andrew@matauadvisory.com.au
+61 412 122 778

Commodity Review 20191206 by Andrew Pedler – Now Available

Exploration Australia

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

When hearing or reading of forecasts of supply or deficits, always consider which side of the story the writer is from (supply or demand), or is the author an impartial analyst or group.  It often helps frame the comments.  

  • Australian exploration spending recovery is well under way in minerals, and is starting to recover for the petroleum sector.   
  • Geopolitical uncertainties continue at pace, many USA driven, and mean that several markets are uncertain as to their expected direction.  The surge in political unrest / demonstrations in Iraq, Iran, Chile, France, Bolivia, Hong Kong (still), Haiti, & Algeria, is somewhat surprising in the concurrent timing, though perhaps witnessing Hongkong has led unrest down these paths.  
  • USA PMI data is still poor, and consistent with other USA  manufacturing data. 
  • Saudi (despite earlier commentary) has again led OPEC in calling for output reductions to support the oil market balance and prices.
  • Base metal markets remain fundamentally tight, and are incrementally continuing to tighten.  Prices continue to be relatively low, influenced more by market sentiment that focused on uncertainty.  These conditions cannot be sustained.  Watch for supply disruption(s). 

 

SUMMARY  

*Copper  Prices expected to increase in a tight mkt for Mar20Qt, and improve to year end.

*Cobalt  Avg Ni, Co & Mn use per battery is increasing despite slowdown in EV car sales.

*Nickel  Stainless steel outlook is upbeat in China but not in rest of world.  Watch Ni’s contango.

Zinc & Lead  AZI, HRR & RVR.  Despite a tight market and positive news, sentiment keeps prices low.

*Tin  China’s Sn output down.  China’s looming New Year 2020 is of the Metal Rat.

*Aluminium  Trump re-imposes tariffs on Brazil & Argentina, despite exemptions granted May 2018.

Gold  Australian ownership of domestic gold production has improved from 30% in 2002 to 60% recently.

Platinum & Palladium  Norilsk testing a digital metal assets trading platform using blockchain, but likely to ban crypto.

*Oil  OPEC+ has agreed to reduce oil output in addition to curbs agreed to in Oct 2018.

Coal  Met-coal settlements for Dec19Qtr by POSCO.

Iron Ore  China’s iron ore imports fell in Nov. India’s iron ore output likely to reduce in 2020-21.

Shipping  Cape & Panamax rates increased this week, supported by iron ore.

General 

Australia – Exploration Expenditure:  Minerals spend recovering well.  Petroleum growth started.

USA – Purchasing Managers’ Index:  Only one segment for Nov data is >50.

 

Commodity review 20191129 by Andrew Pedler – Now Available

STEEL

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

When hearing or reading of forecasts of supply or deficits, always consider which side of the story the writer is from (supply or demand), or is the author an impartial analyst or group.  It often helps frame the comments.  

  • A number of signs are appearing that suggest the commodity markets may perform within the next 12 months.  
  • Geopolitical uncertainties continue at pace, many USA driven, and mean that several markets are uncertain as to their expected direction (Au, Pt). 
  • USA and Japanese data continue to illustrate slowing economies, in most aspects
  • Saudi has again indicated it is balking at being the ‘fixit’ implementer for the oil industry.  Some are calling a looming downturn in USA oil output, though USA has become a net oil exporter.
  • Base metal markets are fundamentally tight, and are incrementally continuing to tighten.  Prices continue to be low, influenced by market sentiment that focused on uncertainty.  These conditions cannot be sustained. 

SUMMARY  

Copper  Cu prices dipped on ongoing tensions in trade disputes.

Cobalt  COB anticipates outcomes from the Independent Expert Determination this week.

Nickel  Indonesia – European trade dispute escalates over Ni ore exports.

Zinc & Lead  IBG’s Citronen project progressing.  NMT’s Technical success in Li-ion battery recycling.

Tin  Sn’s forecast deficit in doubt for 2019, but outlook for 2020 is better..

Aluminium  Australian aluminium smelters struggling on several fronts.

Gold  Geopolitical uncertainties abound.  Gold price unsure of direction.

Platinum & Palladium  Analysts evenly divided on outlook.

Oil  OPEC’s extension of production cuts in doubt.

Coal  China’s domestic coking coal procured holding out for better contract pricing.

