S.Africa commodities basket edges lower

The global commodity market has been experiencing a downward trend due to the ongoing slowdown of the global economy. Despite a moderation in global inflation, commodity prices remain at historically high levels. To provide insights into the half-year performance of the commodities market, particularly focusing on iron ore, steel, and green metals, CNBC Africa hosted a discussion with experts Erik Hedborg, Principal Analyst for Steel at CRU, and George Bennett, CEO of Rainbow Rare Earths. Both experts shed light on the current state of the market and shared their outlooks for the future. Erik Hedborg, discussing the dynamics of the iron ore and steel market, highlighted the impact of China's reopening earlier this year on commodity prices. While there was initial optimism surrounding rapid economic growth in China post-reopening, the actual demand for commodities did not surge as expected. Steel prices saw a short-term spike, but have since started to decline. Iron ore prices, which had reached a peak of $220 per tonne in June 2021, have now dropped to around $100 per tonne. Hedborg attributed this decline to a slowdown in China, where steelmakers have faced profitability challenges, leading to weaker demand. Additionally, the supply from major producers like Australia and Brazil has increased, further influencing prices. Notably, countries like Ukraine, Russia, and South Africa have encountered supply constraints, impacting global trade dynamics. Shifting the focus to green metals, George Bennett discussed the significance of rare earth elements in driving the green revolution. He emphasized the essential role of elements like neodymium, praseodymium, terbium, and dysprosium in manufacturing permanent magnets crucial for electric vehicles and wind turbines. The demand for green energy has surged with the push towards achieving net-zero emissions by 2050. However, disruptions such as China's lockdown and geopolitical tensions have impacted the prices of rare earth elements. Bennett detailed a price spike followed by a decline, with forecasts indicating a gradual recovery by the first quarter of 2024. In light of these market dynamics, both experts highlighted the critical role of supply in shaping prices. While challenges in countries like Ukraine and South Africa have disrupted the iron ore market, the green metals sector faces uncertainties related to China's dominance in production. Bennett underscored Rainbow Rare Earths' strategic efforts to contribute to an independent supply chain outside of China by developing a rare earth mining project in South Africa. The project aims to enhance global supply diversity, reduce dependency on Chinese production, and meet the increasing demand for rare earth elements driven by green energy initiatives. Looking ahead, the outlook for the commodity market remains influenced by geopolitical events, economic trends, and the transition to sustainable energy sources. As stakeholders navigate through supply chain disruptions and market volatility, the focus on strategic investments, sustainable practices, and diversification will be crucial in ensuring the resilience and growth of the commodities industry.