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March Market Minute

Upcoming Event

Capitalight Research will be attending this year's Prospectors & Developers Association of Canada (PDAC) held in Toronto.

Stop by our booth #350 for a chat!

March Market Minute

This month the Market Minute highlights research from our three metal publications. Starting with an excerpt from the Silver Monitor on Metals Super-Cycles. We then move to the increased demand for Critical Metals as the energy transition unfolds from our Critical Metals for a Sustainable World report. And conclude with a link to our chart presentation of bullish and bearish factors for the gold price from our Gold Monitor report.

Metals Super-Cycles

Many commodities go through periods of extended boom and busts (“super cycles”) where prices move well above or below their long-term trends. As compared to short-term fluctuations which are influenced more by microeconomic factors, super-cycles differ in that they tend to span a much longer periods of time. Price upswings during these periods may last 10 to over 20 years, generating 20 to over 40-year complete cycles. These super cycles occur over a broad range of commodities as many of these are the necessary inputs for urbanization and expansion of industrial production as an emerging economy begins to gather momentum. The most recent super-cycle occurred in the early 2000s with the emergence of Brazil, Russia, India and predominantly China. In 2000, the urbanization rate in China was ~35%. Over the course of the subsequent decade, this rate approached 50%. This mass of migration required huge quantities of industrial metals for the construction of apartment buildings, roads and other infrastructure and the continuing buildout of the electricity grid. In less than a decade, the industrial metals index climbed by nearly 250%. Our view is that the next super cycles will again be demand driven with increasing needs in Africa and Asia. However, as opposed to previous cycles, future periods will be magnified by supply constraints. Over the longer term, we are very bullish on industrial metals as well as silver and gold.

The Energy Transition Will Trigger a Huge Increase in ‘Critical Mineral’ Demand

Supply concerns have lifted copper back over US$4 per pound. The LME official cash settlement price for copper rebounded to US$4.08 in January from US$3.80 in December and remains over $4 in mid-February – well above the US$3.42 low last July. Supply concerns together with the re-opening of China’s economy largely account for the bounce back. China Lithium Prices have edged down after the Spring Festival. Market activity in China remains limited, following the Lunar New Year holiday. Cathode producers continue to draw down inventory, awaiting signs of a rebound in EV sales, after a weak performance in January. The spot price of lithium carbonate (battery grade) EXW China declined to US$69,025 per tonne the week of January 25 to February 8 from US$71,950 in late January. Similarly, lithium hydroxide spot prices EXW China fell to US$70,850 from US$73,500 at January monthend (based on BMI price assessments). Global nickel consumption – estimated at 2.9 million tonnes in 2022 (+5%) – will remain strong in 2023 (+11.5%), as stainless-steel demand recovers in China, alloy & specialty steels continue to perform well and use in nickel-rich cathodes for EVs advances further (particularly in the West).

British Petroleum in its recently released ‘bp Energy Outlook, 2023 edition’ – has modeled the potential impact of the shift towards more renewable energy as well as the electrification of transport on long-run demand for copper, lithium, and nickel. These projections are not intended to be forecasts, but rather broad indications of order of magnitude impacts based upon three scenarios of the changes needed in the global energy system to achieve decarbonization. Please see the charts below.

Complimentary Gold Price Outlook: Bullish/Bearish Factors for 2023-24

We are quite bullish on the gold price over the medium and longer term. The short term is up in the air for the moment as US employment data last week needs to be confirmed with future releases. Click here to read our Gold Price Outlook

Bonus Tip:

Turbulent markets are likely to continue over coming months. Exposure to precious metals is a great way to help diversify your portfolio!

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