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Commodity Review 20190816 by Andrew Pedler – Now available

USA – Housing Starts, Industrial Production, Electricity End-Use, Bond Yields

Matau’s Comments:  

  • USA   is slowing!  Data this week reinforces last week’s OECD CLI implications.
  • Base metal inventories continue to remain tight.   Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.   However sentiment (geopolitical) continues to drive prices over fundamentals.  
  • Several metals (Ni & Co this week)  are showing signs that reduced supply is likely to lead to higher prices.
  • Outlook is for ‘not enough’ new mine supply in coming years (the next decade), for several key commodities. 

The theme of the Resources Rising Stars conference at the Gold Coast earlier this year is appropriate:  “Pick the stock, not the market”.

 

SUMMARY  

*Copper  Codelco optimistic about long term price for Cu.  Short term prices pressured by growth concerns.

*Cobalt  Co price is up on news that Glencore is shutting its large DRC mine.

*Nickel  Philippines’ largest exporter of ‘high’ grade Ni laterite ore is to shut upon depletion of its Reserves.

*Zinc & Lead  ORN calling for ongoing need for more Zn & Cu production.  Nyrstar Pb smelter stopped again.

*Tin  Trump acknowledges that tariffs increase domestic prices.  Delays new tariffs till after Christmas.

Aluminium  Beijing announced additional import scrap quotas.

*Gold  Gold price gains as faith in Central Banks is about to be tested again.

Platinum & Palladium  Progress … of sorts … being made in wage negotiations with AMCU..

*Oil  .Russia & China have stuck by Venezuela, though that may change.

Coal  A weaker CNY, a safety campaign, shipment restrictions, though premium HCC is preferred.

Iron Ore  Beijing’s stimulus restraint driven by low infrastructure spend, impacting prices.

Shipping  Baltic indices, Cape, Panamax & Handymax up this week.

*General 

Port Hedland – Iron Ore shipments:  Shipments down in July after a bumper June effort.

USA – Electricity End-Use:  Total demand slowing, mostly in residential demand.

USA – Bond Yields:  A historical review + Current 10yr-2yr curves ‘almost’ inverted.  10yr-3mo is!

USA – Industrial Production – Capacity Utilisation: Really slow IP growth.  Cap Util is sub optimal.

USA – Housing Starts:  House starts almost stalled.

Commodity Review 20190809 by Andrew Pedler – Now Available

OECD CLI’s

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • OECD CLIs  suggest that growth outlook for much of the world (except Europe) looks like picking up in late 2019 with much of Asian emerging countries currently in decent growth mode. 
  • Chinese Freight traffic  for June reports good growth.  
  • Base metal inventories continue to remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.   However sentiment (geopolitical) continues to drive prices over fundamentals.  
  • Japanese LNG pricing is reacting to changes (liberalisation) of its energy markets.

 SUMMARY  

*Copper  Recent slide in Cu prices to limit investment in new mines, creating a tighter future market.

*Cobalt  Glencore to reduce Co output from DRC at current ‘low’ prices.

*Nickel  Fears Indonesia will bring forward bans on Ni ore exports.  Confirmed being considered.

Zinc & Lead  NCZ progressing Century expansion.  Woodmac summary of Zn mkt.  Pb mkt OK near term.

Tin  Indonesia’s refined Sn exports shrank.

Aluminium  Rusal is restoring operations post USA sanctions.  Concerned about USA-China trade tensions.

Gold  Make reasonable estimates of future gold price.  Most forecasts are ‘wishful thinking’.

Platinum & Palladium  Pt-Pd price spreads.

*Oil  USA EPA proposed new rule to limit states from stalling pipeline construction.

*Coal  Tata Steel has large future HCC demand.  China’s import controls settling into place.

Iron Ore  Prices stabilising after large drop last week.  Market to remain undersupplied to 2020.

Shipping  Cape and panama rates softened.

General 

*OECD Composite Leading Indicators:  Most, except Europe, with good growth outlooks.

China – Freight:  strong positive growth.

*USA – Baker Hughes Rig Counts:  USA counts are down while rest of world counts are up.

*Japan – LNG prices:  Prices fell heavily, on liberalised markets and with oil price falls.

