In recent years, as the global energy transition, a new round of technological revolution, and industrial transformation have deepened, critical minerals—or strategic mineral resources—have emerged as a new arena for strategic competition among major global powers. China’s dependence on foreign sources for several key mineral resources remains high, and given the constantly evolving international landscape, this dependency inevitably affects both economic security and even national security. Energy resource security has thus risen to become a comprehensive, strategic issue that is vital to the country’s economic and social development. At this year’s National Natural Resources Work Conference, it was proposed that we should comprehensively launch a new round of mineral exploration breakthrough initiatives, centered on strengthening domestic exploration, development, and reserves enhancement of crucial energy and mineral resources, thereby ensuring the safety and reliability of our critical energy resource supply system. On the market side, the performance of strategic mineral products has also been subject to fluctuations driven by multiple factors, including the international environment and policy changes. So, how have the markets for hot-spot minerals performed since the beginning of 2023? What are the underlying factors influencing these trends, and how can we respond appropriately? Recently, Zuo Geng, Chief Expert at the Economic Research Institute of China Minmetals Corporation, shared his views on these very questions.
　　Financial capital triggers fluctuations in iron ore prices.
　　Iron ore is a fundamental means of production that underpins socio-economic development and is closely linked to economic and social progress. Abnormal fluctuations in its price not only disrupt the stability of underlying commodity prices but also adversely affect China’s efforts to stabilize and revive its economy. However, since the fourth quarter of 2022, the Platts iron ore index has rebounded sharply after hitting bottom, with prices rising continuously by nearly 68% as of March 15 this year—far exceeding the recovery幅度 of steel prices.
　　“Judging from China’s 2022 pig iron production and its pig iron output from January to February 2023, the supply-and-demand dynamics for iron ore spot markets have remained unchanged. Globally, the supply of iron ore available for trading remains ample, and China’s port inventories of iron ore continue to stay above 130 million tons,” said Zuo Geng. “The market has grown significantly more confident in the recovery of China’s economy following the 20th National Congress of the Communist Party of China and in China’s projected economic growth rate of 5% for 2023. This has become the primary driver behind the upward trend in iron ore prices. Meanwhile, rising costs resulting from resource transitions among major global iron ore producers, coupled with the approaching off-season for coal consumption in China, have also created additional room for iron ore prices to rise.”
　　In February 2023, Goldman Sachs released a report stating that iron ore prices would rebound to above $150 per ton, further fueling market speculation. Driven by positive spot price expectations and speculative capital in the futures market, iron ore futures prices on the Dalian Commodity Exchange continued to rise under the strong push from bullish investors, and the Platts iron ore price index followed suit.
　　It can be said that financial market forces and price manipulation were the primary drivers behind this recent price volatility.
　　In February 2019, driven by financial speculation and fueled by the collapse of a medium-sized mine operated by Vale—resulting in the release of 7 million tons of tailings—iron ore prices surged once again. Since then, iron ore prices have never fallen back below the $80 per ton mark. If this round of price increases is not closely monitored and rigorously managed, the current price of $130 per ton could serve as the starting point for further price volatility, potentially pushing prices even higher—to $150 per ton or beyond—and seriously jeopardizing the foundation for the healthy development of China’s steel industry.
　　To mitigate the impact of volatile prices of bulk commodities such as iron ore on the economy, it is crucial to strengthen our analysis of supply and demand trends and price movements, and to enhance our ability to respond swiftly to price fluctuations. Zuo Geng suggested that we must adopt targeted and precise policies, closely monitor financial market developments, regulate the statements made by various research institutions, futures companies, and information media regarding the iron ore market, crack down rigorously on financial speculation, and take immediate action against any signs of market manipulation—showing zero tolerance and leaving no room for leniency.
　　The lithium resource market has experienced a “roller coaster” ride.
　　Against the backdrop of the global energy transition, lithium—often referred to as “white oil” due to its clean and sustainable nature—has enjoyed an unprecedented boom in recent years, with prices soaring steadily. In 2022, lithium prices skyrocketed even further, reaching nearly 600,000 yuan per ton by late November—a year-on-year average price increase of nearly 300% compared to the same period in 2021. Since the beginning of this year, however, lithium prices have taken a sharp downward turn. As of March 15, lithium prices had fallen below 300,000 yuan per ton, nearly halving within just two and a half months.
