[Ferro-Alloys.com] Sustainability will be key to the recovery of metals markets as the world bounces back from Covid-19, in terms of both the underlying fundamentals and the ethical considerations affecting multiple supply chains, industry experts said at the Argus Metals Live conference.

 

A recovery is already well under way for several key metal markets, with sentiment buoyed by vaccination programs, government stimulus spending, and investment in green technology and sustainable development. There has also been a V-shaped recovery in most metal-linked Purchasing Manager Indexes (PMIs), while a weaker dollar has helped drive international base metal prices higher over the past year.

 

But the revival of metal demand comes with strings attached, with consumers and industry experts emphasising the need for environmental, social and governance (ESG) adherence and sustainability at this week's conference.

 

Copper and Nickel exposed to broad recovery

 

Copper prices, seen as an industry bellwether, soared to near 10-year highs in February on China's economic recovery, optimism in other global markets and the long-term positive outlook for the clean technology and green energy sectors. The LME three-month copper contract touched $4,626.50/t on 23 March 2020, its lowest price since September 2016, but has since risen to $9,077.50/t yesterday.

 

Nickel is also well exposed to the wider economy and a strong indicator of some of the macro-economic trends buffeting metal prices in 2021. With much of the world under lockdown, a consumer goods-driven recovery supported manufacturing sector growth in China last year, as demand for stainless steel and nickel-intensive white goods increased and China ramped up output from July in order to meet demand. China's refrigerator exports were up by 45pc year on year in December 2020, official export data show. Manufacturing of consumer electronics in Asia has also boomed, absorbing semiconductors and contributing to a global shortage.

 

The nickel market is also exposed to the green energy transition and increasingly impacted by the electric vehicle sector's growing appetite. Battery grade nickel accounted for 8pc of overall global nickel demand in 2020.

 

But developing industries now come with strings attached, and customers are emphasising ESG as a central pillar of any new supply chain. The sustainability of nickel supply from both a cost and environmental standpoint was questioned by industry experts at the conference, especially with new supply in Indonesia dominated by High Pressure Acid Leeching (HPAL) projects.

 

"We see the HPAL projects in Indonesia are currently delayed, mostly because of the issue with deep sea tailings disposal. The Indonesian government are coming to the realisation that companies, particularly in the west, would not be able to use the end product because of ESG," Denis Sharypin, director of strategic marketing at Russia's Norilsk Nickel, told an industry panel at Metals Live.

 

Chinese investors also realise that's definitely not the path to follow. They need to find a different solution… this will take time and additional capex and opex," he said.

 

ESG central to cobalt's future in batteries

 

ESG in the cobalt industry has transitioned from an after-thought to a central issue, with implications for demand-supply fundamentals.

 

Several industry figures commented on the need for the cobalt industry to clean up its image in order to remain relevant amid calls from downstream consumers to remove cobalt from batteries. A steep rise in cobalt metal prices — to $24.50-25.40/lb du Rotterdam on 18 March from $15.60-16.20/lb on 4 January — has prompted renewed attention from electric vehicle producers on their raw material costs.

 

"I think the reputation of cobalt was one of the main drivers which led to OEMs to try to substitute cobalt out of the battery mix," said Glencore's head cobalt trader David Brocas. "Several things have been happening over the past two years with partnership initiatives to try and address these issues in the DRC… the adoption of the Responsible Mining Initiative is working well, with more and more miners on the list."

 

Because its demand is highly linked to electric vehicles, the industry is increasingly responsive to demands from downstream consumers. James Nicholson, head of corporate responsibility at Trafigura, told delegates that creditors have also put pressure on them as buyers of cobalt to do more to ensure a sustainable supply chain.

 

Source: Argusmetal