The Base Metal Boom: The Start of a New Bull Market?
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The Base Metal Boom: The Start of a New Bull Market?

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Base metals are the most fundamental minerals produced for the modern economy, and metals such as copper, zinc, nickel, lead, and aluminum are the key components that support sustained economic growth.

During periods of economic expansion, these are the first materials to support a bustling economy, reducing inventory at metal warehouses and eventually their source, mines.

A Base Metal Boom?

Today’s infographic comes to us from Tartisan Nickel and it takes a look at the surging demand for base metals for use in renewable energy and EVs, and whether this could translate into a sustained bull market for base metals.

The Base Metal Boom: The Start of a New Bull Market?

Over the last three years, prices of base metals have risen on the back of a growing economy and the anticipation of usage in new technologies such as lithium-ion batteries, green energy, and electric vehicles:

Cobalt: +232%
Zinc: +64%
Nickel: +59%
Copper: +45%
Lead: +34%
Tin: +36%
Aluminum: +42%

As goes the success and development of nations, so goes the production and consumption of base metals.

Why Higher Prices?

Development outside of the Western world has been the main driver of the base metal boom, and it will likely continue to push prices higher in the future.

China has been the primary consumer of metals due to the country’s rapid economic expansion – and with recent efforts to improve environmental standards, the country is simultaneously eliminating supplies of low quality and environmentally toxic metal production. India and Africa will also be emerging sources of base metal demand for the coming decades.

But this is not solely a story of developing nations, as there are some key developments that will include the developed world in the next wave of demand for base metals.

New Sources of Demand

Future demand for base metals will be driven by the onset of a more connected and sustainable world through the adoption of electronic devices and vehicles. This will require a turnover of established infrastructure and the obsolescence of traditional sources of energy, placing pressure on current sources of base metals.

The transformation will be global and will test the limits of current mineral supply.

Renewable Energy Technology
The power grids around the world will adapt to include renewable sources such as wind, solar and other technologies. According to the World Energy Outlook (IEA 2017), it is expected that between 2017 to 2040, a total of 160 GW of global power net additions will come from renewables each year.

Renewables will capture two-thirds of global investment in power plants to 2040 as they become, for many countries, the cheapest source of new power generation. Renewables rely heavily on base metals for their construction, and would not exist without them.

Electric Vehicles
Gasoline cars will be fossils. According to the International Energy Agency, the number of electric vehicles on the road around the world will hit 125 million by 2030. By this time, China will account for 39% of the global EV market.

Dwindling Supply

Currently, warehouse levels in the London Metals Exchange are sitting at five-year lows, with tin leading the pack with a decline of 400%.

According to the Commodity Markets Outlook (World Bank, April 2018), supply could be curtailed by slower ramp-up of new capacity, tighter environmental constraints, sanctions against commodity producers, and rising costs. If new supply does not come into the market, this could also drive prices for base metals higher.

New Supply?

There is only one source to replenish supply and fulfill future demand, and that is with mining.

New mines need to be discovered, developed and come online to meet demand. In the meantime, those that invest in the base metals could see scarcity drive prices up as the economy moves towards its electric future on a more populated planet.

An extended base metal boom may very well be on the horizon.

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Energy

The Periodic Table of Commodity Returns (2012-2021)

Energy fuels led the way as commodity prices surged in 2021, with only precious metals providing negative returns.

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commodity returns 2021 preview

The Periodic Table of Commodity Returns (2022 Edition)

For investors, 2021 was a year in which nearly every asset class finished in the green, with commodities providing some of the best returns.

The S&P Goldman Sachs Commodity Index (GSCI) was the third best-performing asset class in 2021, returning 37.1% and beating out real estate and all major equity indices.

This graphic from U.S. Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.

Commodity Prices Surge in 2021

After a strong performance from commodities (metals especially) in the year prior, 2021 was all about energy commodities.

The top three performers for 2021 were energy fuels, with coal providing the single best annual return of any commodity over the past 10 years at 160.6%. According to U.S. Global Investors, coal was also the least volatile commodity of 2021, meaning investors had a smooth ride as the fossil fuel surged in price.

Commodity2021 Returns
Coal160.61%
Crude Oil55.01%
Gas46.91%
Aluminum42.18%
Zinc31.53%
Nickel26.14%
Copper25.70%
Corn22.57%
Wheat20.34%
Lead18.32%
Gold-3.64%
Platinum-9.64%
Silver-11.72%
Palladium-22.21%

Source: U.S. Global Investors

The only commodities in the red this year were precious metals, which failed to stay positive despite rising inflation across goods and asset prices. Gold and silver had returns of -3.6% and -11.7% respectively, with platinum returning -9.6% and palladium, the worst performing commodity of 2021, at -22.2%.

Aside from the precious metals, every other commodity managed double-digit positive returns, with four commodities (crude oil, coal, aluminum, and wheat) having their best single-year performances of the past decade.

Energy Commodities Outperform as the World Reopens

The partial resumption of travel and the reopening of businesses in 2021 were both powerful catalysts that fueled the price rise of energy commodities.

After crude oil’s dip into negative prices in April 2020, black gold had a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.