Iron Ore  China’s steel mills paying higher premia for high iron grade ore.

Shipping  Freight rates increased on a busy iron ore market and seasonal Asian port congestion.

General

World Steel: Lower output in October, but higher over past 12 mo.

USA – Durable Goods, Vehicles & Electronics:  New orders have broadly headed backwards.

Japan – Industrial Production & segments: Positive growth in select electronics.

Commodity Review 20191122 by Andrew Pedler – Now Available

China

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

When hearing or reading of forecasts of supply or deficits, always consider which side of the story the writer is from (supply or demand), or is the author an impartial analyst or group.  It often helps frame the comments.  

  • A number of signs are appearing that suggest the commodity markets may perform within the next 12 months  …pls  read the comments on copper, cobalt, iron ore, oil.
  • Notably CRU comments that a surge for commodities by growth in EV production has not started  … yet.  CRU suggests 2020-21, though depending on how fast (slow) the uptake is, it may be 2021-22.  This will have meaningful impact on the usual suite of EV commodities, though notably Ni, Co, REE & Li.   

SUMMARY  

*Copper  The Cu concentrate market is tight and will tighten further next year.

*Cobalt  The age of the electric vehicle is about to dawn, soon, but not quite yet.

Nickel  MCR set to revive its Ni production in the Kambalda region.

Zinc & Lead  Glencore’s Brunswick Zn-Pb smelter to close.  Sichuan to licence Pb-acid battery collectors.

Tin  ITA published a new assessment criteria for due diligence in the Sn supply chain.

*Aluminium  Moves to reduce plastic packaging is starting to increase demand for aluminium packaging.

Gold  Gold price driven by (USA-China trade deal, USA Fed, USA manufacturing data, & Trump..

*Platinum & Palladium  South African miners face a conundrum: the risks of increasing palladium and rhodium output.

*Oil  OPEC geopolitical turmoil puts supply at risk.  .OPEC+ to extend supply cuts on slow growth.

Coal  Met coal movement into China may be less restricted in 2020.

*Iron Ore  Major miners say they are unable to cover a looming supply deficit (partly due to Vale).

Shipping  Shipping rates edged upward this week on strength in grains and iron ore.

General 

USA – Yield Curves:  From ‘inverted’ to effectively back to ‘normal’.

*China – Industrial & Energy Output:  electricity & gas show strong growth, + some other.

*USA Industrial Production & Capacity Utilisation:  Feeble growth.

*USA Housing Starts. Strong growth, notably in the South & West.

Commodity Review 2019115 by Andrew Pedler – Now Available

Ports

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

When hearing or reading of forecasts of supply or deficits, always consider which side of the story the writer is from (supply or demand), or is the author an impartial analyst or group.  It often helps frame the comments.  

  • The price of copper and other base metals slipped on Wednesday after USA President Donald Trump threatened more tariffs on China, disappointing investors keen for a trade deal.  While Trump said in a speech that a phase one trade deal was close, the market focused on his comments about raising tariffs on Chinese goods “very substantially” if a deal fails to be agreed.  “It raised the level of uncertainty again, coming at a time when the market’s been in risk-on, happy-days mode for the past month,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. 
    • Three weeks ago now, Chinese officials said it is doubtful about the resilience of any trade deal that may be signed with the USA under the Trump Administration.   So far they are spot on!  USA-China trade agreement – described by one commentator as ‘like parking on opposite sides of a street on alternate days’.  Matau has doubts removal of all the tariffs placed in the recent year will be removed before the 2020 elections, and even then …
  • Gold – “Demand in Hong Kong is steady as spot prices fell, but that is being offset by the protests as people are not shopping,  not only jewellery but anything for that matter,” said Peter Fung, head of dealing at Wing Fung Precious Metals. 
  • Indonesia – Significant numbers of miners agree to only sell Ni ores domestically (from January.   
  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  However low base metal inventories are getting more attention in the media than previously, and price responses in some commodities beginning to be seen through sentiment. 
  • IMO 2020 low sulphur regulations have already started to impact bunker fuels.

SUMMARY  

*Copper  Supply set for a crunch with gap of 8 Mtpa by 2030, according to MEP.

*Cobalt  Outlook to secure offtake of ‘traceable’ Co-hydroxide hard unless dealing with Glencore customers.

