Riding the Commodity Rollercoaster

Investing in commodities can, at times, be a roller-coaster ride. We often hear about the best-performing commodities when they're at all-time highs, lamenting why we didn't get to buy them earlier. This reactionary approach to commodity investment often leaves investors buying at the top or watching and waiting on the sidelines, contemplating what might have been.

We'll examine recent trends in commodity prices in Australia and the key factors driving their movements. We'll explore the inherently cyclical nature of commodity markets and how understanding these cycles can inform smarter investment decisions. Specifically, we’ll look at the rise in gold and copper and the fall in uranium and lithium prices.

While the list of ASX-listed companies in this space is almost endless, we’ll focus on the more prominent companies in each space (Evolution Mining, Sandfire Resources, Paladin Energy, Boss Energy, and Pilbara Minerals) to illustrate how these price trends have impacted producers.

Nature of Commodities

Commodity markets operate cyclically, with prices moving through peaks and troughs as supply and demand fluctuate.

High prices stimulate production and investment, often leading to oversupply and downturns. During low-price periods, producers reduce expenditure and projects, eventually tightening supply and triggering the next upturn. Thus, today's bust can become tomorrow's boom. Investors target undervalued commodities at cycle bottoms, recognising that when companies scale back, supply-demand balances can shift from surplus to deficit, driving strong price recoveries. This pattern demonstrates why contrarian thinking in these "unusually cyclical, unusually volatile" markets can reward patience when sentiment shifts.

Gold & Copper Prices

Gold and copper have seen strong price increases recently, driven by different yet sometimes overlapping factors. Gold is trading at record highs above US$3,000/oz, representing roughly a 63% jump from late-2023 lows. Multiple forces have fuelled gold's rise, including its status as a traditional safe haven during global economic uncertainty, trade tensions and inflation fears. Geopolitical events, particularly the escalating US-China trade war, have boosted gold's appeal.

Central banks have been purchasing gold at a historic pace to diversify reserves away from the US dollar. The People's Bank of China has significantly increased its gold reserves since late 2022, adding more than 300 tonnes between November 2022 and December 2023—the longest buying streak on record. By early 2024, China's official holdings exceeded 2,200 tonnes. Similarly, Poland has emerged as a major European buyer, with the National Bank of Poland adding 130 tonnes in 2023 alone.

Factors that could negatively affect gold prices centre around macroeconomic and geopolitical issues.

• A stronger global economic recovery could shift investor focus back to risk assets, putting additional downward pressure on gold.

• A sustained decline in global inflation could reduce gold’s appeal as an inflation hedge. While falling interest rates typically support gold prices, if real yields remain elevated or if investor demand shifts back to risk assets in a more stable macro environment, gold may face downward pressure.

• Easing geopolitical tensions, such as a de-escalation in conflicts like the Russia–Ukraine war or improved US-China relations, could reduce gold’s need as a safe-haven asset

• If central bank purchases slow or reverse—especially from major buyers like China—this could weaken price support.

Copper, like gold, has seen prices climb to historic levels, hitting $5.20/lbs in March this year, passing its previous high in May 2024. A global push for electrification (from electric vehicles, renewable energy infrastructure, and grid expansion) has stoked copper demand, while supply has been constrained by years of underinvestment and disruptions. Copper first rallied strongly in 2021, dipped during the 2022 global growth slowdown, then rebounded as China’s economy reopened and Western climate initiatives accelerated. Risks to the copper price include:

• Any slowdown in global economic growth, particularly in China, the world’s largest consumer of copper.

• Slower-than-expected adoption of green technologies, such as EVs and renewable energy infrastructure, would reduce the urgency of copper demand growth.

• If major mines (especially in Latin America) ramp up production faster than expected, or if new projects come online earlier than forecast, the market could shift into surplus.

• If the US dollar strengthens or global interest rates stay higher for longer, investor appetite for commodities like copper may weaken.

