put us on the pathway to net zero.

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