The call of the mountains

Some good news at last
The war between the USA and Iran seems to be over. On Friday, the 19th June 2026, a peace agreement is expected to be signed on a mountaintop close to Lake Lucerne in Switzerland. By coincidence (?) between the 15th and 17th June, the G7 summit took place in Évian-les-Bains in France by the shores of Lake Geneva, only 200 kilometres away, practically just a stone throw. Central to the peace agreement is the opening of the Strait of Hormuz, which before the war had not even been closed. Whether therefore, the USA has achieved its war goals will only be answered when the discussions on the nuclear programme are completed. This point has so far been left open by the parties in order not to jeopardise the rest of the agreement.

It is certain, however, that an unrestricted resumption of shipping will once again ensure a better supply of a huge number of raw materials and goods globally, although it will probably be some time before supply chains are stabilised again. This should lead to an improvement in global economies and therefore improve growth prospects in individual regions. Affordable oil and energy prices are still an important prerequisite for the positive development and prospects of every economy. Furthermore, the growing worries about higher inflation should fade, or at least be eased, so giving the central banks the possibility of leaving interest rates unchanged or even perhaps to lower them.

Additionally at this point, it would certainly be also wished that the conflict between Russia and the Ukraine could be steered in the right direction. And almost as if planned, the USA gave such signals at the G7 summit in Évian. Then the world would indeed look totally different again than in the first half of the year, and prospects for a speedy return of private consumer spending and the willingness for companies to invest would be much better. It has often been mentioned here that improved confidence amongst economic agents and a correspondingly positive market sentiment can make a real difference.

In the meantime, on the London Metal Exchange (LME) nickel prices had recently lost some ground. While the increasing shortages in sulphur, the news of the reduction of mining licences and the centralisation and state control of raw material exports, also including primary nickel from Indonesia, did initially help to support prices, the long duration of the war in the Middle East, and the ongoing conflict in the Ukraine, with counter-strikes reaching far into Russian territory, have pushed economic and inflation fears once more into the limelight.

In addition, speculative investors have probably pulled back in a general risk-off trend. Certainly, expectations of higher interest rates will have played a role here after the European Central Bank (ECB) had increased the key interest rate by 0.25% as a precaution. It has yet to be seen whether the ECB has got its timing wrong now, after it was especially determined not to miss the right moment for a change in rate again. The newly appointed Governor Walsh of the US Federal Reserve does have a little more breathing space than had previously been thought. However, everything is subject to a “deal” actually happening on Friday, the 19th.

Specifically, these events were reflected in the nickel price development, described as follows. After the very short test of a high of USD 20,000.00/mt on the 6th May 2026, prices fell rapidly. At the time of our last edition at the middle of May, prices were just around the USD 18,500.00/mt level (-7.5%). They fell again slightly, until hope returned which brought prices back in the direction of USD 19,300.00/mt at the beginning of June.

Contradictory reports and with hopes once more fading of an agreement, then sent prices, and not only in nickel but also almost all the other industrial metals, downwards until finally on the 10th June a bottom of USD 17,500.00/mt was reached. Since then, prices are moving upwards once more and if everything goes well, the end of the Iran war will be sealed by the signatories of the USA and Iran on the 19th June 2026 at the Burgenstock resort in Switzerland. At the time of going to press, the 3 months nickel future on the LME was trading at USD 18,000.00/mt.

Tension in the nickel market: Indonesian production cuts coincide with global supply bottlenecks
After the report already in our last edition about the importance of sulphur and its impact on stainless steel production, the focus has now moved to a critical energy raw material. The current geopolitical disturbances – in particular the ongoing war in the Middle East – have increasingly led to shortages of key raw materials in the mining sector and have pushed up production costs at mines and refineries worldwide.

As well as sulphur – which is essential for the production of sulphuric acid and, therefore, also for nickel production but also for around 17% of global copper production – the fossil fuel diesel has developed into a key risk factor. As fuel for heavy machine engines, it has an influence on nearly all areas of mining – from surface mining to transport logistics to ore processing. While the big producers have still been able to cushion the rising costs so far, smaller operators are increasingly being put under pressure. In regions of Africa and Australia, for example, there have already been production cutbacks since diesel has become more difficult to obtain or has become significantly more expensive.

The situation is especially critical in the logistically (and politically) demanding markets, such as in the Democratic Republic of the Congo. Here, the supply of imported diesel is not just a cost factor, but also an operative bottleneck which has a direct influence on production levels. Also, in countries such as Ethiopia or Australia, tangible impacts can be felt: Projects are being slowed down, non-essential activities reduced and investment decisions are increasingly being deferred. Uncertainty of supply chains is increasingly felt.

In parallel to this, Indonesia – in the meantime by far the most important nickel producer globally with a share of well over 60% – has further exacerbated the situation with targeted supply management controls. The government had drastically reduced the mining quotas for nickel in order to stabilise prices on the world markets. This hit particularly the Weda Bay Mine in Halmahera, one of the most important nickel deposit sites worldwide. As well as others, the French Mining group Eramet is also involved in this project. The mine is on the verge of temporarily stopping production as the sizably reduced annual quota is already exhausted.