Companies in Focus

Evolution Mining (ASX: EVN) - a major Australian gold miner that has seen its share price climb significantly, underpinned by strong financial results thanks to higher gold prices. The company’s profit for the last half-year was almost four times higher than the pcp. In its full-year results for FY2024, Evolution reported record earnings, with EBITDA margins expanding to 47% on the back of higher gold and copper prices, while also doubling its final dividend in 2024. The company has been executing a strategy of “margin over ounces,” focusing on profitable ounces rather than sheer volume, which paid off in the high-price environment.

Sandfire Resources (ASX: SFR) is a copper-focused miner that enjoyed a rebound as copper prices climbed. Sandfire underwent a transformative acquisition in late 2021 (the MATSA copper mine in Spain), which initially burdened it with debt and contributed to losses in 2022. However, the past 12 months have seen a turnaround, returning to profitability. In the half-year to December 2024, Sandfire’s revenue jumped 37% year-on-year and delivered a net profit of A$51.5 million, a sharp reversal from the prior year’s loss. This reflected higher copper prices and improved operational performance as the MATSA acquisition became fully integrated.

Uranium – Why the Price Has Fallen

The uranium market has seen dramatic ups and downs in the past 3–5 years, with the price softening recently after a strong rally. After a long period of low prices in the 2010s, the cycle turned upward around 2020–2021. By late 2021, uranium spot prices had roughly doubled into the US$40–50/lb range, buoyed by supply cuts from major producers and investor speculation. This upward momentum continued into 2022 – uranium touched about US$60/lb in early 2022, the highest in nearly a decade. Although it wavered sideways in mid-2022 on global recession fears, the longer-term outlook – with many countries reconsidering nuclear power for clean energy – remained positive.

The next leg up came in 2023: uranium prices marched even higher, reaching levels not seen since the 2007 boom. By the end of 2023, spot uranium had broken out above US$70, and by January 2024, the uranium spot price briefly hit the triple digits, around US$100–107 per pound.​

This surge was helped by revived nuclear demand and constrained supply (few new mines and existing mines slow to ramp up). However, such lofty prices proved hard to sustain. As 2024 progressed, several factors caused uranium to pull back from its peaks. Profit-taking and the unwinding of speculative positions put downward pressure on spot prices. Some supply responses also kicked in as dormant projects started moving toward restart (e.g. Paladin’s Langer Heinrich), and secondary supplies were sold into the high-price market.

Several key catalysts could help push the Uranium price higher over the next 12-18 months:

• The growing global shift toward nuclear energy as a low-emissions power source, with countries such as China, India, and parts of Europe expanding reactor fleets or extending the lifespans of existing plants.

• Supply Constraints: Few new mines are coming online, and existing producers remain cautious about ramping up. If demand continues to outpace supply, inventories may tighten further.

• Any disruptions to major supply regions (like Kazakhstan or Africa)

Paladin Energy (ASX: PDN) is a uranium miner known for its Langer Heinrich mine in Namibia. Paladin was one of the companies leading the last uranium upswing – its share price rocketed in 2021–2022 as uranium sentiment improved and the company prepared to restart Langer Heinrich (which had been on care and maintenance).

However, the past year has been challenging for Paladin, with its share price plunging by more than 50%​ as uranium prices cooled and Paladin faced company-specific setbacks. Firstly, Paladin announced a deal to acquire Canada’s Fission Uranium Corp, aiming to create a larger international uranium player. While potentially a transformative deal in the long-term, shares drifted lower on the announcement, with added uncertainty and shareholder dilution. More recently, Paladin was hit by an operational disruption earlier this month. Unseasonal extreme rainfall – described as a one-in-50-year weather event – struck Namibia, forcing Paladin to temporarily suspend operations at Langer Heinrich due to flooding and site inaccessibility.

Boss Energy (ASX: BOE) is another Australian uranium company that owns the Honeymoon uranium mine in South Australia, which it has been refurbishing and restarting after years of inactivity. In the uranium upswing of recent years, Boss’s share price rose; however, like many peers, Boss saw its share price slide in 2023 as uranium prices fell– by the end of 2024, Boss’s stock had endured a prolonged bearish phase, ending roughly 43% lower over 12 months.​

Boss achieved its first production from the Honeymoon mine in late 2023. By Dec 2024, Boss had sold its first batches of uranium from Honeymoon, totalling ~400,000 pounds of U₃O₈ at an attractive price of US$77.77/lb​.  Throughout early 2025, Boss has reported that the ramp-up at Honeymoon is on schedule and on budget. Not all are enthused by its prospects, with Boss Energy remaining the most shorted stock on the ASX, with a 24.5% short interest.

