“… Indian financial development is at present the strongest on the earth, and its rising manufacturing base, sturdy infrastructure spending and demographics, all recommend rising per capita consumption of useful resource and vitality commodities,” it mentioned in ‘Sources and Vitality Quarterly’ launched on Thursday.
In China, sturdy funding in infrastructure and manufacturing capability has helped useful resource and vitality commodity demand within the face of weak demand from the residential property sector, the AOCE mentioned.
World financial development mushy
“World financial development stays mushy, weighed down by comparatively tight monetary circumstances. Nonetheless, key markets have continued to assist commodity demand. US financial development has been strong regardless of rate of interest hikes previously 2 years,” the quarterly mentioned.
World vitality transition shall be a key think about useful resource and vitality commodities over the outlook interval to 2029. “Whereas the transition will see elevated demand for commodities utilized in low emission applied sciences (for instance, iron ore, aluminium, copper, nickel and lithium), it’s going to cut back demand for different commodities (reminiscent of some fossil fuels),” it mentioned.
The persevering with evolution of applied sciences through the vitality transition will increase the problem of forecasting future demand, provide and costs. “The decarbonisation of metal/aluminium manufacturing and provide chains will have an effect on development and commerce patterns over the outlook interval to 2029,” the AOCE mentioned.
Weak outlook for nickel, lithium
Overcoming the substantial technological, vitality and feedstock challenges required to realize this transformation will take each time and substantial capital funding. There are already many pilot metal crops below building world wide, particularly hydrogen-based DRI operations, most of that are anticipated to start over the subsequent two years, it mentioned.
Aluminium producers are more and more resorting to renewable energy to cut back their emissions, and this development will speed up over the outlook interval. “This may embody the usage of inexperienced hydrogen,” the ‘Sources and Vitality Quarterly’ (REQ) mentioned.
The AOCE mentioned a comparatively weak worth outlook has contributed to introduced closures and manufacturing cuts by quite a lot of key nickel and lithium producing nations (together with Australia). It has added to current provide chain uncertainties related to Western nations’ coverage measures to safe future provide.
Costs of lithium and nickel reached excessive ranges in 2022 and H1 2023. “Mixed with sturdy provide development since 2020, softer-than-expected (cyclical and structural) demand for each metals has since seen market surpluses develop. Because the final REQ, rising inventories have seen the costs of lithium and nickel hit 5-year lows,” it mentioned.
Aus export earnings to fall
Some high-cost nickel producers might exit the market completely. “Nonetheless, nickel’s use in a widening array of supplies and applied sciences means a tightening world stability and improved costs within the latter half of the outlook interval,” mentioned the AOCE.
Lithium stays a central element of batteries utilized in quite a few applied sciences. Australian lithium exports are prone to stay substantial, with most lithium producers in Australia prone to stay globally aggressive, the REQ mentioned.
For the 2024-25 monetary yr (July-June), Australian useful resource and vitality export earnings are forecast to fall additional to round $369 billion, reflecting additional bulk commodity worth declines and an increase within the AUD/USD.
Via the remainder of the outlook interval (to 2029), export values are anticipated to degree out as commodity worth declines gradual and the AUD/USD lifts modestly, it mentioned.
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