*Nickel  Many Indonesian miners now committed to only sell ores domestically (to processors).

Zinc & Lead  Zn still in backwardation – conflicting pressures of supply & demand, plus ‘hidden’ inventories.

*Tin  Bolivia (with its traditional political risks) plans to morph from tin to lithium for its major value export.

Aluminium  Some capacity is migrating within China from coal-fired to hydro-electricity power source.

Gold  Gold price in India returns to higher levels than pre-gold import duty (5 July 2019).

Platinum & Palladium  Signatures now on a new three-year miners’ wage agreement.

Oil  Venezuela Is using invisible oil tankers to skirt USA (political) sanctions.

Coal  China’s new policies in key production regions appear focussed on economy rather than pollution.

*Iron Ore  Vale – the first miner to use a Chinese mainland iron ore futures price on a spot physical contract.

*Shipping  Freight rates on Asian routes fell last week, influenced by the looming *IM 2020 deadline.

General 

*Port Hedland Iron ore shipments:  Strong growth in October, flat over 12 mo.

*Port of Singapore – shipping traffic:  broadly +ve growth.  nb: low-sulphur bunker fuel changes

*Japan – LNG prices:  LNG and oil prices have been trading in relatively narrow bands since June.

Commodity Review – 20191108 by Andrew Pedler – Now Available

Germany  UK

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Sentiment drivers still outweigh fundamentals for base metal pricing, but progressively by less and less.

 Indonesia – trying to drive added value in Ni and Al in-country;  runs some risks. 

  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  However low base metal inventories are getting more attention in the media than previously, and price responses in some commodities beginning to be seen through sentiment. 
  • Last week China said it is doubtful about the resilience of any trade deal that may be signed with the USA under the Trump Administration.   So far they are spot on!  USA-China trade agreement – like parking on opposite sides of a street on alternate days. 

SUMMARY  

*Copper  USA-China trade deal, reported agreed, then ‘but Trump not reducing tariffs.  .

*Cobalt  Global cobalt mine-output will increase at a slower rate in 2019 than in 2018.

*Nickel  Indonesia relaxed temp-export ban.  Full time ore-export ban to be from Jan 2020.

*Zinc & Lead  WRM SFR JV – Red Mountain -high grade Zn intercepts.  Pb-Zn mkts tight but surpluses forecast

Tin  Sn underperforming.  China flipped from being a net importer of refined tin to exporter in Sept.

Aluminium  Indonesia imposing ‘safeguard’ tariffs on Al foil to protect domestic producers.

*Gold  Volatility and uncertainty are alive and well.

Platinum & Palladium  AMCU may conclude a labour wage deal with major SA Pt miners.

Oil  OPEC’s crude oil production is up.  China’s crude oil imports at record highs.  .

Coal  China began import controls on Mongolian imports.  Vietnam’s coal production increasing.

Iron Ore  Chinese iron ore prices reduced as cold winter reduces construction in the north.

Shipping  Cape & Panamax size rates down this week.

General 

*Germany – Industrial production et al:  IP down but Durable Goods up.

*United Kingdom – Industrial Production et al: Generally down for most sectors.

Commodity Review 20191101 by Andrew Pedler – Now Available

USA

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Still …  USA – Construction Spend – Private residential and Private spend are still negative growth. 
  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  However low base metal inventories are getting more attention in the media than previously, and price responses in some commodities beginning to be seen through sentiment. 
  • China is doubtful about the resilience of any trade deal that may be signed with the USA under the Trump Administration. 

SUMMARY  

*Copper  Short-Mid-long-term prospects are bright, though global sentiment is hampering industry.

*Cobalt  Co supply remains robust, mainly as a by-or co-product, for now.

*Nickel  Indonesia’s immediate ore export is temporary (1-2 wks).  The main ban is enforced Jan 2020.

Zinc & Lead  ILZSG forecasts – Zn demand down 2020, up again 2021.  Pb surplus 2019 & 2020..

Tin  Roskill’s Sn outlook.  Demand forecast to increase markedly with Li-ion batteries.

Aluminium  Al to replace plastics in numerous applications.

*Gold  Au prices re – touched USD 1,500 on uncertainty(s), particularly on Trump & trade deals.

Platinum & Palladium  South African Pt wage talks have more confusion than clarity (including murder).

