MARKET COMMENT
Commodities had a good start of the year, with our first reference index the Bloomberg Industrial Metals subindex [BCOMINTR Index] posting +1.38% over the month and our second reference index the Bloomberg Commodity Index [BCOMTR Index] +3.95% in January. All complexes were in positive territories this month, with Precious being the lead performer and Industrial Metals complex the last.
INDUSTRIAL METALS
The Industrials metals complex was positive over the month, with the beginning of Trump’s presidency beginning with a high before price correction towards month end, notably on growing fears over tariffs and transition policy changes.
Prices during the first half of the month were supported by resilient economic data in the US and China.
PRECIOUS METALS
The complex recorded an excellent start of the year despite the decision form the Fed to hold interest rates steady. Platinum posted the best performance over the month, followed by gold and silver.
EX-BENCHMARK METALS
As often this complex was a mixed bag, with top positive performers being Steel Scrap, Tin and HRC Steel while Lithium and Cobalt were in negative turf over the month.
BIOBASED
Over the month both ethanol and lumber were well in positive territory.
FOCUS BOX – TRANSITION MATERIALS AND THE AI SUSTAINABILITY PARADOX : NAVIGATING CHALLENGES AND OPPORTUNITIES
The rapid rise in artificial intelligence (AI) and data centers (DC) presents a paradoxical situation regarding sustainability. While AI holds immense potential to drive a more sustainable future by optimizing resource use, enhancing efficiency, and informing better decision-making, its development and deployment also raise significant environmental, social, and economic concerns.
The negative environmental impacts of AI stem from its energy consumption, e-waste generation, and reliance on scarce resources. The energy-intensive nature of training and deploying AI models, coupled with the energy demands of DC, contributes to GHG emissions, and exacerbates climate change.
Despite the challenges, AI holds immense potential to drive sustainable development. AI can optimize resource use, improve efficiency, and enhance decision-making across various sectors. This includes optimizing renewable energy systems, streamlining transportation and logistics, implementing precision agriculture, and supporting sustainable urban planning. AI can also provide valuable data-driven insights to inform policy decisions and interventions related to sustainability.
The transition to a low-carbon economy necessitates careful consideration of the materials used in AI systems. Sustainable material sourcing, circular economy principles, energy-efficient AI systems, and collaborative policymaking are crucial for mitigating the environmental impacts of AI.
The DC market is essential to the technology industry, providing the physical infrastructure that powers our digital world and cater to diverse clients, providing solutions for their IT infrastructure needs.
DC are already supporting demand for electrical power, which in turn can boost demand for transition materials linked to electrification (i.e. copper, aluminium).
They also require substantial amounts of materials such as steel, copper, and aluminium in the making. Companies are looking for ways to reduce the carbon footprints of the materials used in construction, for example by using low carbon concrete solutions for building or alternate materials for datacenters insulation.
A progressive supply shock in materials such as copper, coupled to a more supportive macro setting for western demand coming from manufacturing and monetary easing and a resilient China demand from the green segments could be very supportive for materials prices.
These technological materials are concentrated in specific regions, making them vulnerable to political instability, regulatory changes, and tariffs, which could further disrupt supply and elevate costs.
We expect these challenges to be addressed and generate a huge market for decarbonization solutions, as several cloud hyperscalers (i.e. Google, Microsoft, Meta…) look to meet their 2030 carbon neutrality objectives, despite having already set their emission targets before the recent AI build-out!
DC operate on electricity and hence reliance of technological metals and materials is rooted.
As for technological metals, DC currently account for less than 1% of global copper demand. However, this is projected to increase. The global rise of AI is expected to exacerbate the existing copper shortage, a critical issue in the transition to transition. As DC evolve to support AI applications, their demand for copper will grow significantly. These facilities require substantial copper for power supply, cooling systems, and internal connectivity. This rising demand could lead to a surge in copper prices as supply struggles to keep pace.
Nickel, primarily processed into alloys, finds its largest application in stainless steel for plating and anticorrosive coatings, which is structurally vital for data centers. Additionally, nickel's combination with lithium or zinc produces high-density backup batteries that occupy less space. These batteries can also operate at higher temperatures, allowing to reduce cooling costs significantly.
Aluminium is another essential component in DC, used in structural elements such as racks and ventilated wall cladding for cooling purposes. Its superior thermal conductivity making it ideal choice for managing heat and cold more efficiently than other metals.
Servers and especially their electronic boards are the heart of DC. RAM and CPUs, drive boards and mother boards contain a high amount of gold and silver. Platinum is found in memories as well as glass for displays.
Cobalt is found in HDD, semi-conductors as well as integrated circuits, which are key component of DC. Lithium has been mentioned already with its use of Nickel for backup batteries. Tin is used heavily as a solder and steel as a structural component
When it comes to transition materials, Wood has been quoted as a potential structural material for DC for some time. The pioneering EcoDataCenter in Sweden is built with cross-laminated “glulam” structural timber. Lumber is used to replace concrete and steel. Ethanol and biodiesel could be used as a back-up energy sources fueling generators.
In conclusion, the AI sustainability paradox underscores the intricate interplay between groundbreaking technology and the pressing imperative for a sustainable future. While AI holds remarkable potential to advance sustainable development, its evolution and application necessitate careful oversight to navigate the inherent contradictions and trade-offs involved.
The substantial energy demands linked to data centers present a significant challenge, yet innovative solutions—such as improved construction techniques and enhanced insulation—offer pathways to mitigate these impacts. However, the issue of material supply remains much more complex. Essential metals like copper, tin, and lithium, which are critical for electronics and renewable energy systems, are likely to face supply chain strains, leading to potential shortages and escalating costs. As data centers increasingly rely on these transition materials, their demand will inevitably rise.
Furthermore, as companies become more aware of their carbon footprints, there will be heightened scrutiny of those utilizing data centers and AI. This accountability will drive a shift toward innovative transition materials, such as recycled steel and lumber, as viable alternatives to traditional concrete and cement in pursuit of carbon neutrality.