Commodity Review – 20190802 by Andrew Pedler – Now Available

Yields – USA

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • USA Yield curves are an odd shape in the current form, with a huge sag in the middle.  A review of current and pre-GFC curves shows some differences.  Some commentators consider the current duration has not been long enough.  Others comment on the ‘shape’ of the curves.  Opinions are invited.
  • Base metal inventories continue to remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.  However sentiment (geopolitical) continues to drive prices over fundamentals.
  • The USA Fed met last week and cut rates a bit.  Trump took umbrage and announced further “taxes” (tariffs) on Chinese imports.  The markets took this hard, as a further level of uncertainty and volatility, and parts of the market appear to have capitulated.  Base metals’ contangos is one example.

SUMMARY  

*Copper  The size of the world copper market has been progressively underestimated.

*Cobalt  Indian JV Co formed to seek sources of Li, Co, et al.  Volvo cars with recycled Co produced.

*Nickel  BHP Group plans to start production of nickel sulphate in the Jun20Qtr.

Zinc & Lead  ZMI’s Kildare Zn project.  Pb supply improving (for now).

Tin  China switched to being a net exporter of refined tin last year.

*Aluminium:  quote: “Trump’s trade war with China is backfiring and impacting the US economy”.

Gold  Central Banks adding to holdings. Trump vows more tariffs on China. Global uncertainty increases.

Platinum & Palladium  WPIC upbeat on surge in Pt EFT holdings.

*Oil  USA share of growth is strong, with light crude;  heavier Iranian and Venezuelan output is down..

Coal  China again planning to limit imports, after a strong start to the year.

Iron Ore  China prices fell as Brazilian exports picked up, on Vale restarts.

Shipping  Freight rates slowed from a peak earlier in July.

General 

*USA – Yield Curves:  an examination of the current and an earlier period.  A signal not a cause.

USA – PMI:  Still positive, though still slower outlook.

*USA – Construction Spending:  -ve growth for Total and Private & Residential spends.

Japan – Industrial Production:  slow down for IP and several segments.

 

Commodity Review 20190726 by Andrew Pedler – Now Available

World Steel and China

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • There is a lot in this week’s issue … reading is recommended.
  • World steel output continues positive growth, supported by expected Chinese infrastructure spending, and despite sanctions / tariffs.
  • Chinese industry and energy output for June reported largely positive growth.  Electricity generation remains strong.  The rise of electricity and natural gas is closely connected in the industrial and residential sectors, as these energy sources provide a good match for the needs of lighter industrial sectors and for a population increasingly concerned about local air quality, according to IEA.  It is estimated that by 2040, the average Chinese household will consume twice as much electricity as today.  
  • Base metal inventories continue to remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.  However sentiment (geopolitical) continues to drive prices over fundamentals.
  • The USA Fed meets Wednesday to consider rate cuts.  A 0.25% cut is anticipated, however a 0.5% cut would likely change the USA yield curve back, from inverted, to normal.  Gold bulls are hoping for the latter cut.

 SUMMARY  

*Copper  Concentrates penalised for As content.  TC/RC’s strongly favour ‘clean’ concs.

*Cobalt  International consortium plans large Ni-Co plant at Morowali in Sulawesi.

*Nickel  Recent Ni rally on ‘not news’ easing.  Potential medium term shortfalls for Co, Li, & Ni.

*Zinc & Lead  Qld miners hit by anti FIFO rules.  Neves Corvo Zn expansion delayed and increased cost.

Tin  PT Timah expects to double Sn output in 2019.  … may acquire output of illegal miners

Aluminium  Canadian Al producers benefit from tariffs, USA consumers do not.

Gold  Central Bank Gold Agreement (CBGA) to be discontinued upon expiry.

*Platinum & Palladium  Zimbabwe talking (so far) of unwinding high political risk elements, to attract investment.

*Oil  Natural gas gaining more traction as best on-demand energy production source.

*Coal  Japanese utilities testing off-spec thermal coal products.

Iron Ore  Expectations of Chinese infrastructure stimuli continues to support Fe ore prices.

Shipping  Capesize & Panamax rates slipped this week.

General 

*World Steel:  positive growth continues led by China and other Asia.

Marine Traffic & Port of Singapore traffic:  Tanker traffic +ve, Bulks & Containers -ve growth.
USA – Interest rates, yields:  Fed to consider rate cuts on Wednesday.

USA – Durable Goods, Vehicles, Electronics & Computers: Durables -ve, Vehicles +ve, Elect +ve.

*China – Industrial & Energy Output:  more positive than negative growth items.

