Featured
Thanksgiving Thoughts - and The Year Ahead for Commodity Investors
Commodity Intelligence Comment - Thu 08:52, Nov 27 2025
The Commodity Intelligence/Burdass View - We Filtered the Noise in 2025 - Looking Ahead to 2026
If 2024 was the year of Waiting for the Pivot, 2025 has been the year of Divergence. The rising tide is no longer lifting all boats. We have been in a market where commodity correlations are breaking down—most notably the historic decoupling of gold (bullish) and oil (bearish/complex). Commodity Intelligence has been on the right side of these shifts and we hope that you, our clients, have profited.
If 2025 was about Divergence, 2026 is to be the Year of Consequence.
For five years, the market has traded on "paper promises"—promises of seamless green transitions, promises of endless shale supply, and promises that inflation was transitory. In 2026, those narratives start to hit the wall of physical reality.
The "noise" in the coming year will be about weak growth and demand destruction (recession fears). Our "signal" is the Supply Cliff. We are entering a window where capital starvation in parts of the mining sector is finally showing up in the physical delivery numbers.
Focus Commodities for 2026
Gold
2024 was the Stealth Bull Market. We saw it developing at Commodity Intelligence, yet we are not sure if the generalist investor was on top of it.
2025 brought the rise of the Eastern Central Bank Buyer. We believe China bought a lot more gold than it disclosed and is becoming the non-aligned world's gold custodian. U.S. Treasuries no longer seemed as attractive as they did historically to these buyers.
What about 2026? We think this could be the year when the Western institutional Buyer capitulates and joins the gold party. The driver is fiscal dominance. With Western debt interest payments becoming unmanageable, the market is realising that "real rates" don't matter if the currency itself is being debased to pay the bills.
What should you be doing in your gold portfolio? We think that the royalty companies are now starting to look expensive. There's relative value in Anglogold. Of the majors, Barrick looks more interesting than Newmont at the moment. With Elliott Management inside the tent and the Old Guard exiting, Barrick is no longer a 'value trap'—it is an event-driven breakup play. We are buyers of this volatility. Small caps like resource-heavy Seabridge are front of mind from a fundamental valuation perspective. This is our preferred smaller play, yet there will be other small and mid-caps that have cleaned up their balance sheets and are now better candidates for M&A activity.
Copper
In H1 2025, our view was that copper was heading for a near term surplus. This was reasonable based on the data we had at the time and the views of the International Copper Study Group (ICSG).
The outlook has changed, based not on accelerated energy transition or stronger growth, but a string of major outages, most notably at Grasberg in Indonesia.
We now see copper heading for a modest deficit of 250,000-300,000 tonnes (1-1.25% of the market). The risk to that forecast could be toward a greater deficit if further mine level incidents occur.
The market is obsessed with the mine hole at Grasberg, but it is missing the smelter crisis. Chinese scrap availability has collapsed. The supply chain is short from both ends.
We see First Quantum as a strong play on copper with pure alpha should Cobre Panama return to the portfolio. Even should this not happen, a $5.50/lb copper price should act as a tailwind.
Uranium
We have been closely tracking the return of demand for nuclear power stations, especially in the U.S. and UK but also elsewhere.
The Inventory Overhang narrative is dead. We are now seeing a scramble for physical pounds.
The easy beta trade (physical trusts) is over. The alpha in 2026 belongs to the Permitted Western developers—the only ounces that can legally satisfy the new data-center baseload contracts.
Oil & Gas
We see the potential end of the Ukraine war coming into the near-to-mid-term investment horizon. The Commodity Intelligence view on oil prices for this cycle sees a bottoming process in the $50s, with a hard floor at $45 driven by U.S. shale breakevens. We aggressively refute the 'oil to $30' bear case.
From an equity perspective, the sector is providing relatively strong dividends and has taken bold measures to cut costs, especially its corporate HQ footprint, during 2025.
At a stock level, our focus on BP over Exxon continues. Special situations get more interesting where there is no directional price momentum to move the stocks. We carried a story recently suggesting one of the last major oil bulls has given up the call; our view is that the market may become less sensitive to the last few dollars of oil price downside from an equity perspective.
The year ahead will be volatile, but for the disciplined investor, volatility is just the entry fee for value. Stay with the signal, ignore the noise.
Featured Commodity Intelligence Comment - May 20th 2025
China Now Forming More Households than Homes?
"Moreover, property investment in China fell 10.3% in the first four months of 2025 from a year earlier"
China’s property sector continues its structural unwind. Investment fell 10.3% year-on-year in the first four months of 2025, but the more telling figure is the 23.8% collapse in new floor space starts—a clear signal of developer retrenchment. Sales are also falling, down 2.8%, confirming ongoing demand-side weakness.
More striking still is the price picture. Used home values are now just 10% above 2011 levels, meaning Chinese real estate has posted negative real returns for over a decade. In a country where property once anchored middle-class wealth, this is a profound shift.
Overbuilding in lower-tier cities looks indisputable, with construction in some areas having run 3–5 years ahead of actual household formation. Data discrepancies between population registers and household records further cloud demand forecasts. Commodity Intelligence openly questions the integrity of China’s demographic data, with discrepancies emerging between population counts, police data and household registrations—raising further questions about the underlying demand assumptions that underpinned the boom.
While local governments are now buying excess inventory and easing credit conditions, the road to recovery looks long. In Zhengzhou, part of a five-city group reducing inventories, unsold stock fell by over 1.3 million m²—progress, but against a still-high national backdrop.
New housing starts in 2024 were just 739 million m²—only ~33% of the 2019 peak—and likely lower in 2025. With long-run sustainable demand estimated at ~800 million m², supply has now dipped below equilibrium, but inventories remain bloated.
In our view, this is not a V-shaped rebound. It’s a long reset. And for commodity investors, the message is stark: China is now forming more households than it is building homes for—proof that the property bubble has well and truly burst.
These are dynamics we’ve tracked closely at Commodity Intelligence, supported by on-the-ground insight from Beijing to Anhui. For clients seeking deeper data or regional analysis, we’re happy to provide more.
Original story from the news below:
SINGAPORE: Iron ore futures prices fell on Monday, pressured by tepid economic data from top consumer China and uncertain near-term demand for the steelmaking material.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange traded 1.03% lower at 721.5 yuan ($100) a metric ton, as of 0258 GMT.
The benchmark June iron ore on the Singapore Exchange was 0.56% lower at $99.5 a ton.
Broadly, growth in China’s industrial output and retail sales slowed in April, official data showed on Monday, as a trade war threatened to dampen momentum.
Moreover, property investment in China fell 10.3% in the first four months of 2025 from a year earlier, following a drop of 9.9% in the first quarter, official data showed on Monday.