Lithium – Why the Price Has Fallen

Lithium was the hottest commodity from 2020 through 2022, typifying a commodity boom/bust cycle. The lithium boom was driven by the electric vehicle (EV) revolution: surging demand for lithium-ion batteries caused a scramble for lithium raw materials (like lithium carbonate, hydroxide, and spodumene concentrate). By late 2021 and into 2022, lithium supply struggled to keep up with the exponential demand growth. The price of lithium carbonate in China rose from under US$10,000 per tonne in 2020 to over US$80,000 per tonne at its peak in late 2022. Spodumene (a lithium ore) spot auction prices similarly jumped to record highs. However, as is often the case, high prices incentivised a supply response. Throughout 2022 and 2023, a wave of new lithium projects, mine expansions, and brine operations ramped up worldwide. By mid-2023, signs of oversupply emerged, just as there were hints of a slowdown in EV sales growth. The result was a steep drop in lithium prices. Between late 2022 and late 2023, the average realised price for many lithium producers fell by over 70%. Lithium carbonate prices in China plunged from the ~$80k/tonne highs to ~$20k or below by the end of 2023. This collapse was exacerbated by short-term inventory destocking in the battery supply chain and a flood of Chinese domestic lithium supply.

Lithium prices could rebound in the next 12–18 months if several demand- and supply-side catalysts materialise:

• Re-acceleration in EV sales, particularly in China, Europe, and North America, following recent slowdowns

• Renewed policy support—such as subsidies, tax credits, or emissions mandates

• Project delays, cost overruns, or production cuts emerge (especially from higher-cost producers reacting to low prices), it could tighten the market

• Inventory destocking across the battery supply chain may begin to reverse, leading to restocking-driven demand.

Pilbara Minerals (ASX: PLS) is Australia’s largest independent lithium miner.  Pilbara operates the Pilgangoora mine in Western Australia, producing spodumene concentrate (a feed for lithium conversion). During the boom, Pilbara Minerals enjoyed a revenue and profit bonanza, with its share price accordingly soared – at one point above $4.20 in 2022. Fast forward to 2023–24, as lithium prices fell, Pilbara’s financial results were hit hard. In FY2024 (year ended June 2024), Pilbara’s statutory profit after tax plummeted 89%, from a record A$2.39 billion the previous year down to A$257 million. The collapse in earnings was directly due to the price crash: Pilbara reported a 69% drop in revenue, as the average realized lithium price fell 74% year-on-year (only partially offset by a 16% increase in sales volumes)

Pilbara Minerals has managed to “survive” the downturn better than some peers – it remained profitable (albeit much less so) and ended FY2024 with a hefty cash balance of $1.5 billion and new debt facilities to fund expansion when the time is right. Management emphasised that despite the price slump, the company retained a 43% EBITDA margin, showcasing low costs and resilience. Pilbara is now focusing on prudent capital management and staged growth aligned with market conditions.

Lessons for Investors

The commodity market's cyclical nature presents both challenges and opportunities for investors. As demonstrated by the contrasting fortunes of gold, copper, uranium, and lithium, timing is crucial. While gold and copper currently enjoy strong price growth—driven by safe-haven demand, central bank purchases, and electrification needs—uranium and lithium have experienced significant corrections after impressive rallies.

These divergent paths reflect the fundamental principle that commodity cycles are self-correcting: high prices stimulate production that eventually leads to oversupply and price declines, while low prices prompt production cuts that eventually create scarcity and price increases. The experiences of companies like Evolution Mining, Sandfire Resources, Paladin Energy, Boss Energy, and Pilbara Minerals illustrate how these price movements directly impact corporate performance.

For investors, the key lesson is to recognise that some commodity investments may require a contrarian mindset. The best opportunities often emerge when sentiment is negative, and prices are depressed—precisely when most investors have abandoned the sector.

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DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make economic decisions. We strongly recommend conducting your own research before making any investment.