Canadian miners could be getting a shiny new pricing system that may help even the playing field with their competitors overseas.
Driving the news: A federal cabinet minister says the government is exploring a way to manage prices of critical minerals, like nickel and cobalt, to mitigate the impact of a production boom overseas that’s sent mineral prices plunging.
- Energy and Natural Resources Minister Jonathan Wilkinson said the government could adopt a system developed by the U.S. Department of Defense that uses an AI-backed model to predict the cost and supply of critical minerals, replacing the current futures-based pricing system prone to massive swings.
- Wilkinson partially blamed “issues relating to market manipulation and dumping” for the sharp drop in prices of some critical minerals, including nickel and lithium.
Why it matters: The recent slump in mineral prices has made it more difficult for Canadian miners to raise funding, and some in the industry are now calling on Ottawa to back new projects or risk permanently falling behind China in the critical minerals race.
- When commodity prices are low, new mining projects become unattractive to private investors, which puts pressure on governments to pick up the slack until prices return to normal levels.
Zoom out: Canada is home to 40% of the world’s listed mining companies, but overseas production of critical minerals has surged in response to forecasts of big demand in the near future driven by increased battery usage.
- Indonesia, for example, has ramped up its nickel production and processing industry, and now accounts for around half of the world’s supply.
- As a result, nickel’s price has fallen by around 50% in just over a year, leaving roughly half of the world’s nickel operations unprofitable.
Bottom line: More stable critical minerals prices could eliminate disruptive boom-and-bust commodity cycles in what many regard as a strategic sector key to the future of Canada’s economy. —LA