Since the invasion of Ukraine, “a four-step waltz has been playing out for many raw materials, tossed between geopolitical and health crises, observes Yves Jégourel, co-director of the Cyclope report and commodity specialist. The war and its beginnings caused anxiety and caused base metal prices to soar until the beginning of March.”
Then the market realized that the West would not impose sanctions on Moscow on commodities, which, added to doubts about global growth, the rising dollar and inflation, drove prices to s slump until October. “Then hope returned, between the perception of a moderation in rate hikes and the reopening of China. In February, the movement was reversed: the markets started to fall again”, sums up the economist.
For many raw materials, this confusing year 2022 ended “at levels equivalent to, or even lower than, those of January”, points out the Cyclops 2023 edition. The palm of the increase goes unsurprisingly to natural gas, which Europe, largely deprived of exports from Russia, hitherto its major supplier, went to seek high prices from the United States in the form of transportable liquefied natural gas (LNG). In the wake of the energy crisis linked to the invasion of Ukraine, electricity and coal have surged. Lithium, an essential product for the green economy, for electric vehicles in particular, saw its price double over the year.
The trajectory of metal prices is fairly homogeneous, there is a lot of price instability and volatility, and this should continue in the coming months, anticipates Yves Jégourel. For 2023, CyclOpe predicts measured declines for most commodities. Especially since, focused on geopolitical risks, the markets do not take into account the long-term prospects of critical materials while, according to the International Energy Agency, the demand for copper, for example, should be multiplied. by 2 or 3 by 2040 and that of lithium by 40. Unless disruptive innovation is unlikely, lithium should remain a non-substitutable key component of rechargeable batteries for the next twenty years. The year 2022 has also been favorable for investment: the global budget dedicated to the exploration of this mineral resource has almost doubled between 2021 and 2022, going from 250 million to 470 million dollars, according to the agency S
In this very uncertain context, the way in which Europe secures its supplies of critical metals is essential. Many projects have been launched, including the European Critical Raw Materials Act by the European Commission in March 2023, point out the authors of CyclOpe. But, “with these very unstable global markets, flexible policies are needed,” they insist. If only to face China. The world’s largest producer of many critical minerals and metals will not let its competitors develop strategies without reacting. “Beijing will probably seek to lower prices in the short term and then raise them,” predicts Yves Jégourel. However, “the temporary and artificial drop in prices can penalize Western operators just as much as their increase. It can undermine the business models of American or European mining and recycling activities”. For this reason, Western industrialists should focus on managing the intrinsic volatility of metal prices, and not just their long-term appreciation, recommends CyclOpe.
