The commodity supercycle is gaining momentum: Full steam ahead into 2023!
Dear Sir or Madam,
dear readers,
We are back after a short recovery period and wish everyone a good start to 2023. The previous year began with an event that can be interpreted as both a political and economic turning point: Russia’s invasion of Ukraine. Rarely has our dependence on other countries for raw materials been more apparent. Without Russian gas, we worried about how we would get through the winter. At the same time, we had to accelerate the transition from coal, oil, and especially gas to renewable energies, as Germany aims to become climate-neutral by 2045.
New types of energy production require new commodities. Here, the next trap loomed: our dependence on China’s technology metals and rare earths. The Middle Kingdom could impose tariffs or halt deliveries at any time. Political reasons for this arise primarily from China’s conflict with Taiwan, which it regards as a breakaway province. However, Taiwan is also an important trading partner for us Europeans. It is unthinkable what would happen on the markets if China were to cease its diplomatic efforts and take more unpleasant paths in foreign policy. In that case, Europe might lose two important suppliers of critical metals at once.
But there is also good news, not least the performance of our metals. The price of hafnium rose particularly sharply and is already sold out until March 2024.
We are in the third year of the pandemic, and the economy is gradually recovering. E-mobility and hydrogen as climate-neutral fuels are gaining importance. Green hydrogen, in particular, is playing an increasingly significant role for the industry. In Hesse, trains powered by it are already in operation. However, the expansion of the hydrogen industry requires platinum, palladium, and rare earths such as scandium. A key objective for the new year is certainly to find new raw material partners such as Australia and South Africa. This is the only way to manage the rapid construction of new electrolysis plants for hydrogen production.
Research also remains crucial in the new year. For example, American scientists were able to set a new milestone in the development of nuclear fusion. Using neodymium lasers, they succeeded for the first time in obtaining more energy from a fusion than was invested. Even though the technology is still a long way from market readiness, this was an important step.
As you can see, much is happening in 2023. Technology metals and rare earths are definitely a central part of the developments ahead of us. Furthermore, the commodity cycle has only just begun. A chart from Incrementum illustrates this through the trough in the ratio of the S&P GSCI Total Return Index to the S&P 500:
The chart shows the amount of S&P 500 indices (equity index) required to purchase one S&P GSCI index (commodity index). This value is symbolic of the level of commodity prices within the overall economic context. Commodity prices are beginning to rise, yet these are only the first small signs of a massive trend that is likely to last for a total of 10–15 years.
Wishing you all the best and much success in the new year,
The team at Noble BC GmbH