China’s current move to curb metals speculation and rising prices is a “short term game” that would not materially impact price levels, Ivan Glasenberg, CEO of metals producer and trader Glencore said June 22. Prices will stay strong on underlying demand and supply fundamentals, he said.
China’s economic planner, the National Development and Reform Commission, announced June 17 it will index prices of key goods including steel, iron ore and other metals from Aug. 1 for three years to curb volatility after prices reached record highs in May. NDRC is also monitoring steel and iron ore companies following alleged price collusion, and the country’s Strategic Reserve Board has started to auction copper, aluminum, zinc and iron ore from its strategic stocks in a bid to put a brake on rising prices.
“Recently, the Chinese have tried to push it [the metals market] down to bring it back to lower levels: I think this is a short-term game because the underlying fundamentals will keep it at these levels, ” Glasenberg said in an interview during the Qatar Economic Forum.
“They’re taking some material from the strategic stockpiles and putting that in the market — how big the stockpiles are we don’t know exactly … They can do this for a while but eventually they’ll need to restock the strategic stockpiles, they can’t keep it at these low levels, so it’s a short-term phase.”
LME cash copper prices, considered a barometer of global economic health, plunged June 21 to $9,042/mt from multi-year highs of $10,212/mt on June 1, amid the latest Chinese moves.
On June 21, NDRC announced it was working with market regulators to identify entities involved in iron ore “hoarding” and “speculation,” according to investment bank Liberum. “The report prompted another pullback in ore prices,” said Liberum analyst Tom Price.
S&P Global Platts assessed the 62% Fe Iron Ore Index at $206.55 dry mt CFR North China on June 21, down $10.75/dmt from June 18, although prices rebounded June 22 to $212.70/dry mt. This compared with an all-time high of $233/mt for the steelmaking raw material May 12.
Despite the current volatility, steel and metals prices will continue to rise on strong demand as many governments have boosted infrastructure spending in a COVID-19 recovery push, including in the US where an infrastructure bill has recently passed, at the same time that supply has continued to be tight, Glasenberg said. “Demand for commodities will remain strong for a long time yet,” he said.
Robert Fig, a partner in risk management company The Metals Risk Team, said Chinese attempts at price control via actions by the SRB and Peoples’ Bank of China have historically never worked.
“Chinese curbs may have only an interim effect on prices, may stabilize them for a while,” Fig said in a June 22 webinar organized by AI metals price forecaster ChAI. “But there’s no question the trajectory over time, for battery metals, iron ore and coking coal, is in an upwards direction. The Chinese will not impact the upward trajectory of metal prices and their defense will not work.”
‘Struggle to keep pace’ with demand
The Glencore CEO, soon due to retire, told the economic forum that new mining projects will take longer to come on stream than they did during the “supercycle” boom in metals prices in the early 2000s because of a recent lack of investment in the industry and because available mine deposits are now becoming harder to work and are located in more remote areas.
“I believe the mining industry will struggle to keep pace” with the expected rapid growth in demand in coming years for copper and nickel to “green” energy supplies and to provide enough metals including cobalt for electric vehicles batteries, according to Glasenberg.
By 2050, the world will need to produce two and a half times more energy than is used today, the CEO noted. A mixture of public and private investment will be needed to achieve this and the metals production for as many as 55 million electric vehicles/year by 2030, which will require “a lot more copper, nickel and cobalt … and will we have the metals to supply this?” he asked. It will be difficult to meet forecast demand growth of 1 million mt/year copper and 250,000 mt/year of nickel, he said.
Crucial to fill energy ‘gap’
It is important to ensure that renewables fill any potential gap in energy supplies during the energy transition to avoid commodity prices rising much higher, added Glasenberg.
Thermal coal is a case in point, he said. Advanced economies are pulling out of thermal coal usage, no new supply is coming into the market and Glencore should be largely out of this market by 2050 in line with the Paris Agreement. However, new coal-fired power stations are still being built around the world as this is the cheapest form of energy for the developing world, showing demand is still there, he said.
This article has been posted as is from Source