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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
The author is head of non-ferrous metals pricing at Argus Media
Europe’s newfound enthusiasm for army spending is colliding with some extraordinary value surges in some not so well-known crannies of commodities markets. Many area of interest metals wanted for all the pieces from bullets to superior fighter plane are going through acute provide squeezes and stiff competitors from different metal-hungry industries.
Politicians want to grasp the challenges and bear in mind how excessive a value weapons producers could need to pay to get the components they want, and the ripple impact that additional demand and value hikes may have on civilian finish customers of those metals.
The primary trigger for concern should be antimony — used to harden lead bullets and make flame-retardant supplies. As soon as traded comfortably beneath the $15,000-a-tonne mark in Europe, antimony has jumped in value by about 375 per cent because the begin of 2024 due to a worldwide feedstock scarcity and Chinese language export controls that got here into impact in September 2024.
The present value of duty-unpaid materials in Europe’s principal Rotterdam hub is $56,000-$58,000 a tonne. With no fast technique to deliver extra provide from outdoors into play, the squeeze is unlikely to finish quickly. Fierce competitors for supplies is more likely to assure unusually excessive antimony costs for the foreseeable future.
This identical subject of supply-chain inelasticity recurs many instances in metals markets proper throughout the periodic desk. Rhenium — a high-temperature minor metallic utilized in alloys to make high-pressure turbine blades for jet engines — startled many final summer time when its costs abruptly shot up after barely transferring for years. The trigger? An enormous wave of buying by China colliding with rising demand from the aerospace and medical industries elsewhere, and a provide base that merely couldn’t sustain. Rotterdam costs for catalyst grade rhenium ammonium perrhenate (minimal 69.4 per cent of the metallic) have nearly doubled yr on yr to $1,800-1,900/kg. Rhenium has a number of makes use of within the medical business reminiscent of making implants, most cancers detection, radiotherapy and treating bone ache.
The rhenium rally had echoes of hafnium only a yr earlier. That is one other high-temp minor metallic, utilized by the aerospace business in superalloys. It underwent a rare rally from April 2022 to August 2023, as consumers from the aerospace and electronics industries went out purchasing after Covid-19.
Not solely that however the electronics sector was booming, and plenty of new purposes have been below growth for the metallic. As with rhenium, provide couldn’t sustain. The worldwide benchmark, assessed by Argus, peaked at $6,950/kg with responsibility unpaid at Rotterdam in August 2023 and nonetheless stays manner above historic norms at $3,700-3,900/kg. For context, hafnium had spent a few years buying and selling at round $750-1,200/kg.
The shortage of visibility and understanding of opaque “essential mineral” markets means supply-chain vulnerabilities could be neglected and fundamentals driving value actions misunderstood.
A pure query is: why can’t we simply enhance provide? Inevitably, the largest downside is often cash. Even when costs are excessive, it may be robust to make the financial case for investing in bringing extra provide on-line, partly as a result of minor metals are often by-products of the refining of different metals.
Hafnium is especially area of interest — a byproduct of a byproduct, zirconium, the supply of which is usually formed by the nuclear business. A processing plant must extract 50 tonnes of zirconium to get only one tonne of hafnium, so it’s not at all times worthwhile for zirconium producers to ramp up their hafnium output even when demand for the latter is robust.
The checklist of metals wanted by the defence business goes on — tungsten, titanium, chromium, tantalum, niobium, cobalt, molybdenum, vanadium. There are the “tech metals” reminiscent of gallium and germanium used to make compound semiconductors and infrared lenses. And naturally uncommon earths, which discover their manner into missile steering techniques, night-vision goggles and fighter jets.
All have difficult provide chains. Many are caught up in geopolitics: China’s new export controls on tungsten, alongside gallium, germanium and graphite, for instance. Because the world pursues increasingly minor metals — for each army and civilian functions — policymakers would do effectively to analyse their provide chains extra intently and establish the place assist is required to get extra manufacturing into play. As each rhenium and hafnium illustrate, shortages can sneak up in opaque markets, and the value spikes go away consumers reeling.
