More bad news for the Cuban economy: falling prices for two exportable products

While presenting the Cuban government’s new economic package to the National Assembly of People’s Power, the Prime Minister Manuel Marrero assured that “the potential we have is greatFor example, negotiating tours that have been. “We have requests for nickels, tobacco, rum.”.

But these aspirations collide with reality. Of the three items mentioned by the official, all traditional to the Cuban economy, there is one whose price will not stop falling in 2023. Nickel was trading at $16,272 a tonne on July 25, after hitting a high of $20,272 a tonne in the world market on January 3, 2024, according to the site. Business Economics.

Nickel is only going downhill, with an annual decline of 47.23%, but Cobalt, another metal, was also mined on the island. In 2023, it loses 42.23% of its market value.

Why this situation? Didn’t we expect a boom in metals linked to the energy transition, driven by growth in demand for electric cars?

The reality is that such omens boosted the supply of minerals like lithium, nickel and cobalt used in the production of batteries for these vehicles. According to an analysis of the electric car market published by The Wall Street Journal, In 2023, the prices of these three minerals decreased“Lithium has been pushed to its cheapest level in two years due to rising supply and weak demand, Cobalt at its four-month low and nickel at its pandemic-era low. “Next year is likely to bring more of the same.”

One of the factors influencing this panorama is that China did not grow as expected in the year just ended, nor did the world. This, along with the increase in interest rates, slowed the expected growth figures.

Energy market research firm Bloomberg NEF acknowledged in a study that “expectations across the industry may be too high.”

In 2023, with more than 20 lithium mines open in the world, mining companies are focusing on long-term production. “Before Covid-19 there were supply issues. “Manufacturers in China and Australia ramped up production as the economy reopened, but demand has not kept pace.”said The Wall Street Journal Kwasi Ampofo, head of metals and mining at Bloomberg NEF.

In 2024, supply of all three battery metals is expected to exceed demand again. “Manufacturers will (consider) further production cuts to balance the market and prevent further losses,” warned Jordan Roberts, battery raw materials analyst at FastMarkets.

For its part, Benchmark Mineral Intelligence projects a 30,000 metric ton surplus in the global lithium market for next year, while Jack Bader, founder and director of critical minerals consulting firm Project Blue, warned that The cobalt market is currently oversupplied due to sluggish demand and high inventories.

“This is all bad news for cobalt prices,” Bader said, adding that he expects more of the same in 2024 as producers deplete stocks.

While the benchmark Mineral Intelligence predicts that Global cobalt supply will exceed demand by 20,000 tonnes in 2024. And nickel, the same“There is not much positive movement and we do not expect this oversupply to change,” said Spencer Ingle, a benchmark analyst.

Some producers in Indonesia, a country that supplies nearly half of all nickel ore consumed in the world, stopped production due to low prices. therefore The global nickel surplus is expected to exceed that of lithium and cobalt next yearThat puts the stock at 200,000 tonnes, according to Benchmark.

And while lower prices spell bad news for miners, they could instead prompt cell manufacturers to lower the price of electric battery packs, which would lower the price of electric cars.

Therefore, the 2024 forecast predicts a decline in battery pack prices to $133 per kilowatt-hour, after closing at $139 per kWh in 2022, down from $161 per kWh in 2022. per kWh in 2013.

therefore, What hope of economic prosperity does the alleged nickel order represent for Havana? What did Marrero refer to when trying to paint a less bleak economic outlook for Cubans than the current one?

Well, a little. The previous summary shows that The electric car boom hasn’t benefited Cuban coffers, and it looks like they won’t. Just look at Sherritt International’s results report at the end of the third quarter of 2023.

According to the Canadian company’s report, “Sherite’s share of finished nickel and cobalt production at the Moa joint venture was 3,841 tonnes and 410 tonnes, respectively, compared to 4,443 and 419 tonnes in the third quarter of 2022.”

Besides, “Sales volume of finished nickel was lower than the corresponding period last year And full production volume in the current quarter was mainly due to lower nickel demand from steel mills, following summer shutdowns and delays in customer sales. “Increased availability of mixed hydroxide precipitate (MHP) and met intermediates eases metal purchases in Asia.”

Marrero will have to make the necessary new disclosures in the near future. No one should forget that Sherritt forced Havana to sign an agreement to cut 80% of nickel production over the next five years. Beginning January 1, 2023, the government aims to collect 361.9 million Canadian dollars worth of debt. With current prices in the world mineral market, this debt (another of the regime’s many) bites and spreads.