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“ We think it ’ s got a little bit ahead of itself ,” he says . And while technological advances are driving demand for some commodities , in some cases they are also detracting from it . Oil & gas could well become worthless over the long term and while demand for cobalt initially grew on the back of its use in EV batteries , the price of the commodity took a hit when Tesla engineered it out of its models . “ The Cobalt 27 company was created to soak up as much cobalt as possible ,” Lequime explains . “ But Tesla ’ s board and management weren ’ t happy to stomach the fact most of it comes from the Democratic Republic of Congo , due to the human rights aspect . “ They reduced the battery ’ s efficiency , but they can live with that . We ’ ve seen that in palladium as well where prices rocketed , but now there ’ s a move to engineer it out of autocatalysts .”
The song remains the same Yet despite these nuances which require specialist knowledge to understand , Lequime warns the main threats to the commodities sector haven ’ t changed . “ You can ’ t just keep printing money ,” he says . “ The biggest concern is the Fed turns off the taps and tapers too early and you get a rapid slowdown in economic activity . “ You ’ ve got 80 % of copper going into construction and durable goods , and demand dried up quickly in the lockdown . Nobody was spending . Now we ’ ve come out , we are spending on new appliances , whatever , we need Dr Copper everywhere . But the expectation of global growth has meant it ’ s got ahead of itself .” Data from FE Analytics shows the price of copper is up more than 100 % in dollar terms since its 2020 bottom . To protect against a slowdown , Lequime initially began focusing more on commodities that were left behind in the rebound , such as lead and lithium – but he says even the latter has now become “ heated ”. As a result , he has raised cash levels to take advantage of any pullback . “ It ’ s an exciting sector , because it ’ s so volatile , but you can easily be caught out . That ’ s why we don ’ t put out presentations for our fund saying ‘ copper , copper , copper , electric vehicles ’. We know that ’ s coming through , but it isn ’ t that different from a year ago when copper was at $ 220 . It hasn ’ t changed , it ’ s just the market enthusiasm .”
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