Governments should step up support for the smelting and refining sectors to ensure resilient supply chains for critical minerals, trading firm Trafigura said today.
"Critical minerals are only useful once converted to critical metals," Trafigura global head of metals and minerals analysis Graeme Train said, speaking at the Japan Energy Summit and Exhibition in Tokyo. "Midstream investment in the value chain needs to be protected."
Train highlighted that profit margins in the smelting industry have remained very low, discouraging private-sector investment in midstream operations under current economic conditions.
This pressure poses "a bit more of a threat to the value chain," he said, and called on public-sector stakeholders to treat smelting and refining as critical infrastructure deserving of targeted support. Train said insufficient midstream investment is causing stress in the market, especially relative to upstream mining where although current supply is tight across the metals market, increased investment is flowing in at a rate that now appears likely to support global requirement for new capacity.
"If the pace of (upstream) investment continues as it has been, then we could expect that the markets will have the supply that they need over the long term," he said.
But he cautioned that sustained investment depends on commodity prices remaining high enough to justify the risk. "Companies that involve in that space need to be confident that the price remains at that level," Train said, citing copper as an example of a commodity currently priced to incentivise investors.
Train also reiterated that the private sector would like to ensure that they are extracting the maximum value from the ores that they are processing. "(We are) not just targeting the primary metals but also making sure they are able to extract some of the secondary metals that come with those ores."
These secondary metals include germanium, gallium, indium and bismuth, he added.
