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The overwhelming focus at present is on the energy sector. As the northern hemisphere heads for peak energy demand as winter approaches, we have more challenges that are refocusing attention on energy availability, which in turn has led to expectations of further energy price hikes. Over the past week we’ve seen Russia cease has supply through the Nord Stream 1 pipeline, and we’ve also seen the OPEC+ group commit to cutting monthly production by 100,000 barrels a day.

Europe is therefore extremely nervous about energy availability – and it’s manifested in developments of the past week that have seen Germany increasingly turning to coal and nuclear, whilst Britain and France are now cooperating on energy supply. EU ministers will meet on Sep 9 to discuss potential gas price caps and emergency credit lines for its energy companies. The bottom line is that high gas prices are here to stay for the next few years at least. Europe needs to sign long-term deals for LNG supplies from exporters such as the US or Qatar and reduce its reliance on the expensive spot market.


Another commodity that’s crucial to global industrialisation and green energy is copper, but it too is facing a growing supply-side crisis. Along these lines, the world’s number one copper producer, Chile’s Codelco, advised last week that it expects its output to reach between 1.49 million and 1.51 million tonnes this year, down from a previous forecast of 1.61 million tonnes. More broadly, Codelco’s struggles are Chile’s struggles: water scarcity, declining grades, depletion rates, skinny project pipelines, industrial action, taxation increases and regulatory uncertainty, and ever-expanding capex budgets. Over the past decade at least, Chile has battled to maintain output levels, let alone increase them. With respect to grades, copper miners now use ore grades of 0.5% copper, a quarter the concentration of a century ago.

To put Chile’s importance into perspective, Chile last year produced a quarter of the world’s primary copper output of 21m tonne. This puts Chile’s position in the world of copper on par not with Saudi Arabia’s in crude oil, but the combined output of the 13 members of OPEC!



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