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RBC Dominion Securities

18 February 2022
Jack Baker

Providing a metals and mining outlook, Nick Dominijanni acknowledged world leaders’ commitments to dramatically reduce carbon emissions. But he says there are few clear roadmaps on how and what commodities will be needed to get us there.

He emphasised the importance of the world moving beyond its infatuation with just lithium powering the transition to cleaner sources of energy stressing the vital role of steel, copper, aluminum, nickel and other minerals for uses beyond electric vehicles.  

“The demand [for these commodities] is likely to outstrip supply and we will see a lot of price volatility, bottlenecks and shortages — but how severe are these supply constraints and what can be done to address it?

“Materials have significant gaps between supply and demand, this is an issue that is coming to light. Exploration in the sector has been underinvested for a long time.

“What I have been seeing is a lot of activity at the exploration stage [of projects] thanks to stable prices. And there is a lot of great minds trying to find and develop the next generation of assets.”

Dominijanni says the US remains the country most well-positioned to provide the biggest impact on critical renewable commodities.

He may be right considering the volatility around the globe with investors keeping a cautious eye on political developments in commodity-rich countries like Ukraine, Chile, Kazakhstan, and Iraq.

“If we look to the Biden administration and what is happening there, there is a Build Back Better act that does not seem to be able to get approval through congress,” he said

“There is about US$500 billion devoted toward energy, credits and the environment that has support. Whether that gets split out and approved is something that remains to be seen that will weigh on clean energy and have an impact on oil.

“The other thing to consider as a broader more macroeconomic factor is the US mid-term elections, the democrats know they are up against the clock to pass any sort of legislation.

“They are likely to lose the balance of power in the house so how that unfolds and what impacts on any policy changes should be significant.”

Dominijanni’s commodity outlook

Gold interesting recent stability is set to continue with the precious metal staying near US$1800 an ounce. Longer-term he expects the commodity to encounter headwinds from reopening economies and inflation.

Iron ore is likely to recover aided by positive signs out of China and increasing global demand. He cautions market volatility caused by the Evergrande collapse in China has the potential to cause further demand disruptions.

Oil price volatility is here to stay for the foreseeable future. He noted oil has had a year-on-year increase of over 60 per cent, with businesses feeling the pain at the pump because of supply bottlenecks.

Copper prices should bounce back due to low inventories, growing demand from electrification and sustainability with supply inconsistencies from both miners and smelters. However, Dominijanni predicts a softer growth trajectory for the commodity in the longer term.

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