Hot metal output, typically used to gauge iron ore demand, fell 8,700 tons month-on-month to 2.45 million tons, said broker Everbright Futures, which attributed the fall to blast furnaces undergoing maintenance.
Total iron ore stockpiles across ports in China also grew, inching up 0.26% on-week to 137 million tons as of May 16, Steelhome data showed.
Still, production among Chinese electric-arc-furnace steel producers ended its two-week slide and increased again on May 15, as hopes for better profits and higher steel demand encouraged the mills to lift output, said consultancy Mysteel.
“The number of profitable blast-furnace steel mills in China continued to increase this week, mainly thanks to the recovery in finished steel prices,” added Mysteel in a separate note.
Other steelmaking ingredients on the DCE languished, with coking coal and coke down 2.43% and 2.17%, respectively.
Steel benchmarks on the Shanghai Futures Exchange lost ground.
Rebar fell 1.03%, hot-rolled coil weakened 1.11%, wire rod fell nearly 1.5% and stainless steel eased 0.19%.
Featured
The End of The Global Carry Trade
Japan’s 10-year government bond yield climbed above 1.77% on Wednesday, marking a fresh 17-year high ahead of a crucial debt auction that could indicate investor demand amid rising fiscal concerns.
The Ministry of Finance plans to auction around 800 billion yen in 20-year JGBs.
On Tuesday, the government proposed a supplementary budget exceeding 25 trillion yen to fund Prime Minister Sanae Takaichi’s stimulus plan, far above last year’s 13.9 trillion yen extra budget, stoking debt worries.
Meanwhile, Bank of Japan Governor Kazuo Ueda told the prime minister that the central bank is gradually raising rates to steer inflation toward its 2% target while supporting sustainable growth.
Afterward, Ueda told reporters the prime minister made no specific request on monetary policy.
On the data front, machinery orders in Japan rose more than expected in September, signaling robust capital spending.
https://tradingeconomics.com/japan/government-bond-yield
Commodity Intelligence Comment - Wed 07:49, Nov 19 2025
Feature by James Burdass:
The Japan Connection:
For much of my investment career, investors have engaged in the well known "carry trade". I had a front row seat at Mitsubishi UFJ Trust during the late 2000's, working for a Japanese institution. During that time, I advised on the major GPIF account, one of the largest single mandates in the world.
I led on Materials in the World ex-Japan. Japan has a unique role as the world's largest creditor nation. As readers know, it has historically been the largest single holder of US treasuries (holding over $1.1 trillion).
Japan's persistent current account surpluses averaged approximately $127 billion annually from 2020-2023 according to the Ministry of Finance Japan. These surpluses have allowed Japanese institutions to accumulate massive foreign asset holdings over decades.
Look at the chart in the link above. It's obvious that the interest rate environment in Japan is changing and the risks of such a structural shift are significant, yet we flag a risk that the market is too complacent about it.
What's the problem here?
For many years, investors have borrowed funds at virtually 0% from Japan and then converted to US Dollars or to Euros to buy higher yielding assets (like US bonds or stocks).
Asian buyers (and others using the carry trade) therefore become key funders of the US fiscal deficit and stock markets.
Now Japan, having raised rates earlier in the year, looks to increase them further. The issue with Japan raising rates is that, with the yield on the 10 year JGB at 1.77%, the market is perilously close to assigning something resembling a normal interest rate to Japan again, for the first time in many investor's memory.
A New World Order, with fracturing trade routes and trading blocs has already dampened non-aligned Government and investor appetite to fund the US deficit. After all, if free trade is blocked, why is Beijing obliged to fund it?
As Japan raises rates, this cheap borrowing disappears. Investors will be concerned that others may be forced to unwind these trades, which then involves selling the foreign assets and buying back the Japanese Yen.
In 2024, as this trend first began, there were some shockwaves, initially in Asian markets such as the KOSPI. However, since that time, investors seem to have become largely complacent about this risk. This is despite the clear shift that a non-zero interest rate would give to an institutional investor like Mitsubishi. The incentive becomes to repatriate capital to Japan. This effect can potentially have second order effects - upward pressure on borrowing costs in other countries, too.
This is the most visible threat to global liquidity that we have seen for some time.
The Good News
There is a little bit of good news here. Rate hikes from the BoJ mean that Japan feels it may have beaten its multi-decade long fight against deflation. Inflation has been persistent (above 2% for several years now) and wage growth continues.
Next steps
The Takaichi administration is clear in its position that the BoJ should not raise rates further at the December meeting (a rise from 0.5% to 0.75% is thought possible). This is a meeting that will have important effects, not just for Japan but also for global liquidity.
Conclusion
The structural risk of the Carry Trade unwinding requires investors to seek protective positions and identify beneficiaries of capital repatriation.
Commodity Impact
The Bank of Japan is closing the door on two decades of global monetary subsidy. While political noise will continue through the December meeting, the fundamental shift toward JGB normalisation means the cost of funding the US deficit is set to rise, and there's a risk that global liquidity could contract.
The clearest commodity beneficiary from this is gold. If investors become less complacent about US fiscal risk, this would encourage central banks to continue topping up their gold positions. Should the US Federal Reserve be seen to be managing debt interest costs, again this comes back to a preference for the yellow metal.
In summary, the rise in Japanese interest rates acts as a systemic stressor on the global financial system. Since gold is a non-debt, anti-systemic asset, the increase in volatility, uncertainty, and sovereign debt risk makes the metal a prime beneficiary. Commodity Intelligence scored a major win for clients by calling gold higher in 2025, we have recently said that gold can progress to $4,750 during 2026.
For areas other than precious metals, this is a risk - we think more people should be talking about it in a wider market that seems fully focussed on disruptors and potentially overvalued AI plays in a market saturated with technology bulls. We would be interested to hear your views, too, at james@commodityintelligence.com.
Featured
Beyond the Barcelona Sun: Divergent Paths for BHP and Rio Tinto
Codelco announced on its website that at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference, BHP and Codelco unveiled an exploration agreement targeting the state-owned company's assets in the Antofagasta region.
The agreement is subject to the requirements stipulated in Law No. 19,137, which outlines the conditions for Codelco to collaborate with third parties in developing mining projects that are not currently operational or are not part of the company's decision to allocate them to its replacement or expansion plans through direct development.
In 2022, Codelco offered 34 exploration assets to interested companies to assess the possibility of collaborative development for projects that do not meet the criteria for independent development by the company.
This portfolio includes the "Anillo" mining area, located in the Antofagasta region and spanning 24,000 hectares. The mine is currently in the early exploration stage, with Codelco and third parties having conducted multiple exploration activities there in the past.
