No commodities ‘super-cycle’ but copper demand from green economy bright

HANOI/BEIJING: Commodities markets are unlikely to experience a “super-cycle” in the next few years, experts and audience polled at an online metals seminar on Tuesday said.

“We’re not a huge believer in a super-cycle now. You’ve started to see some central bank starting to taper bond buying and if they are not tapering, they’ve started to talk about it,” said Geordie Wilkes, head of research at Sucden Financial.

“We are also seeing emerging markets starting to increase some of their interest rates and really started to look at inflation and see how we can keep a cap on that after the rising asset prices we have seen,” Wilkes added.

A global demand recovery as some economies bounce back from the COVID-19 pandemic, strong liquidity injection from trillions of dollars worth of stimulus, and supply disruptions have fuelled some metals prices including copper and iron ore to record highs.

Some global banks are predicting a multi-year super-cycle for commodities, driven by shortages and strong demand from the renewable energy and electric vehicle sectors.

A poll at the LME Asia Metals seminar on Tuesday showed only 6.49% of the audience see “super-cycle” as an accurate word to describe the main force for commodities market trends in the next 12 months, while 33.77% voted for liquidity and inflation and 22.08% went for Chinese demand and a rebound for developed economies.

“We view COVID-19 and the subsequent recovery from COVID-19, even if that’s somewhat extended, to be somewhat transitory. There’s a possibility I believe in around 2023 we could see some (Federal Reserve) tightening,” said Thomas Horn, head of Macquarie Group’s commodities and global markets in China.

All experts agreed that the energy transition trend, which serves major economies’ carbon neutralisation targets, will benefit some metals, notably copper, nickel and lithium. [

Another poll at the seminar showed a dominating preference for copper as the most benefited metal in the next 6-12 months at 52.69% of all voted, followed by lithium at 16.13%, aluminium at 13.98%, silver at 8.6%, nickel at 5.38% and cobalt at only 3.23%.

Copper will be a dark horse, supported by infrastructure demand and the fast growing new energy vehicle market, said Liu Shoujian, deputy chief executive officer of CCB International.

Sucden Financial’s Wilkes said “copper demand from … the green economy is looking strong.”

A new energy vehicle needs 80 kg (176 lb) of copper compared with 23 kg in an internal combustion engine vehicle, while charging, wiring and grid investment of renewable energy will also generate demand for copper, he added.

Lithium, nickel and low-carbon aluminium will also be sought after amid the energy transition trend, Wilkes said.

Macquarie’s Horn said although copper might see a small surplus during 2022-2023 due to a supply recovery and slightly slower demand growth in traditional sectors, the energy transition will take over in the longer term.

“Continued growth of commodities leveraged to energy transition will win out and we see a key inflection point right around the end of 2024-2025 where that supply will plateau and we have high probability of a (copper) deficit,” Horn said.