Twitter

Commodity Super-Cycle and Decline

Column: Power is a double-edged sword for global metals sector – by Andy Home (Reuters – September 28, 2021)

https://www.reuters.com/

LONDON (Reuters) – The world will need a lot more of metals such as copper, nickel and aluminium if it is going to decarbonise. The potential “green” demand boom from more renewable energy, more power infrastructure and more electric vehicles is tomorrow’s promise for such “energy transition” metals.

Yet, as first China and now Europe is discovering, power is a double-edged sword for metals producers and manufacturers. A power crunch in China has idled over two million tonnes of the country’s aluminum production capacity.

Read more

‘A wild time’: Why commodities are in a supercycle of volatility – by Gabriel Friedman (Financial Post – September 22, 2021)

https://financialpost.com/

For months, economists have debated why the price of so many commodities — from aluminum, iron ore and copper to natural gas and lumber — have been so volatile: Are these the first signs of structural shifts in supply chains related to the energy transition, or just temporary blips?

There’s consensus on a few points: The pandemic, by halting and then restarting supply chains, threw supply and demand fundamentals out of whack, and pushed many commodity prices up.

Read more

Mining stocks carnage as iron ore, copper prices fall – by Staff (Mining.com – September 20, 2021)

https://www.mining.com/

Iron ore extended its slump below $100 a tonne and copper prices dropped in New York on Monday as China stepped up restrictions on industrial activity and fears about the collapse of the country’s largest property developer intensified.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $92.98 a tonne, down 8.7% from Friday’s closing. Prices have collapsed about 60% since hitting a record in May, and are below three figures for the first time in more than a year.

Read more

Dawn of a mining supercycle. Are you taking the fizz? – by Frik Els (Mining.com – July 16, 2021)

https://www.mining.com/

Published on Thursday, a new Wood Mackenzie forecast for the green energy transition, or GET™ (a new MINING.COM trademark we’re making freely available) is, for good reason, already in wide circulation.

Written by global metals expert Simon Morris, VP for Research, Metals & Mining Global Metals, at the Scotland-based analytics firm, the whitepaper is titled: Champagne supercycle: Taking the fizz out of the commodities price boom

Scots may be known for their frugality, but at this website we don’t believe in taking the fizz out of anything so we decided to get on the wagon and take another look at Woodmac’s GET and planet decarbonisation predictions.

Read more

Doubting the commodity supercycle? It’s now a cheaper bet – by David Berman (Globe and Mail – July 14, 2021)

https://www.theglobeandmail.com/

Commodity prices have been struggling in recent weeks, pausing this year’s remarkable run on materials stocks and raising the question of whether the opportunity for investors has ended.

But some observers remain convinced that a commodities “supercycle” – an extended period of strong demand for raw materials – is continuing, offering a buying opportunity for anyone who missed the first stage of the rally.

“Although most of the world continues to battle the COVID-19 pandemic, rapidly increasing vaccination rates combined with revved-up economic stimulus has significantly improved the outlook (and sentiment) for commodities,” Orest Wowkodaw, an analyst at Bank of Nova Scotia, said in a report this week.

Read more

Commodities jump in 2021 as economies re-open – by Matthew Parizot (CIM Magazine – July 2, 2021)

https://magazine.cim.org/en/

Commodity metals have had a rough time over the past couple of years. A lengthy trade war between the United States and China during Donald Trump’s presidency, followed by a global pandemic that closed borders and shut down production in many countries did little to assuage the fears of worried economists.

In 2021, however, there has been cause for much more optimism. Prices for industrial metals such as copper and iron ore have set new all-time highs. Gold prices have continued to remain high.

Battery metals have seen increases in demand. Experts are theorizing as to whether the market has entered a new commodities supercycle. According to Marc Desormeaux, senior economist at Scotiabank, there are two main factors at play that have led to this rise in commodity prices.

Read more

Recent pullback in commodity prices divides analysts – by Tim Shufelt (Globe and Mail – June 21, 2021)

https://www.theglobeandmail.com/

The blistering run in resource prices has fizzled out over the past couple of weeks, raising doubts over whether a commodities supercycle is in the works.

What has been one of the hottest asset classes in the world coming out of the pandemic has run into a number of obstacles, including efforts by Chinese regulators to cool down commodity speculation, as well as a spike in the U.S. dollar.

The downturn has been widespread across precious metals, industrial metals, agricultural commodities and lumber, which has been an unlikely poster child of the commodity boom.

Read more

China’s Campaign to Control Commodities Goes Into Overdrive (Yahoo Finance/Bloomberg – June 16, 2021)

https://ca.finance.yahoo.com/

(Bloomberg) — China has stepped up its campaign to rein in commodity prices and reduce speculation in a bid to ease the threat to its pandemic rebound from soaring raw material costs.

State-owned enterprises were ordered to control risks and limit their exposure to overseas commodities markets by the State-owned Assets Supervision and Administration Commission, according to people with knowledge of the matter.

The companies have been asked to report their futures positions for Sasac to review, said the people, who asked not to be identified because the information is confidential.

Read more

Commodities send loonie soaring, creating quandary for Canada – by Theophilos Argitis (Bloomberg News – May 17, 2021)

https://www.bnnbloomberg.ca/

The broad rally in raw materials that’s lifted prices for crops, energy and metals is a bonanza for Canada’s economy and a major challenge for the nation’s policy makers, who are under pressure to ensure that everybody benefits.

