The changing dynamics in global metal market: how the energy transition and geofragmentation may disrupt commodity prices

Abstract

The energy transition and the increase in trade restrictions driven by geofragmentation present significant risks to critical mineral markets. This paper examines a subset of essential transition-critical minerals – aluminium, cobalt, copper, lithium and nickel – to assess how metal commodity markets may be impacted by shifting global economic dynamics. The study explores the key long-term drivers of commodity price formation, the medium-term effects of trade interventions on price expectations, and the short-term volatility triggered by trade announcements. The results indicate that metal commodity markets are primarily influenced by demand-related shocks, with copper and aluminium prices being primarily driven by aggregate demand, whereas nickel prices are influenced by a more diverse set of shocks. Similarly, in the short term, nickel, cobalt and lithium prices are more sensitive to trade announcements compared with copper and aluminium prices. The findings and discussion focus on the risks to the energy transition and financial markets.