"The company must focus on and prioritize its exploration and investment efforts within the approximately 2.3 million hectares of mineral resources it holds in Chile. We possess some highly promising mining concessions, and to expedite their development, we must advance collaborative approaches aimed at capturing value through partnerships with third parties. Our collaboration with BHP, one of the world's largest mining companies, is an example of this," explained Maximo Pacheco, Chairman of Codelco's Board of Directors.
BHP has unique advantages in exploring this project, and if successful, it will possess unique infrastructure capabilities to accelerate the project's development. As part of the agreement, the polymetallic mining company will be able to invest up to $40 million to explore and study the mining potential of the ore deposit.
Mike Henry, CEO of BHP, stated, "BHP is one of the world's leading copper producers, and copper is a crucial metal driving economic development, decarbonization, and digitalization. We are delighted to explore this collaborative opportunity with Codelco, with whom we already have a significant and successful mining presence in Chile. Our ongoing commitment to innovation and our 140 years of experience in mining project development enable us to partner with Codelco to deliver more copper to the world."
If a sustainable business case is established, the contract will include a commitment to collaborate with Codelco in developing the project. If the application is unsuccessful, the research and information obtained will become the property of Codelco.
Commodity Intelligence Comment - Wed 08:53, May 14 2025
Here is our take on Mike Henry's speech at BAML's conference in Barcelona and how the messaging contrasts with Rio Tinto's remarks:
Mike Henry’s 2025 address marks a clear evolution in BHP’s strategic messaging. What stands out is Henry’s emphasis on BHP’s role as a “point of stability” in an increasingly uncertain global environment. This rhetorical pivot showed BHP’s intent to not just weather instability but actively position itself as a safe harbour investment. While operational excellence and capital discipline remain core themes, the speech more forcefully links these traits to BHP’s ability to navigate extremes—from intensified trade wars to potential economic fragmentation.
We thought that a particularly noteworthy update was the growing prominence of copper and potash in BHP’s portfolio. Henry announced that copper now represents 39% of BHP’s EBITDA, and confirmed that production has grown 24% since FY22—a substantial shift that reaffirms copper’s role as a long-term strategic pillar. Furthermore, the Vicuña Joint Venture (previously lesser known) was presented as a transformational copper development, with its integrated potential positioning it among the top ten global copper producers. This was complemented by a first-time disclosure of 38 million tonnes of copper resources within the JV and confirmation of a forthcoming technical report in Q1 2026—clear signals of BHP’s accelerating copper ambitions.
Potash has clearly emerged as a central theme, showing BHP’s deeper commitment to agricultural minerals. While Jansen has been discussed in past forums, Henry’s 2025 speech was much more confident and assertive in comparing it structurally to iron ore—highlighting low-cost potential, jurisdictional stability, and scalability. BHP securing MOUs with global buyers is new and material, reinforcing confidence in commercial viability as Jansen ramps up.
Finally, Henry’s remarks reflected a more assertive tone on productivity gains via the BHP Operating System (BOS). New data points—like Western Australia Iron Ore (WAIO's) ~$8 per tonne margin advantage over competitors—were used to emphasize BOS’s impact. Extending this system to Escondida could bring a second wave of performance improvement, over and above operational maintenance.
We noted with interest BHP's view that iron ore enjoys cost support at $80 per tonne. Our sense is that this floor could be lower than BHP thinks, especially as steel capacity comes out of China and Simandou hits the market.
By comparison to BHP's talk of stability, Rio Tinto was more focussed on growth. The company is now targeting a return to CAGR at 3% 2024-2033 and is highlighting growth from Oyu Tolgoi, Simandou, Rincon, Nuevo Cobre, Resolution and Arcadium.
This is potentially a differentiator between the two companies. We think that BHP is positioning itself as the strongest company in the industry in an uncertain world, whereas Rio sees itself attracted to fresh growth opportunities. As we have previously mentioned in the Daily, this is the result of decisions that were set in motion some time ago. Rio Tinto's strategic pivot towards battery materials is also evident in their acquisition of Rincon and the recent Arcadium Lithium merger, positioning them to capitalise on the energy transition. This focus on growth, particularly in copper and lithium, suggests a higher risk appetite compared to BHP's more conservative stance.
Not everyone at BHP is happy with the relative lack of growth. Indeed, they attempted to buy Anglo American for more copper exposure. We still see a possibility that the internal bureaucracy pivots back to M&A, yet a key takeaway is that it was absent from the speech. The new "Anillo" mine exploration adds an interesting early phase exploration opportunity.
We have run through in our recent feature the candidates for the new CEO. Perhaps the unspoken message is not that change is off the table, but that it may be paused until a new CEO is in place.
The transcript is here:
Featured
The Iran Oil Shock You're Not Seeing (Yet)
Iran, one of the largest oil exporting countries and a key player in the Organization of the Petroleum Exporting Countries (OPEC), has recently increased its oil storage capacity by adding 2 million barrels, after starting the operation of two tanks that have been upgraded at Iran’s Kharg oil terminal in the operational zone.
The reconstruction of the tanks, whose capacity is 1 million barrels of oil (mmbbl) each, was completed and announced on Saturday during a visit by Hamid Bovard, CEO of the National Iranian Oil Company (NIOC) and Deputy Minister of Petroleum.
Bovard stated that these tanks are expected to enhance Iran’s export flexibility, facilitate upstream production, and reduce ancillary costs such as tank leasing. He highlighted the significant value of the two tanks to the oil industry.
Iran holds the third largest proven oil reserves estimated at 209 billion barrels (bbl) and the second-largest natural gas reserves estimated at 1,203 trillion cubic feet (tcf) as of 2021.
https://egyptoil-gas.com/news/irans-boosts-oil-storage-capacity-with-2m-barrels/
Commodity Intelligence Comment - Mon 07:10, May 19 2025
Feature by James Burdass:
https://www.reuters.com/graphics/ISRAEL-PALESTINIANS/IRAN/byvrmodrrpe/
Iran is executing a coordinated strategy to expand oil and gas storage capacity, improve export flexibility, and quietly progress nuclear talks with the U.S. These developments increase the likelihood of a meaningful supply response — potentially catching any oil bulls off guard.
The National Iranian Oil Company (NIOC) aims to increase crude oil storage capacity by 7.7 million barrels, with 2 million barrels coming from upgrades at Kharg Island — the country’s main export terminal.
Meanwhile, progress continues at the strategically important Jask oil terminal, positioned on the Sea of Oman.
https://en.trend.az/iran/4042506.html
Jask allows Iran to bypass the Strait of Hormuz, reducing its vulnerability to regional tensions and enhancing export flexibility. This project is widely seen as a "game-changer" for Iran's ability to sustain oil flows during times of geopolitical stress. Here is a paper on why it is so important:
https://iramcenter.org/uploads/files/The_Strategic_Importance_of_Jask_Port-WebPDF_v21.pdf
Additional moves include:
https://en.shana.ir/news/658819/Sarajeh-gas-storage-capacity-to-increase-to-1-5-bcm
We have previously flagged these initiatives as significant. Historically, scepticism around Iran's project execution has been warranted, but recent activity suggests real momentum. The upgrades are material and reflect a sustained push to improve physical infrastructure — signaling intent to reassert Iran's role as a major energy supplier. The AI flags them as important.
