Commodity Calls: Week Ending 20 September 2024

Lithium miners go offline in China, oil exports jump in Russia, and Microsoft secures some nuclear power.

Join Global X each week for ‘Commodity Calls’ to explore all the recent signals and developments that occurred in the world of commodities.

Looking for more? Check out this week’s Market Moves and Thematic Spotlight.

Lithium

Bullish

  • Contemporary Amperex Technologies, the world’s largest EV battery producer, has announced it will suspend production at one of its major lithium mine in Jiangxi.1 The mine taken offline is one of the largest in the world, accounting for ~5% of global lithium supply.
  • The build out of EV charging infrastructure is expected to accelerate dramatically this year. According to estimates by BloombergNEF, installations of EV charging stations will rise by at least 800,000 in the second half of 2024 – ~30% more than the first half of the year.2 Improving charging infrastructure is seen as one of the most important drivers of EV adoption.

Bearish

  • Hybrids have seen a surprising resurgence as EV adoption slowed in major markets such as China and the US.3 Hybrid vehicles use smaller batteries and partially rely on petrol for operation. Increasing hybridisation has lowered demand forecasts for lithium in the near-term.
  • Battery EVs (BEVs) saw their market share in the EU fall by more than 40% YoY in August.4 The worst losses were witness in Germany and France, which saw BEV registrations fall by 68% and 33% respectively.

Explore lithium with ACDC.

Crude Oil

Bullish

  • 20% of oil production in the Gulf of Mexico remains offline after the passing of Hurricane Francine.5 According to the Bureau of Safety and Environmental Enforcement, staff remain evacuated from 37 separate oil rigs in the gul, representing roughly 10% of the manned platforms in the area.

Bearish

  • Russia petroleum product exports jumped by 10% in the first half of September compared to August.6 Diesel, fuel oils, and other petroleum products saw shipments recover from multi-month lows as multiple refineries returned to operation after longer-than-expected maintenance and repair periods.

Explore crude oil with BCOM.

Uranium

Bullish

  • Constellation Energy has signed a 20-year power purchase agreement with Microsoft that will see a nuclear reactor on Three Mile Island restarted.7 The Three Mile Island Unit 1 (TMI 1) was prematurely shutdown in 2019 due to economic reasons and has enough capacity to power 800,000 homes. TMI 1 sits adjacent to the Three Mile Island Unit 2 (TMI 2) reactor, which was once responsible for the biggest nuclear reactor incident in US history.8 TMI 2 is currently in the process of being decommissioned.

Bearish

  • The average breakeven price of Western Uranium producers sits near $90/lb, and near-term spot price sits in the $80-$90 range.9 High-cost producers are expected to re-evaluate their production and expansion plans in the short term, with higher uranium prices likely required to incentivise further investment.

Explore uranium with ATOM.

 

Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 24/09/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.