Industrial metals are soaring on bets of an economic recovery using clean energy
From base-metal bellwethers to essential inputs for batteries, post-pandemic consumption threatens to outstrip near-term supply
Industrial metal prices are powering to the highest in years on bets that an economic recovery from the pandemic and a worldwide push for cleaner, greener energy will unleash vast amounts of pent-up demand.
From base-metal bellwethers to essential inputs for batteries and home electronics, post-crisis consumption threatens to outstrip near-term supply. Governments and companies globally are announcing net-zero emissions goals, Europe is rolling out a package of environmental initiatives as part of its growth plan, and US President Joe Biden has pledged $400bn on clean energy research and development over 10 years.
That’s set to expand demand for metals and is boosting companies across the supply chain. Tesla has surged more than 300% over the past year on a robust outlook for electric vehicles (EVs), while miners, including Glencore and BHP are sounding increasingly upbeat about the outlook for raw materials. The growing bullishness has even spurred talk about a possible new commodities supercycle.
Here’s some of this year’s noteworthy moves from copper to tin and lithium.
Copper and nickel
Base metals are enjoying a sweep of gains, with nickel at its highest since 2014, and copper eyeing a record stretch of monthly advances as it creeps closer to $10,000 a tonne. The logic is simple: output won’t match accelerating demand growth as economies escape the pandemic and the world splurges on electric infrastructure that can’t be built without copper wires and cabling. That threatens bouts of supply shortages, starting this year with a copper deficit that Citigroup pins at about 500,000 tonnes.
Lithium, key to powering EVs and backing up renewable energy, is rebounding as demand for rechargeable batteries gathers pace. The metal is showing nascent signs of recovery after an extended slump as oversupply plagued the industry.
Market watchers are forecasting more upside this year as policymakers worldwide commit to an accelerated adoption of EVs. The tight market balance may intensify this year, according to Xiaoyi Liu, an analyst at Shanghai Metals Market, adding that “lithium is seen remaining in the upward cycle.”
Platinum has emerged as 2021’s top-performing major precious metal, surging to the highest since 2014. Its use in catalytic converters has propelled demand amid optimism over the automotive industry’s post-pandemic recovery and stricter emissions rules for vehicles. Holdings in platinum-backed exchange traded funds (ETFs) have hit a record.
“There remains a convincing fundamental case for higher platinum prices,” wrote Georgette Boele, senior precious metals strategist at ABN Amro Bank, who upped the bank’s forecast to $1,400 an ounce by the end of 2022. “We continue to expect strong industrial demand and demand for car converters. Moreover, platinum prices may not be as cheap as they were, but they are still relatively cheap compared to other precious metals.”
It doesn’t usually get the same attention as other metals, but tin has muscled its way into the spotlight with a more than 20% gain this year. Mine output is under pressure from environmental curbs in China and coronavirus restrictions in Indonesia, with political ructions in Myanmar threatening a third front of supply disruptions. That’s all unfolding amid an electronics boom that’s lifting demand.
A recent flare in spreads — cash prices on the London Metal Exchange have spiked to a historic premium over futures — suggests deep anxiety about near-term availability as inventories dwindle.
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