Last week the London Metal Exchange held its annual LME Week and while the London West End was buzzing with meetings and cocktail parties, the mood inside the main seminar was somewhat sombre with participants wondering whether a better than expected demand situation in China this year can be sustained into 2024 as the risk of slowdown across the world continues to rise amid high interest rates putting a brake on economic activity. On the other hand, there were also signs that the developed market cycle is getting close to a through following months of destocking whilst a peak in US rates would also help support sentiment.
The energy transition is real, and it will create a significant amount of demand for some metals which in turn is leading companies to look where they can reduce the dependency on these. On the other hand the current uncertainty and rising cost of financing will drive investment uncertainty, raising the risk that sufficient supply will not be developed in time, potentially forcing up prices for in-demand metals with copper, the so-called king of green metals, once again being singled out given the focus on wind, solar, EV’s and subsequent power-grid related demand.
While the short-term outlook for copper remains somewhat challenged, the lack of big mining projects to ensure a steady flow of future supply in the coming years continues to receive attention from long-term focused investors as it supports our structural long-term bullish outlook, driven by rising demand for green transformation metals and mining companies facing rising cash costs driven by higher input prices due to higher diesel and labour costs, lower ore grades, rising regulatory costs and government intervention, and not least climate change causing disruptions from flooding to droughts.