Commodity Review 20190719 by Andrew Pedler – Now Available

USA

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Base metal inventories continue to remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.  However sentiment (geopolitical) continues to drive prices over fundamentals.
  • Base metal (industrial metal) trade volumes though exchanges have slowed markedly during 2019, with ‘trade-war fatigue’ and the lack of apparent progress emanating from the USA-China trade talks, which  is affecting the confidence to make decisions and trade in markets.  
  • USA economic data (industrial production, orders to durable goods, housing starts, construction spending) that relate directly to commodities demand, are all showing signs of either slowing or of negative growth.  employment is usually a lagging data series, orders to durable goods and new housing starts are both indicators of confidence that normally lead employment data changes.  The USA Federal Reserve Chairman commented that there is a concern that slowing global economies may impact upon the USA.  Matau’s observations are that the USA economy is already slowing. 
  • The atmosphere at the recent Noosa Mining & Exploration conference was one of high interest levels and measured up-beat outlook, pending or even in despite of world geopolitical risks. 

 

SUMMARY  

*Copper  Chinese CU smelters slashed CU TC/RCs.  Cu mine production growth forecast 2019 is v.slow.

*Cobalt  USA pushed (by local politicians) to investigate Australian miner merge with Canadian miner.

*Nickel  Guatemala to suspend large Ni mines’ production.  WSA to ramp up output due to tight supply.

Zinc & Lead  Yinzhushan – new China Zn-Pb mine.  Analysts cannot agree forecast Zn prices.  G1A high grades.

Tin  SRZ seeking early production from Razorback, upon further drilling and evaluation.

Aluminium  Chinese daily aluminium output records record levels in June.

Gold  USA Fed monetary policy statement due in 10 days.  Au price is up on mkt punts of more rate cuts.

Platinum & Palladium  Sth African Pt miners enter labour negotiations.

Oil  Slowing oil demand growth and a persistent global glut will cap oil prices.

Coal  China import restrictions appear to have been introduced.

Iron Ore  Look to Vale’s Jun19Qtr report next wk for clues for restarting production.  Iron ore prices are high.

Shipping   Cape & Panamax rates up on demand for bulk commodities

General  Port Hedland – Iron Ore shipments:  The export surge continues, with some Brazilian influence.

USA – Industrial Production & Capacity Utilisation:  IP has slow +ve growth. CU is sub-optimal.

USA – New Housing Starts:  growth picked up in June, into +ve levels.

 

Commodity Review 20190712 by Andrew Pedler – Now Available

LNG

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Base metal inventories continue to remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.  However sentiment (geopolitical) continues to drive prices over fundamentals.
  • Base metal (industrial metal) trade volumes though exchanges have slowed markedly during 2019, with ‘trade-war fatigue’ and the lack of apparent progress emanating from the USA-China trade talks, which  is affecting the confidence to make decisions and trade in markets.  
  • USA economic data (industrial production, orders to durable goods, housing starts, construction spending) that relate directly to commodities demand, are all showing signs of slowing or negative growth.  employment is usually a lagging data series, orders to durable goods and new housing starts are both indicators of confidence that normally lead employment data changes.  The USA Federal Reserve Chairman commented that there is a concern that slowing global economies may impact upon the USA.  Matau’s observations are that the USA economy is already slowing. 

 

SUMMARY  

*Copper  Term concentrate TC/Rs between Chinese and Chileans.  DRC’s Cu output down.  AIS doing well.

*Cobalt  Artisanal Co miners in DRC are the global swing producer.

*Nickel  Indonesia may reinstate Ni-ore export ban in 2022.   WSA, PAN.

Zinc & Lead  Nyrstar extends force majeure.  NCZ production ramping up.  Plans to double capacity..

*Tin  *Tin market under greater pressure from economic slowdown & falling demand than supply issues.

Aluminium  Trade conflict with China which investors expect to weaken economic growth and metals demand.

*Gold  Gold and financial markets may be a little ahead of themselves.  No details on talks still.

Platinum & Palladium  Wage negotiations: talks begin.

*Oil  Market tightening, though not clear how long will last.

Coal  Chinese mills restocking met coal, ahead of possible import controls.

Iron Ore  China’s iron ore imports fell in June.  Heading into the maintenance and antipollution half year.

Shipping  Capes boosted by iron ore.