　　“This is mainly due to the rapid expansion of China’s production capacity for ternary battery materials from 2021 to 2022. The huge demand has put domestic lithium resources in short supply, forcing China to rely heavily on imports to meet its production needs. At the same time, auction prices for lithium mining resources at Pilbara in Australia have been steadily rising, providing an opportunity for these companies to drive up lithium prices—naturally leading to a dramatic surge in lithium prices.”
　　Zuo Geng believes that the recent rapid surge in domestic lithium prices is largely attributable to the rapid expansion of China’s ternary battery production capacity. According to incomplete market data, as of the end of 2022, China’s ternary battery output accounted for roughly 70% of the global total, while its production capacity approached nearly 90% of the global total. Yet, domestic demand for ternary batteries represents only about 50% of the global total. In other words, just as China was experiencing a similar scenario two decades ago with iron ore—where China’s burgeoning demand drove up global prices—today, the lithium industry is witnessing a replay of that same dynamic.
　　The roller-coaster market conditions have made it impossible for manufacturers in the new-energy battery materials industry to keep costs under control, thereby stifling continued production. Meanwhile, the lithium resource sector is seeing declining investment returns due to falling prices.
　　“To ensure the successful implementation of our country’s ‘overtaking on a curve’ plan for new-energy materials, we must strictly control the launch of new production capacity for ternary battery materials and take strong measures to shut down inefficient capacities, thereby preventing the market from being overwhelmed by ineffective and low-efficiency capacity. At the same time, we must crack down rigorously on speculative activities involving domestic lithium resources.” Zuo Geng suggested that while stepping up exploration and development of domestic lithium resources, we should concentrate superior resources on comprehensive and effective exploitation, avoiding the “flock mentality” in investment and overheated competition driving up prices due to resource scarcity. Regarding lithium extraction from mica, we need to intensify scientific research efforts to prevent resource waste and environmental pollution caused by tailings. As for lithium extraction from salt lakes, it is crucial to pay close attention to the recovery and utilization of salt lake by-products, and to implement stringent policies to protect the natural environment, ensuring that resource acquisition is environmentally friendly.
　　Copper remains favored by capital but is experiencing high-level fluctuations.
　　China is the world’s largest consumer of copper.
　　In 2022, affected by multiple factors including the macroeconomic environment, copper consumption was somewhat restrained. Moreover, in certain downstream sectors, significant reductions in copper usage and material substitutions have already taken place, further dampening copper demand. However, as market confidence in China’s economic stabilization and growth strengthened, by November 2022, industrial metal commodities—including copper, aluminum, and iron ore—finally experienced a genuine rebound.
　　From the supply side, with new and expanded projects in various countries coming on stream in 2022, global copper supply has shown some improvement. However, copper costs have risen significantly, and coupled with historically insufficient capital expenditure, production has been somewhat affected. Moreover, major copper-producing countries such as Chile and Peru have seen their copper supplies fall short of expectations due to changes in government policies that have altered their understanding of mineral resources. Added to this, the impact of geopolitical crises has also exerted a certain negative influence on the global copper supply landscape.
　　According to ICSG data, the growth rate of global copper mines and refined copper production has been slowing down. From January to September 2022, global copper mine production reached 16.143 million tons, representing a year-on-year increase of 3.5%, with capacity utilization at around 79%. This slowdown is mainly attributable to constraints on copper production growth in Chile and Peru.
　　“At least for now, there are no signs of increased or higher production at major copper mines worldwide,” said Zuo Geng. He added that, driven by economic recovery and the transition to new energy sources, demand will continue to grow. With supply falling short of expectations and demand prospects strengthening, copper—supported by capital—has managed to maintain high prices amid a fragile balance.
　　Downstream pricing models for nickel products may give rise to disagreements.
