Muzhu Mining Ltd. (CSE: MUZU)
Creating lasting wealth by developing gold and silver properties with near-term mining potential
When it comes to the commodity market, Paul Bloxham, the chief economist of HSBC, introduced a concept called “super squeeze.” Bloxham suggests that the tightening of commodity supply and insufficient investment, exacerbated by geopolitical and climate risks, is causing a significant impact on the market.
According to Bloxham, the “super squeeze” phenomenon refers to price increases driven by supply shortages rather than strong demand, which is not a positive development. This situation negatively affects both suppliers, whose performance is impaired, and demand, which faces increased costs and reduced profitability, ultimately impacting normal production activities.
Bloxham enumerates three main reasons for the occurrence of the “super squeeze” in the commodity market: political uncertainty, climate change, and insufficient investment in the transition to green energy.
Geopolitical risks, such as conflicts in the Middle East and the Russia-Ukraine war, have caused evident disruptions in global trade, while climate change particularly affects the agricultural sector and the commodity supply chain. Furthermore, the insufficient investment in critical minerals for energy transition, such as copper, nickel, and aluminum, is a contributing factor.
Regarding climate change, Bloxham highlights the growing demand for metals due to the global net-zero carbon emissions vision. However, the investment in these critical minerals remains insufficient. The report from the Energy Transition Commission states that a significant shortage of metals like graphite, cobalt, copper, nickel, and lithium is expected in the next decade, necessitating an increase in annual capital investment to ensure adequate supply, a level not yet reached.
In the metal market, analysts predict the highest potential for price increases. Bloxham specifically mentions clean energy metals and iron ore as leading the bullish trend due to low inventory levels and insufficient production investment, with iron ore prices rising by over 24% in the past year.
However, there are opposing views in the market. Arlan Suderman, chief commodities economist at StoneX, suggests that the commodity market’s supply is generally sufficient due to declining global demand resulting from a weak global economy. Additionally, many anticipate a rebound in the Chinese economy, which could drive demand. Whether 2024 will be a breakthrough year for commodity prices hinges on the revival of the Asian economy.
