In recent years, the market for metallurgical raw materials cannot boast of a stable situation. Usually, the growth of metal prices is driven by the growth of export quotations and changes in the exchange rate. However, on a larger scale, there are many more reasons for increasing the metal cost.

Reasons for the increase in the cost of metal

• The end of the cycle of price decline, the beginning of the cycle of growth

The dollar was strong at the beginning of 2014, while oil and the ruble dependent on it were expensive. Everything in the world seemed to be in abundance, including metal. There were so many surpluses that copper futures fell to $6,446 a tonne, not seen since 2010. The market reacted most logically: to reduce investments and slow down production turnover.

• The collapse of oil prices, the devaluation of the ruble and sanctions

But the favourable period ended with the beginning of events in Ukraine in 2014. The majority of the market players lost not win due to these events. It is possible that there were metal exporters with production facilities in Russia among those who won but only before the first purchase of imported equipment and the subsequent adjustment of domestic prices.

• The metal demand in developing countries

Recently, India's integration into global markets has become increasingly apparent. The country government's controversial reform may have a negative impact on small farming, but in the long run, it will make India a world food leader. However, this requires a significant modernization of equipment, the purchase of powerful tractors and modern agricultural equipment. And this, in its turn, means an increase in demand for the metal.

• Trade wars

For example, in 2018, US President Donald Trump set duties on imports of steel (+25%) and aluminium (+10%). The decision mainly had a significant negative impact on China, which has also imposed counter-tariffs on imports of US aluminium scrap. Such decisions, and even against the backdrop of a weakening dollar, forced importers from outside the North American bloc to raise prices.

• The response to COVID-19

In March 2020, the WHO declared COVID-19 a pandemic. In China, all production in Hubei province, the centre of world metallurgy, had been paused for more than a month. As a result, in April, due to the peak of European quarantines, the capitalization of 30 leading mining and metallurgical enterprises sank by 28% from January values, and 56 steel mills stopped production. The collection of scrap metal has fallen to almost zero. All this led to a terrible shortage of metal forming on the market.

• The growth of the mineral extraction tax (MET) rate from 2021

From January 1, 2021, the MET rate for iron ore and non-ferrous metal has been multiplied by a rent factor of 3.5. It is likely that the initiative, directed originally against exporters playing on the ruble's devaluation, will hit the consumer hardest, provoking an increase in prices for all metal products.

War conflict in Ukraine

The war in Ukraine has changed the situation in the international serial market and fundamentally affected the flow of raw materials and finished products almost overnight. Therefore, at the moment, there is more demand in the market than reliable supply.

Even though the production of iron and steel in Ukraine has not stopped, many steel mills and production facilities were damaged or destroyed during the hostilities.

According to trade-tracking analysts, Russia's metal exports are dwindling as the country's incursion into Ukraine is pushing commodity buyers and financiers away from significant producers.

Since Russia is one of the world's top five producers of steel, nickel and aluminium, cuts in the metal's supply threaten to further shrink an already undersupplied market. In addition, although metals are not directly sanctioned, prices are rising due to concerns that the measures taken could lead to problems with payments to suppliers and restrict banks from financing purchases of Russian goods.

Disruptions in supplies from Russia and Ukraine affect the price of raw materials, but this creates new opportunities for other countries that also have the potential in this field, such as Kazakhstan and Uzbekistan.

The Republic of Uzbekistan is rich in mineral resources and precious metals, such as tungsten, molybdenum and zinc. More than 2,700 deposits and promising ore occurrences of various minerals, including about 100 types of mineral raw materials, have been discovered in the depths of Uzbekistan.

Kazakhstan has extensive reserves of ores and non-ferrous metals. Among the regions of Kazakhstan in terms of metal ore mining, the Kostanay region leads, followed by Karaganda and Akmola regions.

Gateway Global Metals Pte. Ltd. started its trading activities in 2010 and is a part of an international group of mining and manufacturing for-profit companies. We have our mining field located in the central part of the Karaganda region of the Republic of Kazakhstan. We have everything to provide a high-quality product: excellent raw materials, reliable equipment and an experienced team. Low costs for mining, processing and logistics of raw materials allow us to offer final metal products at low prices (while the quality remains at the same level). In addition, the innovative technologies we have made our production more efficient.

For more information, please contact us info@ggm.sg