General 

*LNG markets:  demand will start to outstrip supply by 2022-2023

UK – Industrial production, manufacturing et al:  positive growth in most segments.

USA – Construction spending:  remains negative growth, particularly in private & residential segments.

Germany – IP, durable goods, & construction:  IP & Durables -ve.  Construction +ve.

Commodity Review 20190705 by Andrew Pedler – Now Available

Rig Counts, PMI, Au price correlations

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Base metal inventories remain tight. Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.   However sentiment (geopolitical) continues to drive prices over fundamentals.
  • Trade war announcements regarding re-entering negotiations (e.g. China-USA, North Korea-USA, Iran-USA) are likely to result in protracted negotiations, as parties currently remain distant on terms.  These could be drawn out till say mid-2020 … though that is perhaps a little transparent.

 

SUMMARY  

Copper  Price down on strong USD and markets seeking a firm deal  between USA & China.

*Cobalt  Chinese CoSO4 demand (EVs & smartphones) has declined since early 2018..

*Nickel  China’s Ni ore stocks falling.  Liquefaction risks of shipping Ni laterite ores.  Plant cost blow-outs.

*Zinc & Lead  Zn & Pb both in deficit.  Chinese refined Zn output up.

*Tin  China to lift ban on foreign investment in Mo, Sn, Sb & F, but not W nor REE.

Aluminium  ABX advances its projects on refining bauxite ore to aluminium fluorides.

Gold  India to increase gold import taxes.  Au price down on strong USD and good USA jobs data.

Platinum & Palladium  Norilsk better placed with Pd than South Africa with Pt.

*Oil  Brent oil is in a slim backwardation.  OPEC rolled over its 1.2 mmbbl/day cuts.

*Coal  LVPCI and SSCCC contract price agreements for the Sept19Qtr.

Iron Ore  Iron ore supply crunch may be starting to ease, though is still a fair way from ‘balance’.

Shipping  Cape and Panamax rates increased.

General 

*Gold price correlations:  what correlation?

*USA PMI:  Still slowing though PMI remains positive.

*Baker Hughes Rig Counts:  Fewer USA rigs though increased output matches OPEC reductions.

Commodity Review 20190628 by Andrew Pedler – Now Available

Steel

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Trade wars:  the key protagonists may both lose and other bystanders gain.  It seems like they may now recognise this aspect, hence the preparedness to re-open talks between China & USA, and also between USA & Iran (still some time away).  However we believe that there are still certain egos that remain to be blunted.
  • Base metal inventories remain tight.  Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More media commentary is recognising this condition.   However sentiment (with significant geopolitical) continues to drive prices over fundamentals.
  • World Steel – growth appears to be improving among emerging economies.  Note the views of India360 Steel on global outlook.

 SUMMARY  

*Copper  China seeking Cu scrap. Chuquicamata back up after strike.  Cu mkt in deficit.  ORN’s BFS good.

Cobalt  JRV completed merger with M2.  Evaluating KatangaCu-belt-style mineralisation in Uganda.

Nickel  POS records very good intercepts for its planned restart of producer Silver Swan.

Zinc & Lead  Zn:  good progress for VXR, NCZ, ORN & WRM.  Pb:  Nystar extends Pt Pirie outage to mid-July.

Tin  Sn end-uses.

Aluminium  China issues quotas for imports of scrap aluminium.  Importers say the quotas are too tight.

*Gold  Major inflow into ‘GLD’ ETF.  What are the major ‘passive’ funds doing?.

Platinum & Palladium  Dilemma for producers:  profits up and starting labour negotiations with AMCU.

*Oil  It could take six months or longer before the USA and Iran begin negotiations.

Coal  Chinese liquidity slowed, as prices fell on renewed concerns over import restrictions.

Iron Ore  Prices up on tight supply and despite China’s air pollution production cuts.

Shipping  Shipping rates firmed on demand from non-coal bulks for Capes, and Agri products for Panamax.

General 

*Singapore Port traffic:  Bulks and containers slowed, though tankers surged.

**World Steel production:  growth outlook for emerging economies increases as bigger ones slow.

*USA – durable goods, vehicles, electronic goods et al:

Japan – industrial production:  travelling very slowly.