Oil  USA rig count has fallen but USA production has increased.

Coal  Japanese annual Sept thermal reference price contract might not settle.

Iron Ore  Citi outlook:  Fe ore prices to reduce in 2020.

Shipping  Cape & Panamax prices increased last week.

General 

USA – Electricity End-Use:  flat growth trends

USA- PMI:  below 50, though up on the prior month.

USA – Construction Spending:  Fractionally positive growth after 5 weeks of -ve growth.

Japan Industrial Production:  Fractionally -ve growth.  Computers & Buses are up.

Commodity Review 20191025 by Andrew Pedler – Now Available

Steel

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • China – Freight traffic continued strong growth.  … China’s energy production / consumption also records strong growth.  The combination of these two key parameters does not really indicate a sluggish nor slow economic growth regime. 
  • Steel production from Asia has positive growth, driven by China & India.  These appear to be feeding strong domestic growth (in addition to some exports, whereas South Korean and Japanese production growth is shrinking, seemingly due to a heavy reliance on export sales (to largely developed world economies that are struggling to themselves grow, in the current high geopolitical volatility of the times. 
  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  Base metal prices are struggling to cope with the negative fears driven largely by the USA-China trade tensions.  However low base metal inventories are getting more attention in the media than previously.  
  • USA data for durable goods, vehicles and electronics is shrinking.  These are concerning.  

 

SUMMARY  

*Copper  Cu prices up on Chilean disruptions.  Many moving parts in the Cu market makes forecasting hard.

*Cobalt  Closure of Mutanda cut Co mine supply by 17%.  Plus EV uptake is slower than expected.  COB.

*Nickel  Poor demand for stainless steel due to cheap (scrap) imports from Indonesia & China.

*Zinc & Lead  NCZ, HRR.  Zn prices low on fears of hidden stocks.  Pb mkt tight on supply disruptions.  G1A

Tin  A broad risk-off sentiment derived from the USA-China dispute – a factor in low Sn pricing.

Aluminium  RIO evaluating potential closure of NZ’s Tiwai Point Al smelter.

Gold  Gold price up on weak USA data.  Central banks pressured to support flagging economies.

Platinum & Palladium  Potential for Pt-based hydrogen fuel cells is improving.

*Oil  Rosneft has switched from US dollars to euros.  USA oil & gas rig-count has fallen to 2017 levels.

Coal  China has scaled back its anti-pollution plan for winter.

Iron Ore  Chinese steel mills have seen profit margins compress this yr, demand appears to be holding up.

Shipping  Freight rates for Capes and Panamaxes on Asian routes slipped this week.

General 

*World Steel:  Positive Asian output growth driven by China and India.

*USA – Durable Goods, Vehicles, Electronics & Computers:  All fell with negative growth.

*China – Transport:  Freight traffic continues to report strong growth.  Passenger traffic is shrinking.

Commodity Review 20191018 by Andrew Pedler – Now Available

China

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • China – Industry & Energy output for September was notably widely positive.
  • Singapore shipping traffic is also positive for September …
  • Still …  USA – China tariff talks & trade wars continue to stunt trade oriented decisions.
  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  Base metal prices are struggling to cope with the negative fears driven largely by the USA-China trade tensions.   However low base metal inventories are getting more attention in the media than previously. 
  • USA data for house starts, and IP remain low.  These are concerning.
  • USA yield curves:  … have technically reverted to ‘normal’. 

 SUMMARY  

*Copper  Positive Chinese property and infrastructure growth data improved outlook.

Cobalt  Glencore contract with GEM, & Trafigura financing Mutoshi mine in DRC.  Confident of outlook.

Nickel  Bit of a roller coaster between supply fears and outlook subject to growth rates.

Zinc & Lead  Zn TC/RCs expected to stay high.  South Korea is the third largest producer of refined lead.

Tin  Sn use contracting in 2019.  Changing tariffs are disrupting supply chains.

Aluminium  Energy intensive industry in eastern Australia is subject to commercial reviews.

Gold  Prospect of a Brexit deal is muting Au & Ag price reactions.  (UK votes Sat 19th).  Geopolitics fears are rife.

Platinum & Palladium  Pt surplus ahead, and a Pd deficit .

Oil  Asia-Pacific deficit of refined oils by 2025, while region excluding China likely to face surplus.

