A little future-gazing
What to look forward to in the metals business, in 2021 and beyond?
It is customary to engage in some crystal ball gazing at this time of the year so please indulge us while we take a quick look at just three sets of signals and trends permeating the metals business at this time.
Copper is overbought?
Perhaps, though long-term it is hard to imagine a future where less copper is produced, rather than more. Given that most electric motors use copper wiring and the trend towards electrification of all transport is now irreversible and proceeding faster than expected, the world will need to ramp up copper production. The market may react with nervousness to rapid short-term gains, but the far horizon is wide open for delivery of a lot more copper than we see today. Last year (2019) Tesla delivered 367,500 cars. Mercedes sold about ten times as many. Toyota? Thirty times. Now consider for a moment how much copper goes into an electric motor, and add to it the fact that in five years’ time, in much of the developed World, measures taken to combat climate change will make it impossible to register a vehicle with an internal combustion engine. It’s a slam dunk for copper, unless someone designs a radically different electric motor. All this is happening at a moment where it is becoming harder and more expensive to find new sources of copper ores, so mechanisms such as DMX in-ground asset monetisation will be required at scale to fund and facilitate exploration and development.
Driving heavy machinery in your pyjamas?
Operation of major mining equipment is already facilitated by technology which helps people to do these jobs more efficiently. In addition, while companies have been investing heavily in process automation, they have been slow to fully realise the potential gains of these technologies. As a result of these implementations, however, cameras and sensors are everywhere. Combining these two vectors, we foresee a near future where operating centres extend their staffing without having to relocate people to far-flung mining districts. To begin with, they will draw on neighbouring areas — both in terms of both the time zone and the jurisdiction. Australia, Canada and other large technologically-advanced countries will see the highest uptake of such practices initially. Ultimately, time and geography will be unbundled, allowing continuing resource extraction by technical staff who will be entirely time-zone and geography-agnostic. Of course, the ultimate test of this practice will come when asteroid mining becomes viable. Nobody will want to “move” to a mine in space but they won’t have to. By then there will be a large stratum of highly trained people available to do the work, and no-one will care, or perhaps even know, where they live. Technology, applied in thoughtful ways, can benefit all stakeholders of an operation.
Trading is done in person because people trust each-other?
Well, for the longest time people have had little option but to trust each-other, and we know how that turns out sometimes. While humans in the main are good and trustworthy, we sometimes need a little help to steer away from the stick and towards the carrot. Of course, blockchain technology has been lauded as providing “trustless trust” and to a large degree that is true, but it is not enough to slap “powered by blockchain” on the outside of the box and call it a success. In very large and complex industries, the ability to satisfy regulations while satisfying market demands is the key to advancement. In our field, centuries of person-to-person trading have resulted in a market which is largely opaque, few pricing signals being available openly, and costs, in terms of both money and time, being unnecessarily high. As has been the case with many other industries over the last twenty years or so, we will see the market opening to new entrants, enabled by easily accessible technology. We have seen this with options trading, foreign exchange and stocks. We are seeing regulators now open to working with technology platforms towards enabling progress as speed, efficiency and transparency beat friction and opacity. Next year will see the metals market open to investors and traders who have traditionally shunned direct exposure to metal due to the inherent roadblocks and opacity of the field. The resulting increased volume of both capital and liquidity will have a positive effect throughout the metals business.
We will be taking a closer look at these and other signals and trends in articles coming up on our blog, and here our Medium page, through 2021. This industry is adapting rapidly to both fundamental shifts in demand and global strategic circumstances. Speed and agility are becoming governing factors as the metals business comes to realise that it is part of the larger technology business. Not surprisingly, we at DMX are confident that now is the right moment to launch a platform to facilitate global metals trading with less friction, more speed and built-in trust. We look forward to an exciting near-term future, and wish everyone long-term prosperity.
