{"text":[[{"start":7.85,"text":"The Iran war is creating a “super-squeeze” in industrial metals such as copper and aluminium, say executives and analysts who believe persistent tight market conditions mean prices could be set to stay high for years to come."}],[{"start":22.549999999999997,"text":"The price of copper is close to its all-time closing high while aluminium is at its highest level in four years. Both have been boosted by strong demand from data centres — which use copper for wiring and aluminium for server racks — and for the construction of electric grids and vehicles, while supply has been hit in recent months by the Middle East conflict and the near-closure of the Strait of Hormuz."}],[{"start":45.4,"text":"The sharp recent moves highlight how the fallout from the US-Israeli war against Iran, now in its fourth month, is ricocheting through commodity markets beyond oil and gas. But unlike energy markets, where there is plentiful global supply, concerns about looming shortages existed in some of these industrial metals before the war."}],[{"start":65,"text":"“We are going to be in a much tighter supply environment” across commodities, said Craig Miller, chief executive of Valterra Platinum, a South African miner."}],[{"start":75.25,"text":"“The demand for metal is going to continue to grow,” he added, pointing to trends such as the energy transition and the growth of AI. “And supply has not grown, by any stretch of the imagination, to meet that demand.”"}],[{"start":88.95,"text":"The fallout from the Iran war, which has sent Brent crude oil from $72 to more than $90 currently, has reached a wide range of commodity markets. Prices have surged recently for agricultural products such as wheat and corn, for which fertiliser is more expensive, and also for industrial products such as plastics and asphalt, which are both made from refined oil products."}],[{"start":112.6,"text":"For metals, the war has increased the costs of operating a mine because of the higher price of the diesel used to run trucks and other mining equipment, and due to a jump in the price of sulphuric acid, a crucial ingredient used in some copper and nickel mines."}],[{"start":128.7,"text":"James Hayter, chief investment officer at Orion Resource Equities, said that, given conditions in these markets, he was surprised prices across the board had not risen more."}],[{"start":138.79999999999998,"text":"“Everybody is looking at where these prices are, and scratching their heads,” he said."}],[{"start":145.14999999999998,"text":"“There is a structural problem with many of these commodities markets. And we’re going to have to see prices rise substantially,” he added."}],[{"start":null,"text":"
"}],[{"start":152.64999999999998,"text":"In the case of copper, the market was already expected to be in deficit — where demand outstrips supply — this year, because of disruptions at major mines."}],[{"start":162.79999999999998,"text":"The conflict in the Middle East has dented production further, by causing the price of sulphur — a byproduct of oil refining — to more than double. "}],[{"start":171.14999999999998,"text":"Disruptions in sulphur availability could remove as much as 125,000 tonnes of copper production in the Democratic Republic of Congo, according to consultancy Wood Mackenzie. A further 200,000 tonnes of production in Chile could be at risk because of sulphur disruptions, including China’s ban on exports of sulphuric acid, according to Amy Gower, analyst at Morgan Stanley."}],[{"start":193.54999999999998,"text":"“It feels like copper supply is getting harder to deliver,” she said, adding that long recovery times at mines that have experienced disruption are also contributing to the tight market."}],[{"start":204.04999999999998,"text":"Goldman Sachs, which initially forecast a 60,000-tonne deficit this year outside the US market, recently revised that up to a 640,000-tonne deficit, partly because of mine supply issues at Grasberg in Indonesia and at Kamoa-Kakula in the DR Congo. The US bank also increased its copper price forecast 10 per cent to $13,735 per tonne by the end of the year."}],[{"start":232.85,"text":"Mining executives say the shortfall has been building for years and investors have often not allowed them to make the necessary investment in new copper mines."}],[{"start":241.79999999999998,"text":"Cobus Loots, chief executive of Pan African Resources, a gold producer, said: “Since the early 2000s, investors have been pushing mining companies to be more capital-disciplined, which is a great thing, but it also means potentially underspending and underinvesting in new supplies. Now there has to be some level of catch-up.”"}],[{"start":null,"text":""}],[{"start":262.2,"text":"In aluminium, the war has had a direct impact, with the Middle East accounting for almost 10 per cent of global refined production. Major producers including Alba and EGA curbed output following Iran’s strikes, which damaged their infrastructure, and because of the challenge of getting the raw alumina they need to their smelters amid the strait’s closure."}],[{"start":282.8,"text":"Meanwhile, high fuel prices triggered by the war have caused some countries to accelerate investments related to energy security, for instance in renewables, a move that is expected to boost demand for copper and aluminium over the medium term, according to analysts. "}],[{"start":298.8,"text":"While the mining industry is well known for being bullish about the prices of metals it produces, economists also see strong drivers of higher prices from the squeeze on supply. But they warn the bull market could be undermined if the Iran war triggers a global economic downturn that dents demand for metals."}],[{"start":318.8,"text":"“This is very different to earlier supercycles because it is driven by supply disruptions, not strong demand,” said Paul Bloxham, chief economist for Australia and global commodities at HSBC, who has been referring to it as a “super squeeze” since the aftermath of the Russian invasion of Ukraine in 2022. "}],[{"start":337.90000000000003,"text":"“This is going to be a positive story for copper, nickel, aluminium — for products that are a big part of the energy transition,” he said, although he added the constraints in supply also act as a “huge negative supply shock to the global economy”."}],[{"start":352.25000000000006,"text":"One key metric economists are watching is whether demand for metals is being dented by high prices or concerns over economic growth. So far, there is little sign of that happening. "}],[{"start":362.70000000000005,"text":"“I haven’t seen much demand destruction,” said Jean-Sébastien Pelland, executive director at Eland Cables, which makes copper cables used in offshore wind farms and oil rigs."}],[{"start":372.95000000000005,"text":"High costs are passed on to end users, who are willing to pay for them, he said. “People are not going to stop buying cables for renewables energy any time soon.”"}],[{"start":382.75000000000006,"text":"Data visualisation by Ray Douglas"}],[{"start":393.90000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781163097_3524.mp3"}