For example, the publicly traded fund ETF WisdomTree Industrial Metals, which maps the development of industrial metal prices, has weakened by about seven percent since mid-October. From the beginning of the year to the middle of the month, the fund had grown almost forty percent this year to its nine-year high. The reason is the energy crisis in China, where most of the world’s metal production is mined.
“Although the mines have resumed production, many of them operate at 40 to 60 percent because the Chinese government has ordered energy savings and lower greenhouse gas emissions,” said Finlord analyst Boris Tomčiak.
The situation is complicated by the often inefficient and expensive mining of metals and their processing. “Especially the production of metals is very energy intensive. This is mainly another complication for industry, already plagued by problems with inputs. Magnesium alloys, for example, are widely used by car manufacturers and the lack of metal can become a new limitation for them, similar to chips, “says Patria Finance analyst Tomáš Vlk.
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Magnesium on the stock exchanges at the end of September this year rose to almost four times the prices from the beginning of January this year and traded the most expensive in history. “Due to the energy crisis, factories are closing, which is leading to a decrease in magnesium production. The Chinese city of Yulin, which produces the most magnesium, has ordered the closure of 35 of the 50 production plants. The remaining 15 were told to cut operations in half, which drastically reduced production, “says XTB analyst Jiří Tyleček. But now magnesium prices have begun to fall, losing about 27 percent from a historic high.
Historically, the most expensive was zinc at the beginning of October, which rose by about a third, only to weaken by about twelve percent in the last two weeks. At the beginning of October, record-breaking aluminum also fell by about a tenth. However, the most expensive in history remains, for example, molybdenum, which is more expensive by more than forty percent this year, while cobalt prices are at a two-year high, rising by almost 65 percent.
Why are energy prices rising?
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“Given that global energy prices remain high, the situation cannot be expected to improve by the end of this year. European industry will continue to face shortages and high prices for metals and other commodities for several months, ”adds Tomčiak.
The situation with a shortage and rising prices also applies to the so-called rare earth metals, ie lesser-known but important elements, such as dysprosium, terbium, neodymium or, for example, praseodymium. “These are important in the production of engines, turbines and also in the armaments industry,” recalls Fichtner analyst Tomáš Tyl.
Their prices are currently close to the eight-year high, when, for example, the publicly traded ETF VanEck Rare Earth / Strategic Metals is one hundred percent higher this year. Even in the case of rare earth metals, China is the world’s largest supplier, in this case only a few mines around the city of Pa-jen O-po. “Now they are looking for ways to resume their production, for example in the USA, where their mining has already taken place in the past,” adds Tyl.
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