2023-05-23 14:30:00
The calm before the storm ? Fifteen months following the start of the war in Ukraine, commodity prices have returned to more reasonable levels. Natural gas, which had reached 340 euros per megawatt hour in August 2022, is around 29 euros. Copper is at its lowest level in six months. Wheat, following having exceeded 400 euros per tonne, has returned to below 220 euros. However, the world would be wrong to believe that it is out of the woods, assured Philippe Chalmin, coordinator of the Cyclope report, during the presentation of the 2023 edition of this Raw Materials Bible. “The markets are catching their breath, but it’s probably only a lull, a break between two storms”, assures the professor of economic history at PSL Paris Dauphine, who coordinates, with the professor at the National Conservatory of Arts and Crafts (Cnam) Yves Jégourel, the work of around sixty experts from different markets.
For what ? Philippe Chalmin evokes four major crises, the “four Horsemen of the Apocalypse” according to his expression, which should inevitably make prices start to rise once more. “In chapter VI of the Apocalypse of Saint John appear the four horsemen who carry “war,
The calm before the storm ? Fifteen months following the start of the war in Ukraine, commodity prices have returned to more reasonable levels. Natural gas, which had reached 340 euros per megawatt hour in August 2022, is around 29 euros. Copper is at its lowest level in six months. Wheat, following having exceeded 400 euros per tonne, has returned to below 220 euros. However, the world would be wrong to believe that it is out of the woods, assured Philippe Chalmin, coordinator of the Cyclope report, during the presentation of the 2023 edition of this Raw Materials Bible. “The markets are catching their breath, but it’s probably only a lull, a break between two storms”, assures the professor of economic history at PSL Paris Dauphine, who coordinates, with the professor at the National Conservatory of Arts and Crafts (Cnam) Yves Jégourel, the work of around sixty experts from different markets.
For what ? Philippe Chalmin evokes four major crises, the “four Horsemen of the Apocalypse” according to his expression, which should inevitably make prices start to rise once more. “In chapter VI of the Apocalypse of Saint John appear the four horsemen who carry “war, famine, pestilence, wild beasts”, explains the economist. The war in Ukraine, the threats weighing on the food situation world, the pandemic, the climate (which replaces the wild beasts), these are the “riders” who fell on part of humanity in 2022, and continue to threaten it.
End of “happy globalization”
This quadruple shock marks the end of the great illusions of the last thirty years, believes Philippe Chalmin. “The crisis of the late 1970s had put an end to the 30 Glorious Years, the Covid and the war in Ukraine put an end to the 30 Glorious Years of ‘happy globalization'”, he summarizes. The very foundations of globalization have been shaken. “The globe is now fractured: it’s a bit like ‘The West once morest the rest’, with a G7 which is now a kind of economic NATO, and increasingly ambitious BRICS.”
In this grim panorama, what can we expect? The energy transition, made imperative by the climate crisis, will generate an explosion in the demand for metals. “On lithium, the International Energy Agency tells us that if we want to meet the decarbonization objectives by 2050, demand will be multiplied by 42 by 2040, indicates Yves Jégourel. It’s true for all battery metals: the nickel requirement will be multiplied by 19, that of manganese by 8, that of rare earths by 7”.
Copper, although its prices have fallen significantly recently due to weaker than expected Chinese demand, is also cause for concern. “There is a structural weakening of the contents (of copper in mines, editor’s note), underlines Yves Jégourel. However, copper, in a vehicle with a combustion engine, is 23kg. On a hybrid, you go to 60kg, and on a 100% electric, at 80kg.” Copper production is very concentrated (Chile, Peru, Democratic Republic of Congo), with large Chilean mines that require massive reinvestment. The world will therefore not be able to save major efforts on recycling and sobriety. “”Doctor Copper” will probably return to the headlines in 2024 and beyond”, assures Philippe Chalmin.
The inconstant El Niño
Another factor of uncertainty is the high probability of an El Niño-type weather event this year. These, which occur irregularly every three to seven years, are manifested by torrential rains in certain regions of the world, while others are victims of dry spells. In both cases, the phenomenon can lead to harvests of agricultural raw materials, and therefore cause their prices to explode.
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