What Are the Highlights of the Resources Sector from the Macquarie Conference 2024?

The Macquarie Australia Conference is the largest annual gathering of Australian companies with both domesticand international institutional investors. At the 26th annual conference in May, over 800 institutional investors engaged with more than 110 leading Australian and New Zealand companies to discuss macroeconomic and investment trends for the upcoming year. The three-day summit provided a platform for insightful exchanges on a range of topics. The section below outlines the important themes and viewpoints in the resources sector from this conference.

The continued tightening trend in copper's supply and demand continues to propel prices upward. Major driving forces include the unrelenting supply-side challenges that heighten market concerns over copper shortages, as well as the robust demand engendered by the global manufacturing revival and the shift toward renewable energy.

Recent expectations of supply deficits have been intensified due to the deadlock in negotiations between First Quantum and the government to restart production. Panama's newly elected President José Raúl Mulino last week dismissed any possibility of negotiating with First Quantum Minerals unless the company relinquishes several arbitration actions, potentially exacerbating the risk of supply shortages in South America. Moreover, BHP's repeated failed attempts to take over Anglo American imply that the demand for copper may be even more promising than current market forecasts predict. Macquarie analysts said,

The uranium story focused on the growing demand amidstthe deficit in supply. With AI's rapidly expanding list of potential applications and its quick adoption - ChatGPT being the fastest growing app in internet history - there is a significant increase in demand for electricity. In fact, the European Union predicts a 60% rise in electricity demand by 2030. As a result, two transformations are underway: greening the grid with renewable energy and electrifying more energy use for sustainability. It is clear that uranium would become another beneficiary of the AI boom.

In addition, President Biden finally signed legislation prohibiting the import of Russian enriched uranium,triggering a 90-day countdown to the implementation of restrictions on shipments of reactor fuel. This further complicates the supply of enriched uranium. According to Jonathan Hinze, president of nuclear fuel market research firm UxC, cutting off this supply could lead to a 20% increase in uranium prices. Australia, home to the world's largest uranium reserves, accounting for 27.7% of the global share, could see its uranium mining companies benefit from the ban, potentially aiding their development and growth.

Analysts at the conference highlighted, "the impact of a ban on Russian uranium and enrichment driving a bifurcated market, and the potential for nuclear as an energy solution for the increasing power demands of data centres."

Despite lithium prices being down by over 50% from the same period last year, they have risen by approximately 13% since the beginning of this year. The improved sentiment in the lithium market is primarily attributed to marginal tightening supply and government support.

The threat of oversupply in the lithium market is beginning to dissipate as a number of significant mines around the world propose to curtail their production. In addition, unconfirmed reports suggested that Chinese lithium mining and processing projects have been affected by the government's tightening of environmental restrictions on operations.

Governments in the US, Canada, and Australia are continuing to provide significant financial support to the lithium and electric vehicle (EV) sectors as part of their efforts to reduce carbon dioxide emissions. The White House recently declared that achieving the US president's goal of net zero emissions by 2050 will require the large-scale adoption of EVs.

The Australian government has shown strong support for the local critical minerals industry, recognizing its importance to the economy and the nation's environmental goals. In the latest federal budget, the critical minerals, hydrogen, and green metals industries were identified as key beneficiaries. Treasurer Jim Chalmers informed Bloomberg that these industries will receive significant support from the government.