　　Nickel is one of China’s strategic emerging mineral resources and holds a crucial position in emerging industries such as traditional stainless steel and new-energy vehicle batteries. It is regarded by many countries as a “strategic material.” China is the world’s largest consumer of nickel resources, yet it is also a country relatively poor in nickel reserves. Currently, more than 90% of China’s nickel ore requirements are sourced from Indonesia and the Philippines. The resulting supply-demand imbalance has kept China’s dependence on foreign nickel resources at a high level, posing significant challenges to ensuring a stable and continuous supply of nickel.
　　In 2021, as the global economy rebounded, demand for nickel—driven by both batteries and stainless steel—rose sharply at the same time. Coupled with reduced supply from countries such as Russia, the nickel market experienced a significant shortage. In 2022, nickel supply began to recover, while at the same time, demand for nickel sulfate from batteries plummeted, narrowing the gap in the nickel market. Experts predict that with the commissioning of several electrolytic nickel projects in China and Indonesia, the increase in pure nickel supply will accelerate the return of the nickel market to a state of oversupply. By 2023, the long-term supply-demand gap in the nickel market is expected to move further toward balance.
　　Due to the scarcity of nickel resources, domestic enterprises have gradually stepped up their overseas investment efforts, launching projects one after another in Papua New Guinea, Myanmar, and Indonesia. According to incomplete statistics, Chinese-funded enterprises have invested a total of 16.38 billion U.S. dollars in overseas nickel projects. As of the end of 2020, these projects had established smelting capacity totaling 674,000 tons of nickel metal. In the future, an additional 140,000 tons of nickel metal and 11,800 tons of cobalt metal are expected to be added to the smelting capacity.
　　In response, Zuo Geng pointed out that the years 2022-2023 may represent a peak period for the commissioning of nickel laterite mining investment projects in China and Indonesia in recent years. Moreover, the successful pilot testing of QingShan’s “laterite nickel—high-nickel matte—nickel sulfate” process has effectively addressed the overall shortage of nickel raw materials that China has faced in recent years. Looking ahead, given the national steel production ceiling imposed on China’s stainless steel industry, demand for nickel used in stainless steel is likely to reach its peak, and the supply landscape for nickel metal will gradually move toward greater balance or even easing. Furthermore, the pricing of Russian nickel products in RMB on the Shanghai Futures Exchange will further improve China’s domestic nickel supply situation. In the future, as technologies for utilizing laterite nickel ore in both the stainless steel and new-energy battery material sectors continue to advance, downstream pricing models for nickel products may become increasingly divergent.
　　Notably, the European Union recently revised its list of critical mineral resources, adding copper and nickel to the roster. Combined with the earlier move by the United States to include nickel and lithium on its own list of critical resources, as well as the recent agreement between Russian nickel producers and the Shanghai Futures Exchange to sell their nickel products in renminbi, this development further underscores that Western developed countries led by the United States are seeking to exert greater control and containment over China by revising their national lists of critical mineral resources and reshaping global resource allocation.
　　“This runs counter to China’s advocacy of a community with a shared future for mankind and its unwavering commitment to reform and opening-up. The U.S. and Western countries are now attempting to disrupt communication between China and the rest of the world through actions aimed at reversing globalization and de-globalization, thereby seeking to curb China’s development.” Zuo Geng suggested that we must adhere to the long-term development strategy of coordinated “dual circulation,” promote cooperation with countries along the Belt and Road, and fully embrace the concept of a community with a shared future for mankind in fostering friendly collaboration. At the same time, we must rigorously reorganize domestic production order, firmly prevent inefficient and ineffective capacity from consuming resources, step up exploration and development of domestic mineral resources, intensify the recycling and utilization of renewable resources, and pursue a resource-intensive development path to ensure a stable supply of mineral resources essential for China’s economic growth.
　　High molybdenum prices are unlikely to remain sustained.
