Are critical materials prices set to rebound?

News Analysis




Are critical materials prices set to rebound?

Project Blue’s Critical Materials Price Index, comprised of a basket of prices across 30 different critical materials, hit a 12-month low in May 2023. However, those prices are forecast to rebound over the next three months suggesting we have reached the bottom of recent price declines.

Over the last 12 months, Project Blue’s Critical Materials Basket Price Index fell sharply from a post-COVID recovery March 2022 high through to an October 2022 low, largely in response to weakening global macroeconomic conditions. Prices corrected through to February 2023 in response to high energy costs before declining again towards May 2023 lows as energy costs normalised and China’s expected economic recovery lagged expectations.

Looking towards the next three months there are some potential green shoots of recovery, primarily from China where Q1 GDP numbers came in above expectations at 4.5%. April retail sales were up by more than 18% and exports up more than 8%. Other data pointing towards manufacturing and construction are less positive and the outlook across the US and Europe is very unclear as to whether a technical recession will be avoided during 2023.

Project Blue forecasts that short-term critical materials price rises will be largely driven by battery and EV materials prices. Lithium, nickel sulphate and rare earth prices are set to recover sharply over the next three months. Lithium prices will increase by around 20% as purchasers return to the market and build sufficient inventory to meet improved battery demand outlooks. Purchasing activity will continue to build supported by higher-cost producers in China.

However, across the 30 different critical materials prices, the picture will continue to be mixed over the short term. Some critical materials prices, including graphite, magnesium and titanium, are likely to continue to fall over the period as they address more market specific challenges impacting their supply chains.