ERG Warns of ‘Perfect Storm’ for Commodities as Crisis Initiates Super Cycle

By Divya Chowdhury and Savio Shetty

DAVOS, Switzerland – Benedikt Sobotka, Chief Executive of Eurasian Resources Group (ERG), stated on Wednesday that years of insufficient investment in the mining of metals critical for energy transition, alongside supply disruptions and elevated energy costs, will sustain increased commodity prices.

During the Reuters Global Markets Forum in Davos, Sobotka remarked that this confluence of challenges—augmented by logistical issues related to COVID-19 and a growing demand for transparency regarding sustainability—has created “all the ingredients for a perfect storm in commodity markets.”

Sobotka anticipates the onset of a commodity super cycle that is expected to persist for the next 30 years, projecting a 20% increase in prices by the end of 2022.

ERG, based in Luxembourg and privately held, is a global provider of copper and cobalt, as well as alumina and iron ore. It is recognized as the sole producer of high-grade aluminum in Kazakhstan.

The CEO believes that any resurgence of fossil fuels will be short-lived, asserting that the shift toward a lower carbon economy “cannot be stopped.” He estimates this transition will necessitate approximately $50 trillion in investment over the next three decades.

“An annual investment ranging from $200 to $300 billion will be essential for the mining sector to meet the demands of the energy transition,” he pointed out, emphasizing that significant portions of this investment would be directed toward the extraction of copper, nickel, cobalt, and other metals.

In light of high pricing and supply chain challenges, Sobotka foresees that both companies and governments will begin to stockpile key raw materials like oil, copper, cobalt, and other essential metals.

“Small supply disruptions can lead to significant price fluctuations,” he noted, indicating that these impacts could be observed in the latter half of 2022.

He added that major consumers, particularly in the automotive industry, are actively seeking long-term contracts to secure metals such as lithium and cobalt at current prices.

“This situation highlights the difficulties in obtaining materials over the long term, especially those that meet environmental, social, and governance (ESG) standards,” he remarked.