　　As a minor metal, molybdenum is used in approximately 80% of cases in the steel industry. Its application in the steel industry accounts for about 80% of total molybdenum consumption. Molybdenum is typically added to iron as an alloying element to produce special steels or stainless steels, thereby enhancing properties such as strength, toughness, and corrosion resistance. Since 2021, the international molybdenum market has been characterized by supply shortages, causing the price of molybdenum oxide to surge to around US$20 per pound—a level not seen in nearly a decade. Since 2022, molybdenum prices have continued to rise steadily. Recently, amid declining supply and growing demand, molybdenum prices have surged rapidly, reaching new highs in recent years. According to statistics, the current price of domestic molybdenum concentrate with a grade of 45%–50% has hovered above 5,200 yuan per tonne, continually setting new historical records.
　　The rapid rise in molybdenum prices is primarily driven by supply-and-demand dynamics.
　　“The primary reason behind this is that extreme geopolitical events have disrupted global supply channels for molybdenum,” analyzed Zuo Geng. From the perspective of global molybdenum suppliers, overseas molybdenum resources are mainly derived as byproducts from copper mines. Currently, copper prices are robust, and major global copper mining companies have no incentive to expand their production capacity, making it difficult for byproduct molybdenum output to increase significantly. Meanwhile, the vast majority of China’s molybdenum resources are concentrated in single-molybdenum deposits, making it relatively easy to boost production. As global demand shifts toward China in search of supply, most Chinese molybdenum mines—having been idle for a long time due to earlier market downturns—are now resuming operations only gradually. This slow recovery process has led to a temporary mismatch between supply and demand, driving molybdenum prices steadily upward.
　　Meanwhile, from the perspective of domestic demand, the “dual-carbon” goals are driving rapid development in the wind power, photovoltaic, and automotive industries, thereby boosting demand for alloy steel. As the steel industry undergoes transformation and upgrading—shifting from ordinary steel to high-performance special steel—a trend is emerging that will further increase demand for molybdenum.
　　On this point, Zuo Geng adopts a relatively optimistic stance: “As supply increases driven by this year’s rise in molybdenum prices, it’s unlikely that molybdenum prices will continue to remain at high levels. There’s no need to worry excessively about this.”
　　Potassium phosphate fertilizer prices will continue to rise.
　　Global potassium and phosphorus resources are scarce, and supply and demand remain in a tight balance.
　　China is the world’s largest consumer of potash fertilizers, accounting for approximately 26% of global consumption. As for phosphate rock consumption, it primarily meets the demand for phosphate fertilizer production. In China, ensuring a stable supply of phosphate fertilizers is particularly crucial for safeguarding food security.
　　At the 2023 Fertilizer Market and International Trade Seminar held in March, Zhang Jingguang from the Department of Economic and Trade Affairs of the National Development and Reform Commission stated that, over the past period, on the raw-material side, the primary inputs for nitrogen, phosphorus, and potash fertilizers have been constrained by the dual pressures of short-term supply tightness and long-term insufficient guarantees—particularly the severe limitations imposed by poor resource endowments.
　　The global demand for potash fertilizer is severely mismatched with the highly concentrated distribution of its resources. Potash deposits are primarily located in North America and Europe, including Canada, Russia, and Belarus; however, these regions themselves have relatively low domestic agricultural demand for potash fertilizer. Consequently, most of their potash production is destined for export trade.
　　In 2022, prices of upstream phosphate and potash ores rose at a faster pace than those of downstream related products.
　　Zuo Geng’s analysis suggests: “Since 2022, due to ongoing geopolitical crises, major global suppliers of phosphate and potash fertilizers have experienced supply disruptions as a result of sanctions. Coupled with Ukraine—Europe’s traditional granary—being unable to provide supplies, European countries could find themselves facing a ‘food crisis.’ The spreading of these concerns has led to sustained increases in the prices of potash and phosphate fertilizers.”
　　Nutrien (NTR.US), the world’s largest fertilizer company, expects that global supplies of potash fertilizers will remain constrained in 2023. As major exporting countries, Belarus and Russia continue to face partial restrictions on shipments, while many alternative supply channels have already been exhausted.
　　“As the world’s largest producer and consumer of food, we must prioritize safeguarding people’s livelihoods by ensuring adequate access to mineral resources,” suggested Zuo Geng. He recommended that China should secure the stability of its grain production through both domestic resource development and effective external supply.