Commodity Review 20190614 by Andrew Pedler – Now Available

USA Yields and Coal Trade

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • USA Interest rate yields have been inverted for four weeks now.  However it is markedly longer terms of inversion that normally precede a recession.  
  • Trade wars:  the key protagonists both lose and other bystanders gain!
  • Base metal inventories remain tight. Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  More commentary is recognising this condition.  
  • Coal trade (seaborne) has evolved markedly over the past two decades, notably post GFC.  China changed from an exporter to an importer.   Coking Coal remains a global market, while thermal coal became even more regional.  New suppliers are emerging.  Demand growth is dominated by emerging markets.

 SUMMARY  

*Copper  Trade war impacts.  Cu supply down but so is demand.

*Cobalt  DRC very dependent upon, and wants to diversify away from, Co and other resources.

*Nickel  Sulawesi flooding impacting Ni supply.

Zinc & Lead  Zn :  Woodlawn (HRR) ramping up.  Pb:  Port Pirie smelter outage is impacting market.

Tin  Malaysia Smelting Corp ‘said’ to be delaying shipments to customers.  – concentrate shortages.

Aluminium  The Portland Al smelters’ future is in doubt.  Electricity prices are to high for it.

Gold  Gold prices increasing on mounting economic (and geopolitical) concerns.

Platinum & Palladium  AMCU threatens strike action in South Africa..

*Oil  USA gasoline demand out-grown by petrochemicals.

*Coal  June19Qtr HCC & SSCC contract price settlements.

Iron Ore  Current prices forecast to hold through September Qtr(at least).

Shipping  Capesize rates up, though Panamax rates down.

General 

*USA – Yields:  USA yield curve inverted, for the past four weeks.

*Trade Wars – Who benefits:  Not USA nor China, but others do.

*Coal Trade – Evolving patterns of exports and imports.

USA – Industrial Production & Capacity Utilisation:  IP OK.  Cap.Utiln. is sub-optimal.

Commodity Review 20190607 by Andrew Pedler – Now Available

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Australian exploration is recovering from lows in mineral and petroleum spending.  Gold has grabbed a significant share of the spend in this current high geopolitical risk phase, however the tightness of base metals markets warrants more spending in those arenas.  That said, historically periods of tight budgets have often led to more careful targeting of drilling. 
  • Base metal inventories remain tight. Most prices are in the ‘nose of pinch-point graphs.  Pinchpoint positions are mostly less than 1 week’s consumption.  
  • Trade & geopolitical tensions abound!  Uncertainties generated by geopolitical activities continue to hinder normal trading conditions.  Repeated claims that ‘progress is being made’ have not (yet) borne fruit.  Trump has eased sanctions against Turkey, and forced an agreement with Mexico.  There appears little or no actual movement on an agreement with China (but plenty of rhetoric).  The US economy appears to be slowing from its recent blistering pace, according to last week’s and this week’s data. 
  • Baker Hughes Rig counts show reduced numbers of active rigs against low oil prices. 

 SUMMARY  

Copper  Codelco hopes to avert a strike at Chuquicamata while transforming it from o/c to u/g operations.

Cobalt  PRX & IGO drilling the Grimlock project.  Initial results are high in Co.

*Nickel  Over 40x auto-makers are pivoting toward EVs, resulting in forecast demand increases for Ni & Co.

Zinc & Lead  Both Zn & Pb markets recorded deficits in ’17 & ’18, though outlook differs between them for ’19.

*Tin  /  REEUSA Critical Minerals – USA scrambling to secure critical minerals supply with no ‘China element’.

Aluminium  Australian PM defending domestic Al exports to USA, under existing agreement.

Gold  Victoria’s plans to introduce a royalty on gold mining.

Platinum & Palladium  .AngloPlats’ labour issues at Mototolo  have been resolved.

*Oil  USD 60/bbl is too low to encourage / incentivise investment in new oil production.

Coal  USA has eased pressure on Turkey’s steel industry.  Asian thermal prices are under pressure.

Iron Ore  Behemoth China Baowu to merge with Magang (Group) Holding, approaching size of Arcelor Mittal.

Shipping  Freight rates on Asian routes flat.  (Chinese Boat festival).

General 

*Australia – Mineral & Petroleum Exploration Spending:  Both Mineral and Petroleum spending is recovering from recent 10 & 13 year lows.

Baker Hughes Rig Counts – World & Nth America:  Rig counts fell during 2019 on low prices.

*USA – PMI:  Slower but remains a positive outlook.

*USA Construction Spend:  private residential spend slowdown outweighs public non-residential spend.