Metals across the board are going up, and Europe has no idea what to do about this.
If there’s one thing that’s been made clear over the last few years is that politicians don’t care about rational choices. They care about how they look. They want to look as if they’re doing the right thing. They want their voters to think they’re doing the right thing, regardless of what the science or the consequences behind what they’re doing might be.
Well, commodities are the typical thing nobody ever thinks about until it’s too late. Given that commodities are part of everything in our lives, political choices almost always have an impact on the availability and prices of commodities.
We use our iPhones (well, I don’t anymore, luckily), and our laptops, our microwaves, our elevators, our clothes, our forks & knives, and we don’t think about what it really goes into producing all of those, and practically every other thing we touch on a daily basis, we just consume, consume, consume … until we can’t anymore.
The stockpiles of commodities were already coming close to historically low levels because of supply-chain disruptions because of the virus. With all the current sanctions, and supply-chain disruptions, the issue will get a lot worse in coming months.
“Inventories are low, not just in exchange warehouses, but through the entire supply chain. There is limited safety buffer in the system.”Michael Widmer, BoA
It’s not only Europe, by the way. Chile, responsible for more than a quarter of global copper production, recorded its lowest January output since 2011, government figures showed on Monday.
With almost all of the commodities that Russia exports now in backwardation, the issue is really getting much, much worse, and we in Europe will feel it very soon.
To add to the problem, a lot of companies are choosing to suspend their operations in Russia for the moment. Not alone leaving a lot of Russia people without a job, and thus making them less likely to get chosen by a bank to get a loan, which will eventually result in deflation for the Russian economy, but also decreasing the supply of the commodities they usually produce in the country.
One example is Kinross, which suspended Russian operations on Thursday.
Having spoken to many geologists recently, there has not been one single person who tells me that mining raw material has become an easier job. Counterintuitively, it’s becoming a harder job. It’s harder to raise capital. It’s harder to find and keep staff working. It’s harder to get permits. The list goes on, and it results in a dropping supply, which will not be temporarily.
A documentary on coffee, also explains how weather changes can influence the supply of commodities.
With pretty much everything, regarding the supply chain of raw materials from Russia, being disrupted, or plainly destroyed, I will leave this “interesting post” by saying that it looks like this is no longer an issue of “where do I invest to make the best return?”, I think this is becoming an issue of “what should I put my money in, so that it can grow at least as fast as my bills will?”.
The answer, I am highly convinced, lies in commodities. My main focus is uranium. For diversification purposes, I have added precious metals like gold, silver & platinum.