Diplomatic Clock Is Ticking in Favour of More Supply from Iran
The next major headlines could be the completion of Jask, or even a major settlement with the White House. There's more chance of the next development implying increased rather than decreased supply.
Our basis for saying this is the reports during the last week that talks at the working level on Iran's uranium enrichment have progressed to a point where the White House has put out a formal proposal. In April, the US declined to be specific on what might work, yet Iran provided proposals.
This month, a proposal has come back from the US side. Iran claims Non-Proliferation Treaty rights to enrich, however Trump suggests that Iran knows it "must move quickly". The urgency in the talks has ratcheted up a level or two, and in our experience, this increases the prospect of one side or the other moving to "make a deal".
The prospect of an Iran deal alongside their determined efforts to boost supply is a major development we can't ignore. While the immediate knee-jerk reaction might be bearish on oil, the devil will be in the details. How quickly and completely will sanctions be lifted? How readily can Iran ramp up production and find buyers? And crucially, how will OPEC+ respond to this new dynamic? This isn't a simple 'slam the door on oil' scenario, but it does make us think that there's an information asymmetry whereby matters are progressing more rapidly behind the scenes and in the Iranian oil industry than the market may be fully aware of.
If you're an oil bull, ignoring this could risk being behind the curve. Ignoring the interplay between Iran's burgeoning oil infrastructure and the shifting geopolitical winds between Tehran and Washington carries the risk of being blindsided. On balance, now might not be the time to increase your energy exposure, in light of these developments.
Featured
From Control to Contest - Oil outlook
Goldman Sachs reduced its oil price forecast following decisions by the Organization of the Petroleum Exporting Countries and its allies, OPEC+, to accelerate oil output increases, the bank said in a note dated Sunday.
The bank now expects Brent crude to average $60 per barrel for the rest of 2025 and $56/bbl in 2026 down by $2 from its previous estimate.
It has also cut its forecast for West Texas Intermediate (WTI) crude by $3/bbl, now projecting it to average $56/bbl for the remainder of 2025 and $52/bbl in 2026.
On Saturday, OPEC+ agreed to increase oil production for a second straight month, boosting output in June by 411,000 barrels per day despite falling prices and weakened demand expectations.
Goldman Sachs views the OPEC+ decision as a long-term equilibrium strategy aimed at maintaining internal cohesion and strategically regulating U.S. shale supply amid relatively low inventories.
The bank now anticipates a final OPEC+ production increase in July of 0.41 million barrels per day (mb/d), up from the previous estimate of 0.14 mb/d.
This revised forecast is based on the group’s recent decision and stronger-than-expected economic activity data, suggesting that the expected demand slowdown may not yet be evident enough for OPEC+ to slow the pace of production increases when determining July production levels on June 1, the bank noted.
Despite the relatively tight spot fundamentals, Goldman Sachs believes that the high spare capacity and high recession risk skew the risks to oil prices to the downside.
Brent crude futures were trading at $60.02 a barrel by 0802 GMT, while U.S. West Texas Intermediate crude was at $56.96 a barrel.
(Reporting by Anmol Choubey in Bengaluru, Editing by Louise Heavens)
Commodity Intelligence Comment - Tue 06:49, May 06 2025
Feature by James Burdass:
Focus shifts from price support to signs of a global supply and power realignment
The era of price support may be ending. With OPEC accelerating the rollback of its production cuts and oil prices slipping under renewed supply pressure, the global energy market appears to be entering a new phase — not of balance, but of contest. Behind the headlines lies a deep shift: Saudi Arabia prioritising volume over price, Russia under intensifying fiscal strain, and the geopolitical calculus of crude becoming more fluid.
OPEC’s latest output decision marks a potential turning point in oil market dynamics. Following April’s initial production increase, Reuters reports that OPEC will raise output again in June by 411,000 barrels per day, bringing the total unwind of earlier “temporary” cuts to 960,000 bpd — or 44% of the original reduction.
https://www.fxstreet.com/news/opec-to-further-speed-up-oil-output-hikes-reuters-202505050001
This is no longer a one-off. What could have been incorrectly dismissed as a tactical adjustment now appears to be a strategic shift, as we have previously highlighted to you in our Daily commentary. The production unwinds are roughly three times greater than what most analysts had anticipated. This suggests a pivot by key producers — particularly Saudi Arabia — toward defending market share and total revenue, rather than strictly managing price.
There are broader geopolitical consequences. The declining oil price in USD is compounding pressure on Moscow, as a weaker Ruble erodes the real value of Urals crude exports. Recent estimates suggest Russia may now be realizing just 450 Rubles per barrel, down from around 800 earlier this year.
This dynamic introduces a potential feedback or "Doom loop":
If the loop holds, we may be closer to a geopolitical reset than markets are pricing — and further from a stable oil floor than many expect.
The scale and pace of this unwind are now too large to dismiss. For investors, this marks a shift from price control to market share warfare — with implications far beyond OPEC. The oil market is no longer being balanced; the risk is that it’s being contested. As we look for signposts to the bottom, here are some:
· Any reversal or slowdown in the unwind pace at the next OPEC meeting
· Russia's budget response and foreign exchange interventions
· Signals from major importers (India, China) on strategic stockpiling
· Shifts in U.S. shale rig counts or SPR refill activity
· Ruble-to-Urals price thresholds falling below fiscal break-even levels
We will be watching closely.
Featured
Drill Baby Drill! Turning Rhetoric into Reality?
Oil (CL=F, BZ=F) prices are decreasing, with Exxon Mobil (XOM) and Shell (SHEL) shares ticking down as they respectively cite narrowing refining margins and slowing natural gas (NG=F) sales.
On Market Domination, Tortoise senior portfolio manager and managing director Rob Thummel discusses the valuation of top energy companies while addressing the mantra behind Republican leaders and President-elect Donald Trump's stance on US oil, better known as "Drill, baby, drill."
"We have a significant amount of reserves across the US. And so what? Drill, baby drill means to me is that when we need it, we'll be able to drill more and produce more," Thummel explains. "But the goal will be to keep inflation moderated, and keep oil and natural gas prices at moderate levels so that they just don't get out of control."
Thummel also highlights that geopolitical tensions between the US and Iran under a Trump 2.0 administration could put a further strain on oil pricing: “If you sanction Iran then and actually apply the sanctions, you're going to have a basically less oil supply because the result will be lower exports of crude oil from Iran — which basically takes supply off of the market."
