Modern Mining February 2022

COMMODITIES OUTLOOK

Metals to remain supported at elevated price levels in 2022 By Benedikt Sobotka, CEO of Eurasian Resources Group

2021 was certainly a year for the commodity markets’ history books. While we expected a much better year then the Covid-hit 2020, we did not envisage the remarkable price performance of our products, nor the strongest returns of the broader commodi- ties sector in over a decade.

C opper, iron ore and natural gas prices hit all- time highs; the price of aluminium surged to a 13-year high, gaining over 40% YoY; while the price of cobalt more than doubled, reaching its highest level since 2018. The main driving forces for these markets were supply chain disruptions, production restrictions in China, the energy crisis, a stimulus-led consumption boom in the US and depleted inventories. Going forward, the outlook for the sector remains constructive, with most base metals still trading above historical levels, albeit lower on average compared to 2021. The fading pandemic and the tightening US monetary policy both still have the potential to deliver economic setbacks, but persis- tent supply chain challenges, a changing inflation landscape and the energy transition should, overall, create a bullish environment for industrial commodi- ties. Even more encouraging are early signs of policy easing in China, which should filter through to the real economy by mid-2022.

Benedikt Sobotka, CEO of Eurasian Resources Group.

Aluminium: solid gains still expected We believe that aluminium has strong potential to

GBA electric vehicle.

outperform other LME base metals in 2022, having again breached the impor- tant milestone of $3,000/tonne at the start of this year. The market will remain in a sizable deficit for the second consecutive year, with visible inventories at the low- est level since the global financial crisis. China’s aluminium supply growth will be constrained by the country’s strict energy consumption controls and a slow ramp-up of idled smelting capacity. Moreover, the world’s accelerated decarbonisation efforts and soaring energy prices limit capacity additions out- side China. In fact, we could see further smelting capacity cuts in Europe (700 kt or about 14% of ex-Russia European smelting capacity has already been cut). At the same time, aluminium demand is supported by China’s infrastructure invest- ments, while the focus on renewables,

24  MODERN MINING  February 2022