Has the commodities cycle now reached its peak?

The commodities industry downturn from 2013–2016 had a massive effect on companies in Australia and around the globe – with most mining companies going into survival mode. Since mid-2016 though, the market has been in a strong recovery cycle and, some say, it has now reached its peak.

Where we are now is really at an inflection point and, depending on where the global economic cycle moves, commodities will follow accordingly. There are exciting opportunities emerging as well, coming from new technologies especially that can help drive more sustained growth for the industry.

Ernie Thrasher, Chief Executive Officer at Xcoal Energy & Resources explained that “we are at a point where either the global demand will sustain this commodities cycle, or we’re at a point where the recovery cycle has reached its end and we may see another downturn up ahead.” Even those in the market are unsure of what will happen moving forward, but are focused on the need to recognise that both options are on the table right now.

Scott Ryall, Principal at Rimor Equity Research describes this as a time of “cautious optimism” where companies can think about and plan for the medium to long term more so than they’ve been able to for a while.

“During the last five years when we had the downturn, a lot of companies were focused more on survival than on long terms business planning and we’re now in a period that requires more focus on the long term.” He sees productivity as one of the major areas of focus – improving levels of productivity while keeping costs low.

Changes in the commodities cycle is an increasing challenge for the mining and energy industries, but it can also present new opportunities. With governments around the world focused on reducing emissions, electric vehicles have been one of the key drivers for the current commodity cycle. This is an industry that’s growing rapidly, but is still relatively new.

As Tony Wood, Energy Program Director at the Grattan Institute notes, “we’ve seen a high increase in lithium as the flavour of the month. Now though people are considering other metals to make the batteries that go into EVs.” Tony describes how technology shifts are common in fast-growing industries such as EVs, but that it’s difficult to predict the final direction the industry will take. That is, it’s still unclear as to which of the metals groups – lithium, cobalt and graphite vs nickel and copper – will emerge on top in this transitional period.

The global transition in energy and transport is an interesting discussion – understanding what this means for the mining and energy industries in terms of demand for coal, gas, iron-ore, and metals moving forward. And certainly, the shift towards battery technology is a global trend. Kobad Bhavnagri, Head of APAC Economics and Policy at Bloomberg New Energy Finance will be discussing this and much more at the upcoming Energy Mines and Money Australia event.

Ernie, Scott, Tony and Kobad are among the 60+ mining and energy executives, thought leaders and investors taking part in Energy Mines and Money, sharing their thoughts on growth opportunities for the industry including the battery metals.

Energy Mines and Money Australia will showcase over 40 strategic mineral, coal, oil and gas opportunities, matching projects with global investment at a two-day conference and exhibition taking place on June 20-21 at the Brisbane Convention & Exhibition Centre.

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