Commodity Intelligence Comment - Thu 08:24, Jan 09 2025
Editorial note from James Burdass:
President Donald J. Trump will be re-inaugurated on Monday 20th January 2025 at 12pm EST. We are getting incoming client interest in how "Drill, baby, drill" translates into a policy and the interplay between oil itself and gas oil equivalents. This very strong CI feature first appeared in our Daily in late November, and we feel it is still worthy of attention today, although we have shown up to date EIA data in the second graph. Rhetoric is going to smack into reality?
Regarding the Independent headline, you really need to watch this clip from Chris Wright as well:
https://www.youtube.com/watch?v=_r-7z-nNlWk
Drill Baby Drill! A translation of rhetoric into reality?
In a coincidence of sorts, two inter-related pieces of news have got us intrigued and we believe that the newly appointed US Treasury Secretary elect and ex- celebrity fund manager Scott Bessent is making a feeble attempt to row back from his comments on the strategic role of an additional 3MBPD oil production- one of his 3 Arrows framework that he has spoken of eloquently since the news first broke of his likelihood to be nominated as Treasury Secretary in the summer.
The background is that whilst speaking at the Manhattan Institute Treasury Secretary elect Bessent said that one of the arrows of his 3 Arrow Framework (made famous by the late Shinzo Abe) was an increase in US oil production by an additional 3 MBPD. This was back in the summer- for details, here is the original story of Scott Bessent’s 3-Arrow Proposal made at The Manhattan Institute where the reference is very clearly to oil- “3 million more barrels of oil per day”
Possible Trump pick for Treasury lays out 3-point economic plan that calls for deregulation, lower deficit - MarketWatch
Additional 3MBPD, you say? !!!
Now as the latest figures released by the EIA only a few hours ago suggest, this would imply the US oil production topping 16MBPD!
As this EIA announcement says, the US has been the number 1 oil producer every year since 2018- a 3 MBPD rise, if this were at all possible it would, in our view send a chill down the OPEC+ spine in Vienna.
A 3 MBPD additional US production in the next 4 years is probably going to be a geological miracle- we do not believe even Mr Trump could pull this off- something has to give. Following the announcement 2 days ago, confirming the candidature of Mr Bessent as the Treasury Secretary Elect, that 3 Arrow Framework is now under the microscope and the 3MBPD claim is now back.
In what can be called classic back peddling, team Bessent must have, having quickly realised the impossibility of an additional 3MBPD oil, now suggested something interesting: “3 million more barrels of oil equivalent per day” see this Fox News story here- Scott Bessent's 3-3-3 plan: what to know | Fox Business https://www.foxbusiness.com/politics/treasury-secretary-nominee-scott-bessents-3-3-3-plan-what-know
So, what does the additional 3MBPD oil equivalent now mean? We think gas/LNG mainly and condensates. Let's dive into some basic numbers:
The current level of all LNG projects in the US that are under development come to about 9.7BCF/D. These are all projects that started well before even the Biden administration took charge and some of them have been impacted by the LNG pause, which we believe will be lifted as one of the first acts of the Trump 2.0 administration. Not all projects are expected to successfully cross the FID-construction to LNG export “triple jump” and even if all of the 9.7BCF/D production were to come through, that would be approx 1.6MBPD in oil equivalent terms- and none of this volume should strictly be attributable as a gift of Trump 2.0.
That leaves another new 1.4 MBPD in oil equivalent terms and again our bet is that it will have to be gas and not oil- for the simple reason that there isn’t that level of spare refining capacity in the US. This new 1.4 MBPD oil equivalent volume is another 9BCF/D in natural gas terms.
Does the US have that level of reserves? Yes. Is there demand? For sure!
The rising US power generation demand could absorb this new gas- recall our features on the growing US electricity demand triggered by the AI data centre demand, especially in the North Eastern electricity corridor?
To make good that claim about the 3rd arrow of 3MBPD of oil equivalent production would suggest a very significant coal-to-gas switch in electricity generation in the US; here’s the fun bit: this level of coal-to-gas switching would achieve a very substantial level of decarbonisation in the US- speak of unintended consequences.
Ever thought Trump 2.0 could become low carbon re-industrialisation in the US? We think this is possible- though, may not be intentional. We wish the treasury secretary elect the very best for implementing his 3 arrow framework, we aren’t holding our breath on the decarbonisation idea though.
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Commodity Intelligence Year Ahead Series: A Historic Year for Gold: Could Prices Climb Higher in 2026?
By Piero Cingari
Published on 09/12/2025 - 7:00 GMT+1
Gold soared over 60% in 2025, driven by geopolitical risks, rate cuts, and central bank demand. Many experts see further upside in 2026, with gold's role as a safe-haven asset still firmly intact.
After a historic 2025 that saw gold soar over 60% and break more than 50 record highs, investors are now turning their attention to whether the precious metal can sustain its upward trajectory into 2026.
Despite leading major asset classes in year-to-date performance, putting it on track for its best year since 1979, experts think gold may still have room to climb next year. Others warn that risks remain.
Unlike previous years when single events dominated gold’s trajectory, this year saw multiple drivers at play.
Sustained central bank buying, persistent geopolitical friction, elevated trade uncertainty, lower interest rates, and a weakening US dollar all combined to fuel demand for the metal as a safe-haven asset.
According to the World Gold Council’s latest report, geopolitical tensions contributed roughly 12 percentage points to year-to-date performance, while dollar weakness and slightly lower interest rates added another 10. Momentum and investor positioning accounted for nine points, with economic expansion contributing a further 10.
Central banks also continued to buy aggressively, keeping official-sector demand well above pre-pandemic norms.
Forecasts from the World Gold Council
Looking ahead, the Council expects many of the forces that powered gold’s extraordinary rally in 2025 to remain relevant in 2026.
However, the starting point is now fundamentally different. Unlike at the beginning of 2025, gold prices have already priced in what the WGC describes as the “macro consensus”. That's expectations of stable global growth, moderate US rate cuts, and a broadly steady dollar.
In this environment, the Council notes that gold appears fairly valued. Real interest rates are no longer falling significantly, opportunity costs are neutral, and the strong positive momentum seen in 2025 has begun to fade.
Investor risk appetite remains balanced, rather than tilting decisively toward caution or exuberance.
As a result, in its baseline scenario, the WGC sees gold trading within a narrow range in 2026, with performance likely limited to between –5% and +5%.
But the outlook is far from settled, as three alternative scenarios could shape a different path.
In a "shallow economic slip" — characterised by softer economic growth and additional Fed rate cuts — gold could rise by 5% to 15% as investors shift toward defensive assets, extending the gains of 2025.
In a deeper economic downturn, or "doom loop," gold could rally by 15% to 30%, fuelled by more aggressive monetary easing, declining Treasury yields, and strong safe-haven flows.
