I've wrote about this before (see thread here), but the supply-side of Lithium mining appears to be booming with new mines coming online all over the world. It's increasingly seen as a critical metal and therefore is getting more greenlighted supply around the world. Graphic of new supply by 2025 and recent production expansion.
Analysts at Fastmarkets NewGen estimate global lithium production surged by 36% year-on-year in 2021 and expect total supply will rise from 540,400 tonnes of LCE in 2021 to more than three million tonnes by 2030.
I'd rather stick with copper, whose outlook looks much brighter due to future supply deficits.
The past few days saw positive price outlooks for copper being announced by Trafigura and Goldman Sachs, along with G&R in their quarterly letter. Trafigura points out there are only 3.5 days of inventory for copper, which is very tight by historical standards (the number should be more like 10-20 days). Meanwhile there continues to be major shortfalls in production thanks to political instability in Peru.
Jeff Currie:
“On copper, the forward outlook is extraordinarily postive. We’ll be at the lowest observable inventories that have ever been recorded at 125,000 tonnes. We have peak supply occuring in 2024…Near term we put (the copper price) at $10,500 and longer term our price target is $15,000 a tonne.”
Here is Jeff Currie's longer report about copper.
Trafigura:
The co-head of metals and minerals at the world’s biggest copper trader said on Monday the copper price could hit a new record high within the next 12 months owing to very tight stocks, even above $12,000 a tonne.
“I would highlight copper as the most critical metal globally given the shortage in the market. We only had 3.5 days of copper stock equivalent at the end of last year,” Trafigura’s Kostas Bintas told the FT Commodities Global Summit.
March 14th:
Global copper inventories held in warehouses monitored by the London Metal Exchange (LME) hit the lowest in 17 years last month
Rio Tinto sees a positive short-term outlook as well, despite all the fear the past few weeks and muted China recovery. We see evidence of the latter because China smelters are exporting more of their copper they don't need.
More generally, here are the inventories for base metals, including copper. There has been a secular drawdown since the GFC recovery, and the only cure for this is higher prices. From G&R:
Since peaking at 9 mm tonnes of inventory in Q1 2013, base metals inventories have drawn
steadily and are down 90% today. Today, exchange inventories have fallen below 1 mm
tonnes and are dangerously low. Adjusted for days of consumption, inventories have never
been lower. In Q4 2022, exchange metal inventory covered daily consumption by only 2.7
days, surpassing 45% of the lows seen in 2005-2006 of approximately five days and reaching
the lows seen 35 years ago back in 1988-1989.
What has happened when inventories became this low in the past?
In 2006 exchange inventories fell to briefly 1 mm tonnes, and when adjusted by days of consump-
tion, inventories had fallen to less than five days of consumption—the lowest levels since 1990. And just like in the late 1980s, base metals prices experienced a massive surge. From the end of 2004 to the beginning of 2006, copper, nickel, lead, and zinc prices surged between 300% and 400%.
Here is a comment of mine with links to various free resources to read about commodities.
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