PRESS ROOM
Industrial metals weighed down by cyclical pressures and waiting to bounce
Thursday 13th October '22
Industrial metals have historically been cyclical. In this current downturn, we are finding that metal prices are suffering, as they have done in the past. However, the importance of base metals in delivering the energy transition has never been greater. We are currently living in an energy crisis exacerbated by the war in Ukraine. Europe wants to accelerate the energy transition to reduce reliance on Russian energy sources. That will place a higher onus on renewable energy sources coupled with battery storage to meet our energy needs. In short, that will require a lot more metals. However, the production of many base metals is declining. That’s partly due to falling prices, making it more difficult to justify the capital expenditure. Also, high energy prices are making the smelting of metals uneconomical. As a result, current inventory levels for industrial metals are meaningfully below their preceding 5-year average. We do not believe the year-to-date price performance reflects that degree of tightness. And there is ample room for an upward correction.