What Does the Global Energy Crisis Imply for the Metals?

The world is experiencing the very first Global Energy Crisis. In the 1970s, there was an Oil Crisis; presently, there is an Oil Crisis, Natural Gas Crisis, Coal Crisis, and Electricity Crisis simultaneously.

The ripple effects are being seen all over the world, firmly establishing the entire Commodities sector as one of the largest and most profitable chances for making money in the current economic climate.

As Russia plays hardball with Europe’s gas supply, the continent faces an uncertain energy future – and it is not alone in this regard. Since the beginning of the year, soaring Commodity prices across the Metals, Energies, and Agricultural markets have caused an unprecedented supply crunch, with experts warning that “the worst is yet to come.”

Important Basics for Commodity Markets

Currently, the Commodities markets are being compressed once more. This time from two directions: on the one hand, demand is exploding as the economies recover from the coronavirus pandemic. On the other hand, geopolitical factors impede sufficient supplies to meet this need.

While demand for energy has skyrocketed, decarbonization efforts have stifled investment in energy supplies. Ongoing geopolitical tensions have driven up natural gas prices, propelling benchmarks on both sides of the Atlantic past all-time record highs.

The price of natural gas has risen to 12 times its usual for this time of year, even though winter has not yet arrived. In the meantime, supply chain interruptions and labor shortages have exacerbated the imbalance between supply and demand.

In short, Natural Gas today competes with Oil as a geopolitical influencer. And there is not enough for everyone. The market has already experienced a number of spectacular ripple effects caused by the intensifying supply crunch.

Already 50% of the world’s production of Aluminum, Copper, Cobalt, Nickel, Lithium, Palladium, Platinum, Steel, Uranium, and Zinc has been shut down this year due to the massive commodity increase.

The Season and Commodity Costs

Once the colder weather sets in, energy prices will rise again, making it more expensive to produce the essential commodities the world needs to function and survive – resulting in further global production cuts, mine and refinery closures, and eye-popping shipping costs – and opening the door to an even greater price squeeze in the future.

In fact, early indicators are quite promising. This week, Silver, which is officially an industrial metal used in solar panels, medicinal and electrical gadgets, experienced its greatest one-day change since February 2021. Platinum, Palladium, and Copper prices rose to multi-year highs elsewhere. While Uranium prices soared beyond $50 per pound — surpassing the record high established in the spring when Russia invaded Ukraine – Russia invaded Ukraine.

Throughout this year, some top Wall Street institutions, including Goldman Sachs, JPMorgan Chase, and Bank of America, have labeled commodities as their “preferred asset class for the next decade.” In recent days, the cacophony of Wall Street’s largest institutions recommending investors to reinvest in commodities – anticipating the next significant step upward – has become louder.

Leave a Comment