Conversely, if the Trump administration’s policies succeed in reigniting growth, a reflation return would likely push yields and the dollar higher, diminishing gold’s appeal.
Under this bearish scenario, gold could decline by 5% to 20%, particularly if investor positioning reverses and central bank demand weakens.
Predictions from Wall Street
Despite a more measured outlook from the WGC, major investment banks continue to predict further upside for gold in 2026.
J.P. Morgan Private Bank projects prices could reach between $5,200 and $5,300 per ounce, citing strong and sustained demand as a key driver.
Goldman Sachs forecasts gold at around $4,900 per ounce by the end of next year, supported by continued central bank buying.
Deutsche Bank offers a wide range of $3,950 to $4,950, with a base case near $4,450, while Morgan Stanley anticipates prices closer to $4,500, although it warns of near-term volatility.
Supporting this optimism is the ongoing accumulation of gold by central banks, particularly in emerging markets, as well as the view that many institutional investors remain underexposed to the metal.
The potential for lower real yields, coupled with global macro risks, continues to make gold attractive as a portfolio hedge.
Nonetheless, risks could cap further gains. A stronger-than-expected US recovery or a rebound in inflation could force the Federal Reserve to delay or reverse rate cuts, boosting real yields and the dollar, two classic headwinds for gold.
A slowdown in ETF flows or central bank purchases could also dampen demand, while increased recycling, particularly in India where gold is used as collateral, could raise supply and weigh on prices.
A constructive path forward
While a repeat of 2025’s extraordinary 60% surge appears unlikely, gold enters 2026 on solid footing.
The fundamental drivers such as macroeconomic uncertainty, central bank diversification, and gold’s role as a hedge against volatility remain intact.
In a world increasingly defined by unpredictability, gold continues to offer investors not just returns, but resilience. The metal may no longer be in the early stages of a rally, but its role as a strategic anchor in uncertain times is far from diminished.
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First Quantum - An Asymmetric Bet?
First Quantum’s Kansanshi mine in Zambia. (Image from First Quantum Minerals)
First Quantum Minerals (TSX: FM) has commissioned the long-awaited $1.25 billion expansion at its Kansanshi copper mine in Zambia, delivering the country’s largest copper investment in nearly a decade.
The S3 project, first proposed in 2012, includes a new processing plant that nearly doubles Kansanshi’s ore-milling capacity, expands smelter throughput by about 25% and opens up a new pit for mining.
Commissioning of the expansion begins Tuesday, three years after securing board approval, as reported by Bloomberg.
Once Africa’s biggest copper mine, Kansanshi is set to produce an average 250,000 tonnes of copper annually through 2044, up from 171,000 tonnes in 2024. The expansion will bolster Zambia’s mining industry as President Hakainde Hichilema seeks to more than triple national copper output by the early 2030s.
First Quantum’s investment comes as competitors also bet on Zambia’s copper future. Barrick (TSX: ABX, NYSE: B) is investing $2 billion to expand its Lumwana copper mine, also in the mineral-rich North-Western Province.
Strategic lifeline
For First Quantum, the Zambian expansion provides much-needed production growth following 2023’s closure of the $10 billion Cobre Panamá mine, which had been the Canadian miner’s flagship operation. The shutdown, ordered by Panama’s Supreme Court, has cost the company roughly $20 million per month in care and maintenance expenses.
With Cobre Panamá offline, Zambia now accounts for more than 90% of First Quantum’s output through Kansanshi and its nearby Sentinel mine. Together, these operations contribute more than half of Zambia’s total copper production, reinforcing the country’s reliance on the red metal for over 70% of export earnings.
On Tuesday, the copper producer issued an update to its 6.875% 2027 senior notes, relaying that bond holders sold $714 million (C$989 million) back to the company, with an outstanding amount of nearly $35.4 million remaining in the market.
Also this month, the miner commenced an offer to purchase outstanding 9.375% senior secured second lien notes due in 2029 up to a maximum of $250 million, and it issued a new bond, increasing the amount to $1 billion from the original $750 million, offering it at a rate of 7.25% with a term to 2034.
“These bond market moves are unrelated to the increased costs of maintaining Cobre Panama,” a company spokesperson said by email on Wednesday.
“These costs will be met principally by the sale proceeds of the copper concentrate that we recently shipped from Cobre Panama.”
Shares in First Quantum closed 1.8% weaker on Tuesday in Toronto but have gained 21% this year to $22.98 apiece, valuing the company at $19.2 billion.
An earlier version of this story incorrectly stated that First Quantum had added $714 million to its debt. Mining.com regrets the error.
https://www.mining.com/first-quantum-commissions-1-25b-zambia-copper-expansion-amid-debt-push/
Commodity Intelligence Comment - Thu 07:29, Aug 21 2025
"For First Quantum, the Zambian expansion provides much-needed production growth following 2023’s closure of the $10 billion Cobre Panamá mine, which had been the Canadian miner’s flagship operation."
First Quantum is in strategic limbo. Yet our view at Commodity Intelligence is that the company just needs to establish exactly what is happening to earn a re-rating, rather than one specific outcome.
With its flagship Cobre Panamá mine closed, the company's focus has shifted almost entirely to its Zambian assets, which now account for more than 90% of its copper output.
We see the outcome as fairly positive for shareholders. The company is taking proactive steps to manage its debt load, and the debt market is signalling that it is broadly comfortable with the risk of funding the S3 project. This follows the $1bn gold streaming deal a couple of weeks ago.
Shares have been weak during the last few sessions. We think that managing debt whilst you can and not too late is a smart move, however the equity market is taking it as a sign that First Quantum is restructuring its finances to survive without its largest asset. This shows how different capital markets can react to the same event, yet we think it is far too early to conclude that Cobre Panama is a lost cause.
Rather than any debt discomfort, what First Quantum needs to avoid is walking away from Cobre Panama for cents in the dollar. Long time analysts of the company will remember them walking away from the DRC assets in exchange for $1.25bn to Eurasian Resources. They walked away from $16bn of contained copper (on our estimates, gross in situ) at today's prices at Frontier. This allowed them enough liquidity to develop Kansanshi, but at an opportunity cost.
This buys them time to negotiate, and that's a welcome development. What is unwelcome is the sense from Panama that not only has the company moved quickly to restructure its finances, the President is now signalling that a decision has been delayed. Reports suggest that a supplier who has met President Mulino was told that the country will not make a decision until the country has dealt with social security reform.
We see this as a negative catalyst in the short run, as markets dislike uncertainty. However, a multi year view remains more positive. The First Quantum investment case is in an air pocket where several facts need to be established. The outcome is likely to be positive in the long run, yet the market needs clarity on whether the company will fully refocus on 1) Zambia with an expanded Kansanshi and further opportunities to come, 2) look for a trade buyer, or 3) resume operations with its key asset, Cobre Panama, still in place.
