Benedikt Sobotka, CEO of Eurasian Resources Group, one of the world’s leading diversified natural resources groups, predicts a strong metals recovery ahead.
“Eurasian Resources’ view that commodities have fallen foul of wider macroeconomic concerns and the changing geopolitical landscape was confirmed at this year’s London Metal Exchange Week.
“One of the issues that came up repeatedly was the fact that global politics is impacting business as never before.
“This means that metal prices, which weakened significantly over the summer, do not accurately reflect underlying fundamentals.
“Instead, market fundamentals indicate strong conditions in the physical market as evidenced by heavy destocking (in copper, nickel, aluminium, zinc and steel), and rising physical premiums.
“Meanwhile, China is ramping up its demand-boosting policies, having promised a larger tax cut than that of the US, leading to a sharp rally in Chinese equity markets earlier this week.
“With evidence of physical shortages and increasing signs that growth in demand is likely to accelerate in China, the final building blocks for a strong metals recovery into the year-end are falling into place.”
“Copper is no exception, it has been subject to concerns over global trade tensions against a backdrop of rapidly improving physical indicators.
“Based on our latest in-house analysis and conversations during London Metal Exchange Week, Eurasian Resources will be raising its China demand outlook for this year to over 5% and anticipate that prices will recover before the end of the year.
“Next year, Eurasian Resources expects prices to be supported further as supply struggles to keep pace with continued healthy demand.
“The increased likelihood of smelter disruptions and continuing distortions to global scrap flows were key issues discussed in London, which gives us confidence in our positive price outlook.
“In the long term, Eurasian Resources foresees that copper will be underpinned by supportive fundamentals.
“The severe under-investment in mining projects in recent years will lead to protracted deficits while copper demand for electric vehicles and renewable energy, as well as China’s Belt and Road Initiative, will offer an upside.
“Eurasian Resources’ forecast CAGR of 1.8% on the demand side against 1.6% on the supply side to 2022.”
“The global shift towards EVs and battery energy storage means that cobalt remains a widely discussed commodity, and this was no different at this year’s London Metal Exchange Week.
“While overall passenger vehicle sales have fallen in recent months, the sale of EVs continues to grow at staggering rates.
“In China, for example, vehicle sales fell 12% in September, while new-energy vehicle sales grew 55% YoY.
“Meanwhile, the anticipated shift to low-cobalt batteries is proving costlier and technologically challenging than expected.
“Cobalt intensive lithium-ion batteries are also becoming a feature of energy storage systems, but battery life continues to pose a concern.
“Tesla has increased the price of its Powerwall twice this year, which points to robust consumer demand, while solar and wind power generators are increasingly looking at battery storage to maximise profits through load balancing and emergency backup revenue.
“On the supply side, the reaction to stronger cobalt prices has been remarkable, but despite an additional 25 kt of cobalt mined in 2018 compared to 2017, price levels remain significantly higher than before.
“The cobalt market is undergoing a seismic shift in demand and supply will struggle to keep pace.
“When it comes to sourcing cobalt, artisanal mining practices are now responsible for more than 25% of mined cobalt globally while pressure to source the material responsibly is mounting.
“Ethical suppliers are well-placed to gain from this trend.”