This measure has already had an impact: nickel prices have risen since the start of the year. At the same time processing plants in the country are increasingly coming under pressure, since not only mining restrictions affect margins, but also rising costs for energy and ores, especially for sulphur. Some producers already see themselves forced to adapt their operations or make temporary cutbacks.

This development is flanked by strategic considerations at government level. The Indonesian sovereign wealth fund, Danantara is exploring the possibility of investing in Weda Bay Nickel and could therefore acquire shares in Eramet. This would increase the state control of the nickel sector and underlines the growing resource nationalism in the country. The aim is to strengthen the concentration of domestic value creation and, at the same time, safeguard its influence on global supply chains. And we have not even touched on the subject of the centralised controls of all raw material exports which was introduced overnight, but which will be discussed in our next edition.

Overall, this paints an increasingly tense picture for the commodities markets: On the one hand, there are geopolitically motivated shortages of critical resource materials such as diesel and sulphur, and on the other, there is a politically driven shortage of supply for key metals such as nickel. Whilst demand for raw materials remains high, also as a result of the energy transition, factors on the supply-side could further tighten markets and keep prices at higher levels in the long term – with corresponding consequences for industry, supply chains and security of supply.

New EAF projects accelerate Asia’s steel transformation
In Asia, the transformation of the steel industry is gathering speed. New investments in Japan and Vietnam show that modern electric steel technologies are playing an increasingly central role in the decarbonisation of the sector.

In Japan, Nippon Steel, at its plant Yawata is turning to a new generation of electric steel production. Together with Tenova and GE Vernova the biggest electric arc furnace (EAF) worldwide is in the planning. With a batch size of 340 tonnes, the plant will set new standards. At the same time, the direct-feed technology used enables a particularly stable power supply – a crucial factor for such high-performance plants

The project is an important step for Nippon Steel in order to reach its goal for climate neutrality by 2050. The group is, therefore, following the step-by-step strategy of replacing the classic blast furnaces with electric steel processes. This is also being supported by Japan’s national “green transformation” initiatives.

There are also big projects for “green steel” being planned in Vietnam. The Xuân Thiện Group has formed a partnership with Primetals Technologies for the expansion of two new production lines. Not only are several modern electric arc furnaces being planned, but also vacuum degassing plants and a plant for the production of ultra-thin hot-rolled strip products.

The project is especially important for the domestic sectors, such as the construction of off-shore wind farms, ship building or the car industry. Up to now, Vietnam has been heavily dependent on imports for a lot high quality steel products.

The new plants will be powered in the future by electricity, natural gas, and in the long term also by green hydrogen. This could lower CO2 emissions significantly, so enabling Vietnamese steel products to better fulfil the requirements of the international markets in Europe and the USA. In regard to the CBAM (Carbon Border Adjustment Mechanism), these low emissions would also provide advantages for exports to Europe.

The projects in Japan and Vietnam emphasise that the green transformation of the steel industry in Asia has long been started. Modern EAF technologies, clean energy sources and investments in high value steel products should gain more importance in the coming years.

In this connection it is surprising that, in a former steel-producing nation such as Germany, politicians and the country’s largest steel manufacturer have, with almost religious zeal, focused primarily on green hydrogen. The latter has not yet achieved economic viability, and the question remains as to whether it will ever achieve this in a competitive environment.

AI and jobs: Why the fear of mass unemployment is so far unfounded
There is hardly any topic which is currently causing as much uncertainty as artificial intelligence (AI). Whilst investors and companies worldwide are investing billions into new AI applications, the concern is growing that millions of jobs could be lost. Yet a look back at history shows that: While technological progress has always changed labour markets – it has seldom permanently weakened them.

Actually, AI might even come at just the right time for many economies. In view of ageing populations, high public debt and weak growth rates, many governments are hoping for a new productivity boost. So far, however, this has largely not been seen: Despite all the attention in AI, official data has not yet shown any significant acceleration in productivity. Nor has the return on the vast investments been seen yet. But what has not happened yet may well still materialise.

If AI should really lead to more efficiency in the future, then individual sectors will see considerable changes. Some jobs will disappear, others will gain importance. Yet exactly such shifts have been seen again and again over time. After the Dotcom bubble burst in 2000, the telecommunication branch lost about 20 percent of its workforce in the space of two years. Today, employment in this sector is even at around 60 percent lower than its previous highest level. Despite this, the labour market as a whole recovered quickly with a subsequent economic upturn.

The long term transformation in the labour market also shows how economies can flexibly react to new technologies. In the early years of the USA, about 80 percent of the work force was in agriculture. Today it is less than 1.5 percent. At the same time, the service sector is dominating, which relates to about 85 percent employment in the private sector – many of these jobs did not even exist up to a few decades ago. In the last year alone, about 60 million Americans changed jobs. This does not, however, preclude individual fates and decisions which may alter the course of a structural change.

Already in 1930, John Maynard Keynes predicted that technological advancement would one day enable significantly reduced working hours. In actual fact, the economic output per hour worked in the USA is now more than eight times higher than it was back then. Instead of working less, new professions, sectors and consumer preferences are continually being created. Exactly the same could happen this time around.