We think that investor preference would be 3,2,1 on the long term strategy. management may be leaning towards 1,3, and discounting 2 unnecessarily.
This is an asymmetric investment case now. If Panama does not come back, there's little downside. If it does, there's probably $6-7bn NPV there. If it was ever confirmed that Panama is lost, there would be a chorus of investors asking for a sale of the company. We commend it for this reason.
The financial profile also gives reason for optimism in the equity investment case. The new cash flow from S3 would not "transfer to equity" but it would be used to clear the debt, which in turn could reduce risk perceptions and increase the value of the equity.
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Commodity Intelligence Year Ahead Series - Copper Market
Soaring copper orders from South Korea and Taiwan led to the biggest rise in requests for withdrawals from London Metal Exchange warehouses since 2013, pushing copper prices to a new record high on Wednesday.
The price of copper increased by another 2.4% on the London Metal Exchange (LME) early on Wednesday, to exceed $11,400 per ton, which beat the previous record high from just two days ago.
Copper prices have jumped by around 30% so far this year, with the gains mostly occurring in the second half, amid a series of supply issues in key producing countries and speculation about potential U.S. import tariffs.
This year, copper prices have rallied amid threats from the Trump Administration to impose tariffs on the industrial metal crucial for electrification and grid expansion. Trump backed off plans for a tariff, for now, but traders are nevertheless amassing copper into the U.S., which has hiked copper prices at the Comex exchange in New York and shrunk supply elsewhere in the world.
Demand signs have become more bullish in recent weeks, with economies faring better than expected in the tariff chaos of the Trump Administration.
The price of the metal, which is used in industry, electronics, electrification, and construction, is often viewed as a gauge of economic health.
On the supply side, several accidents at mines in Chile and Indonesia earlier this year have reduced global copper production and tightened the physical market.
In recent weeks, traders have been aggressively positioning for deeper deficits next year, analysts and industry executives said at a Fastmarkets webinar last week.
The macro trends will be key for copper markets and pose the biggest uncertainty to demand and prices in 2026, they noted.
“The macro overview matters the most, because the macro then essentially moves the demand numbers,” said Scott Crooks, principal analyst at Chile’s state copper mining giant CODELCO.
“It’s the tweets, policies that come out of different countries as they try and realign in this new world we live in. I think that is what’s really going to move the needle.”
Commodity Intelligence Comment - Thu 08:46, Dec 04 2025
"This year, copper prices have rallied amid threats from the Trump Administration to impose tariffs on the industrial metal crucial for electrification and grid expansion. Trump backed off plans for a tariff, for now, but traders are nevertheless amassing copper into the U.S., which has hiked copper prices at the Comex exchange in New York and shrunk supply elsewhere in the world."
COPPER 2026: THE YEAR OF CONSEQUENCE
2025 Review: The Year of Dislocation
2026 Outlook: The Year of Physical Deficit
2025 was a year of two halves for copper. The first half was defined by dislocation, as Trump’s tariff threats caused a massive logistical scramble that flooded material from the LME and Shanghai into Comex warehouses. While global aggregate supply was sufficient, the location of that supply created artificial tightness in Europe and Asia. Although the tariffs were paused, the scene was set. In the second half, the narrative shifted from logistics to geology. The market became genuinely short.
The Supply Casualties of 2025
We flagged the Grasberg risk early, and it proved far more severe than the consensus anticipated. The September 8th "mud rush" was a catastrophic event for the block cave, triggering an immediate suspension that we believe will bleed well into 2026. But Grasberg was not an isolated incident; the industry suffered a cascade of failures. Kamoa-Kakula in the DRC saw a major seismic event wipe 150,000 tonnes from guidance, with 2026 production fully 200,000 tonnes below where it was planned as compared to the original strategic baseline.
While remediation is underway and noting the recent press release from Ivanhoe, we remain sceptical that full operational rates will return on schedule in early 2026. We are more confident that the mine is ultimately rehabilitated.
In Chile, the tunnel collapse at El Teniente in July highlighted the fragility of aging infrastructure, removing another 48,000 tonnes from the market. Meanwhile, Cobre Panama remained a "zombie asset" throughout the year; even if political clearance arrives tomorrow, it is statistically irrelevant for 2026 supply balances. Perhaps most underappreciated is the "sleeper risk" from the Sino Metals dam collapse in Zambia back in February. Largely ignored by the market as an environmental story, we view it as a regulatory inflection point. Expect tighter compliance across the Copperbelt to slow delivery times significantly in 2026.
2026 Outlook: The Deficit Reality
We look towards 2026 with an unusually high level of confidence that the copper market is entering a structural deficit. History tells us that supply guidance is almost always revised downward. Given that Grasberg is broken, Panama is stalled, and Peruvian logistics remain hostage to community blockades, a paper deficit of 250,000 tonnes could easily morph into a structural gap exceeding 500,000 tonnes. It will only take one more significant event to get there and the probabilities are skewed.
The Price Target
On our October 7th webinar, we forecast $5.50/lb post-Grasberg, and we maintain that target. However, if we see renewed US tariff rhetoric or one more major mine failure, $6.00/lb becomes a realistic ceiling. When inventory becomes scarce in a fragmented world, price spikes are violent and short-lived. The current environment favours higher prices because China dominates the processing of copper through its stranglehold on global smelting capacity. This is the "Electro-State" dynamic we discussed at Mansion House—a feature vastly underrated by investors. In 2026, whoever controls the smelter controls the metal.
Investment Strategy
We maintain a strong weighting to gold and silver, but copper is close behind. Our preferred play, First Quantum, was named in August and the stock is up nearly 40% since our call, yet we see further room to run if copper breaches $5.50/lb or if Cobre Panama sees a political thaw. Elsewhere, we still like Ivanhoe for the "Friedland Factor" and the exploration upside, despite the operational headaches at Kamoa. Conversely, while Antofagasta remains operationally sound, valuations look expensive relative to the peer group.
2025 was the Year of Dislocation. 2026 will be the Year of Consequence.
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China 2024 iron-ore imports hit record on resilient demand, steel exports
BEIJING - China's iron-ore imports in 2024 rose to a record high for a second year, customs data showed on Monday, as lower prices spurred buying while demand remained resilient due in large part to massive steel exports that are inflaming trade tensions.
The world's largest iron-ore consumer brought in a total of about 1.24-billion metric tons last year, data from the country's General Administration of Customs showed, up 4.9% from 1.18-billion tons in 2023, when it posted an annual increase of 6.6%.
China's iron ore imports are also likely to hit a record high in 2025 as traders stockpile cheap ore for the world's top consumer, despite a protracted property crisis continuing to weigh on domestic steel demand.
