'Struth. It's the circle of (commodity) life. Have I ever told you about the hog cycle?*
From Bloomberg via Yahoo Finance, January 9:
A meltdown in some of the most-hyped energy-transition metals is wreaking havoc across the mining world, stalling projects, scuppering deals and triggering a scramble for cash that promises to reverberate through the industry for years.
....MUCH MORELithium — the ultra-light metal used in electric-vehicle batteries — has plunged more than 80% from a late-2022 record, as the market whiplashed from shortage fears to a mountain of surplus inventories. Nickel and cobalt have also tumbled, weighed down by an influx of new production amid concerns that the shift to EVs may not be as smooth and quick as predicted.
It’s a dramatic reversal from the ebullience of recent years that sent prices soaring and sparked a rush by some of the auto industry’s biggest players to secure future supply. Now, carmakers are getting cold feet and abandoning deal discussions, according to mining investment bankers and industry executives. The low prices are making it harder for mine builders to raise money from more traditional sources as well, at a time when the industry is also grappling with rampant inflation driving up the cost to build new projects.
Chemaf Resources Ltd. last year put itself up for sale after a slump in the cobalt price left it struggling to finish key projects in the Democratic Republic of Congo, and London-based Horizonte Minerals Plc scaled back work on its Brazilian nickel mine as it searches for funds to complete construction, and announced an emergency $20 million financing late last year.
Junior producers have been particularly hard hit. Australia’s Core Lithium Ltd. said last week it would halt mining operations at its Grants open pit mine until conditions improve, warning of a writedown, while nickel miner Panoramic Resources Ltd. is suspending its flagship mine after entering voluntary administration late last year when it failed to find a buyer or partner.
The turmoil is likely to have long-term ramifications for supply, and stands in stark contrast to the growing emphasis by governments on securing future access to critical minerals.
Building new mines takes years and sometimes decades, and stalled projects can often be hard to restart. And while most crucial battery markets are now in surplus, shortages are already forecast toward the end of the decade as the greening of the economy accelerates.
In the case of lithium — a once-tiny commodity market that has been catapulted into the global spotlight due to its vital role in EV batteries — the extreme boom and bust of the last few years shows the difficulties in trying to forecast future supply-demand balances and prices, for both producers and their investors.
“There’s nothing magical about EV input markets like lithium and cobalt: when their prices collapse, projects and supply are cut — just like any other commodity market,” said Tom Price, head of commodities strategy at Liberum Capital. “Investors should wait to see evidence of this type of re-balancing among the world’s lithium and cobalt miners, before they think about buying exposure.”....
*Why, yes, yes I have.
The Hog Cycle
No not Harley-Davidson, although I imagine some econ grad student has written the paper.
Wheat and hogs are two commodities with long price series. We mentioned the hog cycle back in January:
The hog price series is one of the longest we have records for, back to the 1200's. The cycle is:
slaughter begets scarcity begets higher prices begets breeding begets over-supply begets slaughter. It's been going on for a while....
And related to the headline story, though sadly sans porkers, Monday's "Deep Dive: Iron Batteries Crushed The Demand For Cobalt, Reduced The Demand For Nickel"
