The role of commodity prices for socio-ecological transformation: Mineral extraction, trading houses and derivatives markets – The cases of cobalt, copper, and lithium in Sub-Saharan Africa

Project team: Dr. Cornelia Staritz, Ph.D. (project lead); Dr. Bernhard Tröster, MA, MSc (Austrian Foundation for Development Research, ÖFSE); Aleksandra Wojewska, MSc, MA; Felix Maile, BA, MA; Luisa Leisenheimer, BA
funded by: Jubiläumsfonds der Österreichischen Nationalbank
Project duration: 01.12.2020-28.02.2023
Project partners: Austrian Foundation for Development Research (
ÖFSE)

Currently discussed socio-ecological transformations in the areas of mobility and energy provision depend on the massive increase in the availability of exhaustible mineral resources. This leads to a dilemma, since resource extraction entails crucial sustainability concerns in producer countries as well as related to the exhaustion of natural resources per se. Research on sustainability implications of resource extraction has focused on the physical sphere without giving due consideration to price setting mechanisms and related financial market dynamics, and how the physical and financial spheres interlink. These interlinkages are however crucial for understanding (i) the feasibility of transformations in the areas of mobility and energy and related impacts on (ii) sustainable development in mineral producer countries and (iii) absolute resource use.

This project assesses price setting mechanisms in mineral global value chains (GVCs), and how they are linked to commodity derivative markets, given their pivotal role in commodity price discovery and risk management, as well as price reporting agencies (PRAs) and the trading strategies of commodity trading houses and other companies involved in mineral extraction and trade. The analysis focuses on the minerals cobalt, copper and lithium given their importance in current socio-ecological transformation strategies in the area of mobility and energy provision. While established derivative markets exist for copper, primarily on the London Metal Exchange (LME), price benchmarks and risk management on derivative markets are just evolving for cobalt and lithium, while PRAs still play an important role in price discovery. The increasing importance of derivative markets and exchange-based price setting may contribute to ongoing financialization processes on commodity derivative markets and in GVCs. 

Prices setting dynamics and their sustainability implications are analysed throughout the GVCs of cobalt, copper and lithium, from extraction in key Sub-Saharan African producer countries, through leading extractive companies and commodity trading houses in Europe, specifically in Switzerland and the UK, to EU-based buyers of minerals and metal products. A particular focus lies on critically analysing the role of financial derivatives markets and also PRAs (and their interrelations) where 'global prices' are set as well as, financialization processes on derivative markets and along the mineral GVCs. The methodology is built on a combination of quantitative and qualitative methods, including (i) trade, industry and financial data analysis, (ii) document analysis (mineral policies and outlooks, industry-specific publications), (iii) econometric analysis (financialization of metal markets and price transmission), and (iv) semi-structured interviews with actors along and around the mineral GVCs and price setting institutions (LME and PRAs). Interviews will be conducted in European consumer countries and in selected producer countries in Sub-Saharan Africa, in particular in the Democratic Republic of Congo (DRC), Zambia and Zimbabwe. This includes firm actors in physical trade (international mineral commodity trading houses, mining companies, traders in producer countries, buyers of mineral and metals) and the financial sector (commodity exchanges (LME), PRAs, financial investors) and institutional actors (relevant government agencies, business associations, civil society actors). Combining these methods is required to analyse trade and production linkages, financialization dynamics and related price transmission as well as underlying firm-level strategies and regulatory and institutional contexts, and sustainable development and distributional outcomes along mineral GVCs.

Contact and Researchers:

Department of Development Studies, University of Vienna, Austria:

Cornelia Staritz
Tenure Track Professor in Development Economics, Department of Development Studies, University of Vienna
cornelia.staritz.univie.ac.at

Aleksandra Wojewska
Doctoral researcher, Department of Development Studies,
University of Vienna
aleksandra.natalia.wojewska@univie.ac.at

Felix Maile
Doctoral researcher
, Department of Development Studies, University of Vienna
felix.maile@univie.ac.at   

Luisa Leisenheimer
Student assistant, Department of Development Studies, University of Vienna
luisa.leisenheimer@univie.ac.at

Austrian Foundation for Development Research (ÖFSE), Vienna, Austria:

Bernhard Tröster
Researcher, Austrian Foundation for Development Research (ÖFSE), External Lecturer Department of Development Studies, University of Vienna
b.troester@oefse.at