Natural gas prices also rose significantly (46.91%), with the UK and Europe’s natural gas prices rising even more as supply constraints came up against the winter demand surge.

Energy commodity returns 2021

Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was 2021’s best commodity.

High electricity demand saw coal return in style, especially in China which accounts for one-third of global coal consumption.

Base Metals Beat out Precious Metals

2021 was a tale of two metals, as precious metals and base metals had opposing returns.

Copper, nickel, zinc, aluminum, and lead, all essential for the clean energy transition, kept up last year’s positive returns as the EV batteries and renewable energy technologies caught investors’ attention.

Demand for these energy metals looks set to continue in 2022, with Tesla having already signed a $1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.

Metals price performance 2021

On the other end of the spectrum, precious metals simply sunk like a rock last year.

Investors turned to equities, real estate, and even cryptocurrencies to preserve and grow their investments, rather than the traditionally favorable gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, only returning -9.64% and -22.21% respectively.

Grains Bring Steady Gains

In a year of over and underperformers, grains kept up their steady track record and notched their fifth year in a row of positive returns.

Both corn and wheat provided double-digit returns, with corn reaching eight-year highs and wheat reaching prices not seen in over nine years. Overall, these two grains followed 2021’s trend of increasing food prices, as the UN Food and Agriculture Organization’s food price index reached a 10-year high, rising by 17.8% over the course of the year.

Grains price performance 2021

As inflation across commodities, assets, and consumer goods surged in 2021, investors will now be keeping a sharp eye for a pullback in 2022. We’ll have to wait and see whether or not the Fed’s plans to increase rates and taper asset purchases will manage to provide price stability in commodities.

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Energy

A Global Breakdown of Greenhouse Gas Emissions by Sector

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A Global Breakdown of Greenhouse Gas Emissions by Sector

In a few decades, greenhouse gases (GHGs)—chiefly in the form of CO₂ emissions—have risen at unprecedented rates as a result of global growth and resource consumption.

To uncover the major sectors where these emissions originate, this graphic from Our World in Data pulls in data from 2016 courtesy of Climate Watch and the World Resources Institute, when total emissions reached 49.4 billion tonnes of CO₂ equivalents (CO₂e).

Sources of GHG Emissions

Global GHG emissions can be roughly traced back to four broad categories: energy, agriculture, industry, and waste. Overwhelmingly, almost three-quarters of GHG emissions come from our energy consumption.

SectorGlobal GHG Emissions Share
Energy Use73.2%
Agriculture, Forestry & Land Use18.4%
Industrial processes5.2%
Waste3.2%

Within each category, there are even more granular breakdowns to consider. We’ll take a closer look at the top two, which collectively account for over 91% of global GHG emissions.

Energy Use

Within this broad category, we can further break things down into sub-categories like transport, buildings, and industry-related energy consumption, to name a few.

Sub-sectorGHG Emissions ShareFurther breakdown
Transport16.2%• Road 11.9%
• Aviation 1.9%
• Rail 0.4%
• Pipeline 0.3%
• Ship 1.7%
Buildings17.5%• Residential 10.9%
• Commercial 6.6%
Industry energy24.2%• Iron & Steel 7.2%
• Non-ferrous metals 0.7%
• Machinery 0.5%
• Food and tobacco 1.0%
• Paper, pulp & printing 0.6%
• Chemical & petrochemical (energy) 3.6%
• Other industry 10.6%
Agriculture & Fishing energy1.7%-
Unallocated fuel combustion7.8%-
Fugitive emissions from energy production5.8%• Coal 1.9%
• Oil & Natural Gas 3.9%
Total73.2%

Billions of people rely on petrol and diesel-powered vehicles to get around. As a result, they contribute to almost 12% of global emissions.

But this challenge is also an opportunity: the consumer adoption of electric vehicles (EVs) could significantly help shift the world away from fossil fuel use, both for passenger travel and for freight—although there are still speedbumps to overcome.

Meanwhile, buildings contribute 17.5% of energy-related emissions overall—which makes sense when you realize the stunning fact that cities use 60-80% of the world’s annual energy needs. With megacities (home to 10+ million people) ballooning every day to house the growing urban population, these shares may rise even further.

Agriculture, Forestry & Land Use

The second biggest category of emissions is the sector that we rely on daily for the food we eat.

Perhaps unsurprisingly, methane from cows and other livestock contribute the most to emissions, at 5.8% total. These foods also have some of the highest carbon footprints, from farm to table.

Sub-sectorGHG Emissions Share
Livestock & Manure5.8%
Agricultural Soils4.1%
Crop Burning3.5%
Forest Land2.2%
Cropland1.4%
Rice Cultivation1.3%
Grassland0.1%
Total18.4%

Another important consideration is just how much land our overall farming requirements take up. When significant areas of forest are cleared for grazing and cropland, there’s a clear link between our land use and rising global emissions.

Although many of these energy systems are still status quo, the global energy mix is ripe for change. As the data shows, the potential points of disruption have become increasingly clear as the world moves towards a green energy revolution.

For a different view on global emissions data, see which countries generate the most CO₂ emissions per capita.

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