10 April 2023 – Is the next raw material supply crunch already lying in wait around the next corner? More and more analysts point to declining ore quality and the increasing demand for raw materials for renewable energies. Are supplier countries possibly coming under the wheels of new legal regulations from the EU and US? SHFE and LME Base metals rising. And China’s bulk commodity market growing in March 2023.
Reasons why a global metals supply crunch could be around the corner
The impending metals supply crunch is driven by factors like the growing demand for renewable energy, electric vehicles (EVs), and battery technology.
Expansion of renewable energies with top priority
Major economies such as the EU and the USA are focusing on renewable energy, leading to increased demand for metals. Supply shortages result from insufficient investment in exploration and mine development, as well as geopolitical issues and labor unrest affecting production.
Quality of mined ores decreases
In addition, increasingly low-grade ores are contributing to higher operating costs, while stringent environmental regulations could increasingly hamper the approval of projects. The combination of these factors is likely to place a significant strain on global metal supply.
Could Indonesia get shortchanged in the EV competition between China and the United States?
Indonesia’s ambition to become an EV battery hub may face challenges due to US-China rivalry and disagreements over green subsidies. As a significant nickel producer, Indonesia aims to leverage its resources and capitalize on the growing global demand for EV batteries. However, the US is pushing for a global minimum tax on profits and stricter labor and environmental standards, which could impact Indonesia’s competitive advantage.
China’s dominance in the battery market, coupled with its investment in Indonesia’s mining and processing sectors, might intensify US-China competition and impede Indonesia’s progress in establishing itself as a battery hub.
Base metals up on intensified expectations for Fed’s rate hikes
SHFE base metals closed mostly with gains last Friday night, while LME was closed for Good Friday, due to intensified expectations for the Federal Reserve’s rate hikes. The market anticipates the Fed’s continued efforts to tackle inflation, supporting the US dollar and affecting commodity prices.
LME and SHFE with base metal gains
Overnight, LME metals experienced gains, with copper, aluminum, and zinc rising significantly. On the SHFE, base metals traded higher with copper, aluminum, and zinc showing considerable increases too.
China’s bulk commodity market growing in March
In March 2023, China’s bulk commodity market experienced improving demand, with coal, steel, and nonferrous metal industries showing positive trends.
Recovery in downstream industries
The China Iron and Steel Association (CISA) reported a 3.7% increase in steel production capacity utilization compared to February, driven by increased infrastructure investment and recovery in downstream industries.
Nonferrous metal industry with steady growth
Meanwhile, coal production and consumption remained stable, with coal prices seeing a slight decline. The nonferrous metal industry also witnessed steady growth as manufacturing activities picked up and demand for raw materials increased.
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