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What a remarkable start to the year

we’ve had for commodity prices

with boards lit up green

all the way through.

ron ore, copper and tin all at record highs, nickel at seven-year tion of renewable energy, zero carbon emissions and the elec-
Ihighs and lithium tripling in the space of 12 months. trification of transport.
Such is the excitement the main question is about what kind That narrative has decades to go if predictions are met. So, if
of super-cycle we are in; another China-cycle or something al- we are in a new super-cycle, one defined by clean energy across
together different. the globe rather than economic development only in China,
Looking at some of the recent commodity forecasts and re- there is a long way to run before ultimate winners are declared
source analyst comments, the answer will likely be dependent and evidence is starting to emerge that iron ore could end up as
on commodity. merely the super-cycle equivalent of being crowned AFL pre-
It is easy to pick the winner currently, given iron ore has miers in April, only to be out of finals contention by August.
breached $US200/t. or now, Australia can bask in the resources sector’s role in
The immediate fundamentals which drove iron ore beyond Fdelivering a swift economic rebound from the pandemic.
$US200/t remain in place. Steel demand in China is up as the The May Federal budget once again highlighted how crucial
Government shoves the economy out of its COVID malaise and mining revenues are to the nation’s balance sheet, allowing
Brazilian iron ore supply continues to struggle as the effects of the Government to be generous in its post-pandemic recovery
the pandemic and the Samarco disaster linger. plans, safe in the knowledge its balance sheet is as robust as a
However, forecasters – including the Federal Government in piece of Chinese rebar.
its May budget – are beginning to price in declines in the me- All of which makes the suggestions international borders will
dium term. not be opened until at least mid-2022 all the more galling for
Westpac has iron ore trending consistently downwards over those in the sector who require borders opening.
the next three years with the 62% fines spot price drifting to Australian media used to regularly report on the “brain drain”
$US177/t by December 2021, to $US115/t in December 2022, out of the country but that conversation has stopped in the last
$US79/t in December 2023 and $US67/t in December 2024. 15 years. Instead, the period has seen Australia attract the
The Westpac forecast is broadly in line with others as expect- world’s brightest talent, largely to work in our thriving, innovative
ed changes on both demand and supply sides come to fruition. extractives industry.
RBC Capital Markets’ weekly update on May 12 reported sub- The inexorable rise of Australian mining and oil and gas over
tle changes in the Chinese steel sector. that period would not have been possible without the contribu-
“Given the modest drawdown of steel/iron ore inventory this tion of these imported workers, whether professional, skilled or
week and extrapolating on recent steel production data, it’s hard even semi-skilled.
to argue that supply/demand fundamentals drove the recent Similarly, the expansion of our iron ore, gas, gold and lithium
price increases, with such movements more likely tied to specu- assets was largely funded by foreign capital.
lative trading,” RBC said. Australia’s position on the global stage was in part won be-
It also reported expectations were increasing that China would cause it was no longer so isolated. With direct flights to LA, Hou-
enforce steel capacity cuts more stringently and that trade ten- ston, Santiago and more latterly London, Australia no longer
sions between China and Australia could cause supply disrup- suffered the tyranny of distance. Financers, professionals and
tions were adding risk premium to prices. skilled labour could come for a week, a month or a year with full
Additionally, Samarco is back expanding production and Bra- knowledge they could return to their homeland at a moment’s
zil production in general is showing signs of recovery despite the notice.
ongoing public health crisis. If Australia’s borders remain closed while the rest of the devel-
The copper market is experiencing similar short-term supply oped world begin to open theirs, we will be in danger of revers-
and demand shocks but while iron ore will remain tied to the ing the brain drain and finding our brightest and most talented,
China economic story, copper – as well as nickel, lithium and whether Australian born or not, departing permanently along
even tin – has very different longer-term dynamics. with plenty of foreign capital.
Where the Pilbara and Brazilian heavyweights – not to men- n the issue of departures, I would like to pay tribute to our
tion the long-promised African factor – have decades of iron ore Ocolleague and deputy editor Mark Andrews who makes his
reserves, copper’s development pipeline is all but empty after final contribution to Paydirt in this edition. Mark was part of the
the arrival of five big projects in the next two years. fabric of Paydirt and GMJ for 12 years and while he has moved
The demand equation for copper is also changing rapidly with on to new ventures, he has left an indelible impression which will
the clean energy revolution set to place unprecedented pres- last for another 12 years or more. Thanks Mark.
sure on availability over at least the next two decades.
While copper is the largest clean energy metal market, the
supply/demand scenario is similar in nickel, lithium and even tin.
They are all now intrinsically linked to the clean energy revolu- dominic@paydirt.com.au @DominicPiper

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