Coal  China unlikely to escalate import controls, on fears of a harsh winter & need for economic growth.

Iron Ore  RIO maintains guidance, taking #1 now ranked iron ore producer, pending Vale ramp-up.

Shipping  Cape & Panamax rates reduced.

General 

*Singapore Ship Traffic:  positive growth in each major segment:  bulks, tankers & containers.

Baker Hughes – World & American Rig Counts:

*China – Industrial & Energy Output:  widespread +ve growth incl electricity, but not vehicles.

USA Industrial Production – Capacity Utilisation:  IP growth is flat.

USA – Housing Starts:  low total growth.  Only +ve in the South.

 

Commodity Review 20191011 by Andrew Pedler – Now Available

Lithium

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • Lithium:  South American miners are struggling to put downstream added value projects into place. 
  • The USA – China tariff talks & trade wars The recent “phase 1” agreement details have yet to see the light of day.   
  • Base metal inventories continue to remain tight.  Low base metal inventories are beginning to get more attention in the media than previously. 

SUMMARY  

*Copper  Strikes in Peru to affect output.  RIO exploring (JV) in China.

Cobalt  GEM Co agreement with Glencore for provision of cobalt hydroxide.  Supply is ‘precarious’.

*Nickel  Ni market is concerned about potential future supply shortfalls.

Zinc & Lead  ZMI hits high grade Zn.  NCZ achieves stable Zn operation.  EPA lead pipe rules changed.

*Tin  Chinese refined Sn output down on reduced feedstock supply.  Conflict minerals’ compliance.

Aluminium  A gap between alumina prices in China and in rest-of-world. Alunorte returns to production.

Gold  High gold price dampens Indian buying ahead of Diwali festival.  The world is nervous.

Platinum & Palladium  Merger agreed for Implats to acquire North American Platinum.

Oil  Attacks on Iranian tanker escalates issues.  USA to send troops to Saudi Arabia.

Coal  Aust coking coal exports increased.  Chinese buyers acting ahead of expected port restrictions.

Iron Ore  China’s Tangshan city extended steel production restrictions, that may favour lump iron ore.

Shipping  New fuel regulations making freight rates more volatile.

General 

*Lithium:  supply chain issues for South American countries.

Port Hedland Iron Ore:  China extended restrictions on steel mills that may favour lump ore..

*PinchPoint Graphs:  tightening further and beginning to get price responses.

*Japan – LNG prices:  Higher oil prices and ship-fuel costs could boost LNG prices further.

Commodity Review 20191004 by Andrew Pedler – Now Available

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

  • OPEC+ participants are girding their loins for potentially more production cut commitments.
  • The USA – China tariff talks & trade wars continue to stunt trade oriented decisions.  Some unexpected consequences (see tin).
  • Base metal inventories continue to remain tight.  In a broad sense not much has changed.  Base metal prices are struggling to cope with the negative fears driven largely by the USA-China trade tensions.  Low base metal inventories are getting more attention in the media than previously. 

 SUMMARY  

*Copper  Trade wars continue to deter activity.  Outlook for future supply remains tight.

Cobalt  Co inventory from the previously failed Fanya Metal Exchange to be auctioned on Oct 5th.

*Nickel  Ni prices responding to low refined Ni stocks and looming ban on ore exports.

*Zinc & Lead  Northern Canadian infrastructure proposed to deliver remote new mine production.   IBG Citronen.

*Tin  A bad vegetable harvest stings tariff affected USA steel makers.

Aluminium  Vietnam imposes anti-dumping tariffs on Chinee products.

*Gold  “Global policy uncertainty is at an all-time high”.

Platinum & Palladium  Pd prices have run to record highs, on demand growth and supply deficit.

*Oil  Nigeria prepared to make cuts to meet its OPEC+ commitments.

Coal  Chinese buying of low price met coal imports continues.

*Iron Ore  India to auction mining leases.  May disrupt local supply and require imports to balance demand.

Shipping  Cape & Panamax rates reduced this week, on easier grain & iron ore demand.

General 

*Port of Singapore Shipping Traffic:  Bulk Carriers & Tankers +ve growth.

*USA – Construction Spending:  public non-residential spending +ve, but private residential is -ve.

*USA – PMI:  Still indicating a contracting manufacturing economy.

*Japan – Industrial Production:  Overall modest contraction in IP.