Davos Update: Commodity Prices Unlikely to Let Up

Commodity prices unlikely to ease in the near future because of years of under investment in metals needed for energy transition, supply shocks and high energy prices, experts said during World Economic Forum in Davos. Adding to the equation covid related logistics issues and demand for transparency on sustainability, a perfect storm has been brewing in commodity markets.

Analysts say this perfect storm could carry on for the next 30 years. As an example, copper prices are expected to rise 20% by the end of 2022.

The rise in commodity and metal prices are in part a result of transition to a lower carbon, which company executives and analysts say is inevitable despite a recent resurgence in fossil fuels. They believe this recent resurgence is temporary, and energy transition will need a projected $50 trillion investment in the next three decades.

For the mining industry, between $200 billion and $300 billion investment will be required a year in order for the energy transition to be fed. Much of this investment will be needed for copper, nickel, cobalt and other metals.

High prices and supply chain pressures will push companies and countries to stockpile strategic raw materials including oil, copper, cobalt and other metals.

Even small supply disruptions could result in sharp increases in prices. A price impact in the second half of 2022 is likely.

Major end users of metals, such as the automotive industry, are working to secure long term supplies of lithium and cobalt at current market prices.

However, to secure supplies of these metals is very difficult, especially for materials that are clean from an ESG point of view.

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