With the price surge for copper, nickel, iron ore and aluminium, there is concern that it is partially driven by speculation, especially with the recent forecast that copper could break 20,000 $/t soon, and that this could be a new price bubble.
While there is a speculative aspect common for any market by its nature of matching anticipations with reality, in this case the main reason of the price growth is a lack of development of new capacities for those metals for many years. At the market price levels dominated for almost a decade for most of industrial metals, not only there were no new production development projects, but even some of already existing operations had to be idled or scaled back.
It seems that the new sustainable market levels are vitally necessary for producers of various metals and commodities. These levels are needed to justify further long-term development considering revised costs, affiliated with three additional factors:
- Modernization of the existing production facilities to meet new global ecologically friendly standards.
- Investment into development of new production capacities due to rapidly increasing demand from downstream industries.
- A digital transformation of the conservative industry of metals production/trade, into a quick and transparent customized supply chain service. We tend to believe that more advanced solutions, combining modern economy and technology achievements, to come up soon.
Implementation of the above will incur costs, but one cannot expect to buy new things and pay the old things price.
Today we are aware of impressive development of the Bitcoin and other crypto currencies markets. The significant growth in this market is a result of the inflation fears combined with trust into new technologies. Due to this growth, more and more Bitcoin codes are being mined around the globe, paradoxically leading to increased emissions from power plants. While metals production is also responsible for its share of emissions and is working on investment into lowering of its emission footprint, the daily use and physical necessity for metals as well as many soft commodities is far larger than crypto currency with no means of physical use.
For the metals market, the increase in the metals value is justified by the goal to achieve the levels of investments necessary to comply with the need to simultaneously modernize, expand and digitally transform, thus making sure there is a steady supply necessary to bring global economy into its green future.