October 19, 2021 – Goldman Sachs sees the top in the commodity supercycle not yet reached and expects it to continue for quite some time due to lack of capacity. Raw materials for European EV battery market are lacking. And South Africa’s Richards Bay bulk port, through which coal, raw aluminum, ferro-chrome and chrome ores are exported, is struggling again.

Stainless Espresso: Peak in commodity supercycle not yet reached
Stainless Espresso: Peak in commodity supercycle not yet reached

Goldman Sachs sees peak in commodity supercycle not yet reached

Investment bankers at Goldman Sachs are themselves surprised by the intensity of the commodity supercycle, according to a recent podcast, even though they had predicted it themselves in January. The rates at which commodity stocks are declining, e.g. copper at 8 to 10% or a shutdown of Zinc producers in Europe, were not expected to be so.

Lack of willingness to invest in old economies

Jeff Curie, head of global commodity research at Goldman Sachs, sees the lack of investment in the old economies, such as Europe and the United States, in recent decades as one of the main problems.

Energy crisis has no origin in decarbonization

He makes an unequivocal rejection of the hypothesis that carbon reduction to underinvestment in traditional energy production has led to the current energy crisis. The energy problem is not a new one, nor one that arose from the pandemic, but rather a lack of interest on the part of large companies and investors to invest in this area.

Capacities were simply shut down

Over the years, old capacities in raw material and energy production were simply shut down. Now that demand is skyrocketing, these cannot simply be fired up again. This imbalance could be somewhat redressed by new capacity in the next 6 months, but is still far from being solved even then, according to Curie.

Market not broken at present

We can only agree with this. And even though every opportunity is taken to write the market into the abyss at the slightest twitch, it punishes the prophets of doom with a high degree of reliability – by simply not doing what they would like.

Europe: Shortage of raw materials for EV batteries

The shortage of raw materials for EV batteries in Europe continues and could increase. Insufficient supplies of lithium, nickel, manganese or cobalt could slow the shift to electric driving in the long term.

Asia needs its own EV batteries

Now that Asia has stepped up its entry into the EV market and is increasingly in need of batteries for its domestic markets, Europeans, who had expected to be able to simply import batteries, are facing a problem.

EU Critical Raw Material Strategy without answer

While adequate production capacity for the European battery market is expected to come online from domestic production by 2030, this does not solve the challenges in sourcing raw materials such as nickel and cobalt, and to which the EU Critical Raw Material Strategy currently offers no answer.

South African bulk port of Richards Bay with renewed problems

South African operator Transnet has had to declare force majeure for the Port of Richards Bay due to renewed difficulties. This time a fire in a warehouse. Bulk port also affected by bad weather.

Transnet under criticism

Transnet and Richards Bay have not been able to get out of the negative headlines for several months, due to repeated accidents, fires or breakdowns. Already at the end of July, Transnet had to declare force majeure after a cyberattack that paralyzed the port infrastructure. There is already speculation that sabotage is taking place at the port. South African bulk exporters are already heavily criticizing Transnet for the company’s failure to get problems at the port under control.

Richards Bay severely congested

According to media reports, Richard’s Bay is now horribly congested, causing massive delays in most bulk exports. For coal alone, the backlog is reported to be 9 million tons. Otherwise, the main exports from Richards Bay are ferro-chromium, unalloyed raw aluminum, and chrome ore. Again, export backlogs are expected to be significant.

Possible Fake News about closure of the port

Transnet on Twitter dismisses as Fake News reports that the bulk port has been closed altogether. Other media are also reporting on the matter.

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