Should the commodities boom hold, it would represent a windfall for the resource-rich nation endowed with oil, natural gas and vast lands to mine and farm. Export receipts are already at near a record and poised to go higher. The value of lumber shipments alone nearly doubled in the first quarter.

But Canada’s economy is already brimming with stimulus and may hit full capacity as early as this year, according to some economists.

Read more

Some analysts say ‘not so fast’ when asked whether this is a new supercycle – by Henry Lazenby (Northern Miner – May 13, 2021)

https://www.northernminer.com/

Economists are tracking a broad economic recovery across the globe that appears to be gathering momentum and commodity prices are trading at healthy-to-stratospheric levels amid recovering demand from the Covid-19 pandemic, escalating geopolitical tension between the world’s industrial juggernaut China and key mining nations like Australia, and circumstantial supply-side issues.

On May 12 iron ore prices surged to a record US$237.57 per tonne and copper broke out of a decade-long rut on May 7, as metal for delivery in July gained 3.2%, with futures trading at a record US$4.75 per lb. (US$10,470 per tonne) on the Comex market in New York, compared with the 2011 record of US$4.50 lb. (US$10,190 tonne).

Unprecedented infrastructure-focused stimulus packages add a new layer of incremental demand growth to already generally bullish commodity fundamentals, and in recent quarterly conference calls the world’s mining majors boasted of record revenues, cash flow and returns to shareholders.

Read more

OPINION: The infrastructure war between China and the United States is fuelling the commodities rally – by Eric Reguly (Globe and Mail – May 12, 2021)

https://www.theglobeandmail.com/

There are all sorts of wars, a shorthand term beloved by politicians, economists and journalists. There is the trade war, the diplomatic war, the new Cold War, the war against the pandemic.

Yet another one is on the horizon – the infrastructure war – and it goes a long way to explain why commodity prices are soaring, with some of them, including copper and iron ore, hitting record prices in recent days. The war could trigger a new commodities “super cycle,” if we’re not in one already.

The infrastructure war is as much geopolitical as economic. It pits America against China, each of which is trying to lock up the resources required to rebuild their infrastructure and ramp up the transition to a clean economy, which will require vast amounts of copper, cobalt, nickel, zinc and steel to produce everything from electric vehicles (EVs) and wind turbines to “smart” power grids and solar panels.

Read more

History of commodity cycles suggests prices don’t go up forever – by Larry Berman (BNN/Bloomberg – May 10, 2021)

https://www.bnnbloomberg.ca/

The history of commodity cycles can last for years. There is likely more to go in the current boom part of the cycle. However, they have shown strong patterns of boom and bust over decades.

Sometimes it is supply shortages in the case of weather issues or disease (or current the labour shortages or under investment). In other cases, spikes in demand permanent or temporary have caused big swings.

Often, on the temporary side, it is investment demand that can be fickle. Permanent increases in demand like population growth or in the case of copper, new technologies that demand more.

Read more

Investors Bet Billions That Metals Bull Run Isn’t Stopping – by Mark Burton (Bloomberg News – May 9, 2021)

https://www.bloomberg.com/

A year into the red-hot bull run in industrial metals that’s lifted copper to record highs, investors are still piling in, staking billions of dollars that it won’t run out of steam any time soon.

The word from Wall St. is “don’t stop buying now,” with Goldman Sachs Group Inc. and Bank of America Corp. among those advising investors to load up in anticipation of a long-term rally fueled by the world’s recovery from the pandemic and a spending splurge on renewable-energy and electric-vehicle infrastructure.

Copper’s already doubled in the past year to more than $10,000 a ton, and Bank of America says $20,000 is possible if supply falters badly while demand surges. Copper extended its surge on Monday, rallying as much as 3.2% to a record high of $10,747.50 a ton.

Read more

Why the commodity supercycle narrative is overblown – by David Rosenberg and Ellen Cooper (Financial Post – April 30, 2021)

https://financialpost.com/

Once the full picture of a divergent economic recovery becomes clear, commodities will likely fall from the stratosphere

It has been surprising to see just how far commodity prices have soared beyond what could be considered real economic growth. Much of the rebound has been a result of the base effects from the pandemic plunge, but there are other factors at play as well.

The largest is China’s stockpiling efforts, which seem to have peaked in most commodities. But there are secular changes to consider, including the greening of infrastructure, that could indeed result in strong bull markets for select commodities such as copper.

As a reminder, in past boom/bust cycles for the highly volatile commodities sector, we typically see bear markets bottom out when the Commodity Research Bureau index hits -15 per cent year over year, while bull markets peak around 24 per cent.

Read more

Mining companies’ struggle to reduce Scope 3 emissions may jeopardize ability to survive – by Eric Reguly (Globe and Mail – April 20, 2021)

https://www.theglobeandmail.com/

The world’s biggest mining companies are both blessed and cursed. They are blessed because most of them produce the commodities – copper, nickel, cobalt, among others – that are essential for the transition to the “clean” economy.

They are cursed because most of these same companies also produce the commodities – coal, oil, iron ore – that are warming the planet and falling out of favour with investors who increasingly view their portfolios through the lens of environmental, social and governance (ESG) standards.

So far, the cursed side is winning, with the Big Five mining companies trading at low valuations, generally 2½ to four times enterprise value (debt and equity) to EBITDA (earnings before interest, taxes, depreciation and amortization).

Read more