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Metals super-cycle to clash with 'gloomy' global economy: Wood Mackenzie

Prices of battery materials have fallen this year due to cooling EV demand in China

Copper scrap metal at a recycling facility
Copper scrap metal at a recycling facility (Sirisak Boakaew via Getty Images)

The metals super-cycle driven by the shift to cleaner energy could stall if geopolitical tensions rise and the global economy weakens, warn Wood Mackenzie analysts, calling for falling profits for miners in 2024.

Nick Pickens, global mining research director at the U.K.-based firm, estimates US$200 billion in new mining projects are required by 2030 to satisfy global demand for copper and other electrification metals.

“A seven-to-10-year lead time for new mining projects makes meeting supply/demand requirements difficult,” he stated in a news release on Tuesday. “Combined with mid-term uncertainties for demand and metal prices, the situation does create some serious headwinds for the metals super-cycle.”

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The war between Israel and Hamas is the latest major contributor to worsening prospects for the global economy, adding to a list that includes Russia's war in Ukraine, and rising borrowing costs.

Last week, JPMorgan Chase CEO Jamie Dimon said the Israel-Hamas conflict could have “far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” adding, “now may be the most dangerous time the world has seen in decades.” IMF managing director Kristalina Georgieva called the war “a new cloud on not the sunniest horizon for the world economy.” Wood Mackenzie on Tuesday chose the word “gloomy” to describe the global macroeconomic environment.

Prices of battery materials like lithium, cobalt and nickel have fallen this year due to cooling EV demand in China. Wood Mackenzie sees bulk commodity price weakness bringing about lower profits for miners in 2024, with debt repayment trumping growth-focused investments at many companies.

“A preponderant concentration on meeting shareholder payout expectations takes precedence, while endeavours associated with growth and decarbonisation take a backseat,” James Whiteside, Wood Mackenzie’s head of corporate metals and mining, added in the release. “Most companies are committing less than 10 per cent of capex to decarbonisation and renewables, and even less on exploration and evaluation.”

Looking further ahead, an executive with global cable supplier Nexans recently told Yahoo Finance Canada that a global copper shortage is likely within two years, a challenge for utility grid operators adapting to greater demand from EVs.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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