Steel output slid by 2.7% from the year before in the first 11 months of 2024 and was on track for an annual decline, but that largely reflected weak output from electric furnace steelmakers, which supply the troubled construction sector and use scrap steel instead of iron ore as a resource.
Demand for iron-ore remained solid among China's blast furnace steelmakers, which have been able to maintain cost competitiveness.
Many electric furnace steelmakers, however, had to conduct maintenance or scale down production amid persistent constraints on scrap supply.
Additionally, traders that bought high-cost iron ore early last year continued purchasing the key steelmaking ingredient to average out their overall production costs and reduce losses, analysts said.
An increase in iron ore imports contributed to a price slump and a pile-up in portside stocks, which climbed by 28% year-on-year to 146.85-million tons as of December 27, data from consultancy Steelhome showed.
China's imported iron-ore prices slid by 31% last year, according to Steelhome data.
In December alone, China imported 112.49 million tons of iron-ore, up 10.4% from 101.86-million tons in November.
The December volume compared to 100.86-million tons in the same month in 2023.
China's steel exports hit a nine-year high of 110.72 million tons in 2024, up 22.7% from 2023, stoking global trade tensions.
A number of countries, including Turkey and Indonesia, have imposed anti-dumping duties, arguing that a flood of cheap Chinese steel is hurting domestic manufacturers.
China exported 9.73-million tons of steel products in December, up 25.9% year-on-year and 4.9% month-on-month.
China also imported 621 000 t of steel in December, bringing the 2024 total to 6.82-million tons, a fall of 10.9% from 2023.
Commodity Intelligence Comment - Tue 10:30, Jan 14 2025
The Unsustainable Rise of China’s Iron Ore Imports: A Powder Keg of Global Consequences
China’s record-breaking iron ore imports in 2024, totaling a staggering 1.24 billion metric tons, have raised eyebrows and alarm bells across the global steel and commodities markets. At first glance, the numbers may appear to signal resilience and dominance, but beneath the surface lies an unsustainable reality. This surge in imports is not a triumph of economic efficiency or robust domestic demand but a short-sighted strategy with precarious implications for global trade, the environment, and even China’s own economic stability as it transitions to an advanced consumer/digital economy.
The below is from our November 26th webinar:
A Mirage of Demand Amid a Domestic Crisis
China’s voracious appetite for iron ore—up 4.9% from 2023 despite a protracted property sector crisis—is anything but organic. Steel output, a key barometer of iron ore demand, fell 2.7% in the first 11 months of 2024, and the annual figures are expected to show a decline. This mismatch between imports and actual production signals stockpiling, not genuine consumption. The portside iron ore stockpile ballooned to 146.85 million tons by year-end, up 28% year-on-year, according to Steelhome data. Such hoarding is unsustainable, especially when the driving force is not economic fundamentals but the need to average down costs incurred from earlier high-priced purchases. This speculative approach leaves China’s steel industry vulnerable to a future price correction, potentially wiping out already razor-thin profit margins.
Global Steel Tensions on the Boil
China’s export strategy further highlights the unsustainable nature of its iron ore imports. In 2024, the country exported 110.72 million tons of steel—a nine-year high and a 22.7% increase from 2023. These exports are flooding global markets, undercutting domestic producers in countries like Turkey and Indonesia, which have responded with anti-dumping duties. This aggressive export strategy is inflaming trade tensions and undermining global steel market stability. The U.S. and the European Union, already wary of Chinese overcapacity, will almost certainly ramp up protectionist measures in 2025 and Commodity Intelligence has carried many stories already showing that this is just about to get going ahead of Trump 2.0.
More importantly, China’s export-driven approach is a zero-sum game. By prioritising external markets over domestic consumption, the country is effectively exporting its economic vulnerabilities. Weak domestic steel demand, especially in the construction sector, indicates a structural issue that exports cannot solve. Instead of addressing the root causes, China’s policy choices are aggravating global trade disputes and risking retaliatory measures that could disrupt its iron ore supply chains.
Environmental Costs: An Unchecked Disaster
From an ESG perspective, the environmental consequences of China’s record iron ore imports are serious. Blast furnace steel production, which accounts for the majority of China’s steel output, is a carbon-intensive process. While electric arc furnaces (EAFs) offer a more sustainable alternative, they have been sidelined due to constraints in scrap steel supply and higher costs. This has led to a troubling paradox: even as China professes its commitment to carbon neutrality by 2060, its reliance on blast furnaces ensures that emissions remain stubbornly high.
Furthermore, the environmental impact is not confined to China. The surge in iron ore imports pressures mining operations in countries like Australia and Brazil, where extractive practices often lead to deforestation, habitat destruction, and community displacement. This global chain of environmental degradation underscores the unsustainable nature of China’s iron ore dependency.
Economic Risks and the Illusion of Cost Competitiveness
China’s steelmakers have long touted their cost competitiveness, but the narrative is starting to crumble. Imported iron ore prices plunged 31% in 2024, a decline that initially seemed like a boon. However, this price drop reflects oversupply and weakening global demand, not a robust economic recovery. As traders and producers scramble to lower their average costs through increased imports, they risk creating a glut that could destabilise the market. Already, the heavy reliance on stockpiling signals a speculative bubble that could burst if global demand fails to recover.
Moreover, the high cost of maintaining such large inventories, combined with escalating trade tensions, puts additional financial strain on Chinese steelmakers. With global markets increasingly wary of Chinese steel, the risk of punitive tariffs and sanctions grows. This creates a vicious cycle: rising trade barriers force China to dump even more steel at lower prices, further depressing the market and eroding profitability.
The Path Forward: Structural Reform or Chaos
China’s current trajectory is unsustainable, and the clock is ticking for meaningful reform. The country must address its over-reliance on blast furnace production and transition to more sustainable methods like EAFs. This shift will require investment in scrap steel supply chains and policies to support the domestic recycling industry. Without this pivot, China risks locking itself into a high-emissions, low-efficiency model that is increasingly out of step with global environmental and economic trends.
On the trade front, China must recalibrate its export strategy to avoid further alienating key trading partners. Instead of flooding global markets with cheap steel, it should focus on improving the quality and value-added features of its exports. This would not only mitigate trade tensions but also enhance the long-term competitiveness of its steel industry.
Conclusion: A Fragile House of Cards
China’s record iron ore imports in 2024 are not a sign of strength but a symptom of deeper structural flaws. From inflated stockpiles to unsustainable export practices, the current strategy is a house of cards poised to collapse under the weight of economic, environmental, and geopolitical pressures. For commodity investors, the lesson is clear: the numbers may look impressive, but the foundations are shaky. As global trade tensions rise and environmental scrutiny intensifies, the sustainability of China’s iron ore and steel juggernaut is more uncertain than ever. The time for China to act is now, or the costs—both economic and environmental—will only escalate.
