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Australian mineral prices fall despite renewable energy future

ABC Business logoABC Business 4 days ago
a city with smoke coming out of it: The Climate Council's latest report had Mount Isa as an industry hub. (ABC Rural: Kemii Maguire) © Provided by Australian Broadcasting Corporation The Climate Council's latest report had Mount Isa as an industry hub. (ABC Rural: Kemii Maguire)

Australia's green future is closer with the large-scale renewable energy target set to be met by 2020.

The Clean Energy Regulator announced last week that the milestone had been met ahead of schedule after four large wind and solar power stations were approved.

With a move away from fossil fuels and thermal coal mining, experts predict a higher demand for minerals like zinc, copper, and cobalt used for renewable energy.

Australia's mineral prices on the other hand are not reflecting the same optimistic outlook.

Minerals' green future

Rare earth minerals such as zinc and copper are the main metal components used inside rechargeable batteries, and in solar and wind farms.

The Climate Council's latest outlook report, released last month, tipped Queensland's north-west minerals province to be the main provider of minerals to boost the renewable energy industry, not only in Australia but globally.

However, copper prices have fallen by 14 per cent over the past six months, with zinc dropping 24 per cent.

ANZ senior commodity analyst Daniel Hynes said the global market was the major catalyst behind the price dive.

"Certainly for those metals, the long-term trends around demand are quite positive," he said.

"But in the shorter term, we're seeing this concern for our economic growth driven globally by the trade war between US and China.

"Investors tend to use it to express their views on the economic outlook so copper in particular, has been weighed down in recent months due to those concerns."

With trade flows being impacted, the global uncertainty in minerals has become a stalemate.

"To be honest, it's hard to see any resolution soon because the Chinese are quite adamant in changing their policies," Mr Hynes said.

"It's likely to last a little while longer, with prices weak."

Renewable energy technology reliant on cobalt

Mr Hynes said once renewable energy technologies such as solar and wind farms reached a critical mass, the demand would drive Australia's rare earth mineral prices.

"I think in five or 10 years' time the outlook will look very different and demand will be strong, but not yet with current global trade," he said.

Renewable energy technologies such as rechargeable batteries are heavily reliant on cobalt metals.

The Democratic Republic of Congo (DRC) remains the dominant force, producing 70 per cent of the world's cobalt output.

Mr Hynes said because of the DRC's unstable political environment, the market was looking for diversification in its supply sources.

"We have the second biggest resource base in cobalt behind the DRC, so I would expect it's a good opportunity for Australia in the medium to longer term," Mr Hynes said.

Over the past six months, several start-up mining companies have begun exploration and drilling for cobalt across Queensland.

High-grade copper-cobalt ores have been drilled for exploration north-west of Mount Isa, with seismic surveys at a Walford Creek project showing cobalt as high enough exporting grade.

For newcomers like Australia, cobalt's rollercoaster price history and renewable energy pressures have made the industry harder to crack into.

MineLife senior commodity analyst Gavin Wendt said the cobalt industry was much more of a market with relationships between miners and end-users.

"It's not so much going out and finding a deposit, there's plenty out there," he said.

"It's not easy to become a big producer, particularly when you've got a company like Glencore that dominates the market."

Cobalt price soars after announcement

This month, the price of cobalt has soared more than 30 per cent after Glencore announced it would close its major mine in the DRC to balance market prices.

"Glencore has a dominance in a number of commodities," Mr Wendt said.

"They have done this with zinc in the past four or five years for the recovery of zinc prices, and I suspect this is what they're now doing to the cobalt market."

Mr Wendt said Australia was a junior player in the cobalt space and was at the mercy of Glencore regarding price and supply manipulation.

"That's very much the risk for new entrants," he said.

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