Everybody’s spoken or unspoken prayers that 2022 would be a significant improvement on the misery of the covid-blighted years of 2020 and 2021were unfortunately not answered; the Gods didn’t want to smile on the world and its population. Whatever worm it was that stirred in the brain of Vladimir Putin, whatever atavistic memory, whatever it was that drove him in February to give reality to his threats, plunged a slowly recovering world back into chaos. It’s difficult to comprehend the mental processes of totalitarianism, and we are always treated to the cop-out of “oh, it was the wrong sort of marxism/communism/socialism” when it goes wrong, rather than accept that perhaps it doesn’t work; has the world learned that? Mmmm….the signs aren’t good, with state control once again being touted.
But let’s forget politics; should we expect better things of 2023? Well, we have to assume that economic growth will largely remain stunted, certainly while Putin’s war drags on and energy prices - or more correctly, energy availability - continue to haunt the world. But, to try and look on a more positive side, perhaps finally necessity will spawn invention, and we may at last see the emergence of rational, coherent energy policies across the developed nations. Is that too much to hope for? It’s one of those instances where you put your head in your hands, because it seems almost easier to get it right than wrong, as long as you listen to reason rather than emotion. (Just as an aside, I found this quote in The Times this morning, in an article about the mess created by the collapse of the energy supplier Bulb: “Bulb got into financial difficulties last year, like several others, after spikes in the energy price that occurred even before Russia’s invasion of Ukraine. It found that it could not buy supplies at the cost which had been agreed with its customers.” Ever heard of hedging? And have the regulators ever heard of hedging, because energy is a regulated business in the UK - apparently…)
Year-on-year inflation numbers will surely come down, not, sadly, because prices of goods and services will drop, but because the twelve-month comparator will be starting from an already inflated base; but that in turn will have a beneficial effect on interest rates.
So what of base metals? Well, I know that at the beginning of the year I was largely optimistic for them, and that proved not to have been the case, overall. But I’d still take the same stance: changes in energy requirements, increasing electrification across society and a - slower than expected - recovery from covid, all suggest that the signs for base metals, particularly those used in power generation and transmission, are generally pointing in a positive direction. But, to temper that modest optimism, the two biggest negatives are really beyond the powers of prediction. How long will Putin’s war still drag on, and how long will China take to emerge from its zero covid lockdowns? If you can answer those, you can probably make a bid for immortality at Delphi.
So, a mixed picture - some good, some bad, and in the end one’s view probably depends on whether one is an optimist or a pessimist; me, I’m marginally more positive than negative, but it’s a close thing.
Merry Christmas and a Happy New Year to all who read this column.
