The International Copper Study Group has issued a warning of a possible 150,000t shortfall of copper in 2026 which could result in a lower surplus in 2025. According to the revised forecast, the strategic metals production market is growing to 1.4% instead of the 2.3%. All this points to the fact that the strategic metals are going to be the backbone of the eco-friendly economy and if we were to transition to a net-zero earth. The reliance for raw materials to produce all electric cars (EVs), windmills, solar panels, and satellites besides super computers for the decarbonization, electrification, advanced weaponry, communication, and the digital revolution, is huge. However, the availability and scarcity of these materials are heavily influenced by various factors. These materials are often by-products of major industrial metals which face short supply while refining and processing are concentrated in China, thus, creating a monopoly. In addition, grid expansion and artificial intelligence (AI) data centers put pressure on the supply while export restrictions and refining bottlenecks all contribute to the uncertainty. Of course, depleted reserves and geopolitical bans also impact the supply of strategic metals.
Liquidity Assessments
Lithium, cobalt, rare earth elements (REEs) and germanium are among the strategic metals whose dynamics differ from base or precious metals like copper and gold. Therefore, assessing their liquidity and volatility involves looking at them in a different way as these markets often lack the centralized or high-volume exchanges that take place in other commodities. That means these materials are not traded on a major public exchange like the London Metal Exchange (LME) or Commodity Exchange Inc (COMEX). For example, the titanium market is primarily driven by long-term contracts between few but large producers and aerospace or industrial giants. Hence, liquidity is measured by the tightness of price assessments, that is, the gap or slack between what someone who wants to buy titanium metal sheets is willing to pay and what a supplier wants to receive.
Another key metric for liquidity assessment is the bid-ask spread which can exceed 5% or 10%. If the spread widens, it is the most immediate signal of a liquidity crunch. Transaction frequency can also be a measure of liquidity. For minor metals, few major transactions may occur per week. As such, low frequency signals ‘high liquidity risk’ as a stakeholder might not be able to exit a position during a market downturn. The availability of exchange-traded fund (ETF) and derivatives also indicates liquidity. Metals such as lithium or rare earths are established ETFs and possess higher ‘synthetic’ liquidity compared to metals like gallium or hafnium which are trapped in physical or illiquid state.
Volatility Patterns and Analyses
Many strategic metals are by-products of other mining like cobalt which is a derivative of copper and nickel. For that reason, their supply is not easy to increase even if prices are high. Volatility is, therefore, driven primarily by supply-side inelasticity. Fortunately, there are tools that can be used for volatility analysis. For instance, generalized autoregressive conditional heteroskedasticity (GARCH) models are utilized to estimate the persistence of volatility. It is a powerful statistical tool to determine volatility clustering.
Algorithms are also used to spots shocks that can change pricing. For example, an export ban or an electric vehicle (EV) battery subsidy essentially raised the price floor. Geopolitical tensions also play a role since production is often concentrated in a few countries. Keeping an eye on these markets by monitoring price reporting agencies, observing by-product production, and tracking inventory levels helps in picking liquidity and volatility.
Strategic metals are usually not characterized by the trading process of high-volume and centralized trading as in the case of commodities like gold or oil. The market is shaped by a mix of physical availability, geopolitical control, and specialized risk modeling to determine the price and volatility.
Pallavi Singal is the Vice President of Content at ztudium, where she leads innovative content strategies and oversees the development of high-impact editorial initiatives. With a strong background in digital media and a passion for storytelling, Pallavi plays a pivotal role in scaling the content operations for ztudium’s platforms, including Businessabc, Citiesabc, and IntelligentHQ, Wisdomia.ai, MStores, and many others. Her expertise spans content creation, SEO, and digital marketing, driving engagement and growth across multiple channels. Pallavi’s work is characterised by a keen insight into emerging trends in business, technologies like AI, blockchain, metaverse and others, and society, making her a trusted voice in the industry.
