Commodity Review 20200710 by Andrew Pedler – Now Available

Exploration Spending, Iron Ore, Japan Orders

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Japan’s Orders to Machinery (May data) also hitting lows not seen for a long time (last week reported on IP segments).
  • Port Hedland iron ore exports at record highs, reflecting China’s surging steel output, also demanding coking coal to match.  However while Cape vessels demand is now flat demand for Panamaxes has jumped.
  • Australian exploration expenditure (Mar20Qtr) showed strong growth for Au & Cu exploration spend.
  • Base metals’ pinch-point graphs show metal prices beginning to rise, in response to (stimulus driven) expectations of increased demand, and recognition of tight supply.
  • Gold prices lifted this week, as did share markets.  Oddly the conditions posed by Covid now have positive factors for both markets:  risk & stimulus.

SUMMARY  

*Copper  RIO slashed forecast Cu output from Oyu Tolgoi.  Further tightens markets.

*Cobalt  KoBold Metals, a start-up by a coalition of billionaires, plans exploring Canada for cobalt.  

*Nickel  Ni prices in recovery mode.  Near term supply issues.  Long term demand growth to squeeze.

*Zinc & Lead  Zn & Pb mine supply and demand both disrupted.  Downstream activity is picking up

Tin  Alphamin-Bisie performing well.  Long term Sn demand to outstrip production.  Way to go yet.  

Aluminium  China is unlikely to dominate growth in the Al market in the next two decades.

*Gold  Both equities and gold prices are increasing.  Current conditions may suit both.

Platinum & Palladium  Russian Pd output un-phased by Covid.  Provides Russia with stronger market position.

*Oil  IEA’s 2020 demand forecast lifted, though USA covid-19 cases may dampen demand growth. 

Coal  Steel production growth needs to be matched with coking coal supply.  Met-coal cost curves.

Iron Ore  China’s iron ore stocks are stable.  This year’s wet season has had minimal impact on miners.

Shipping  Panamax rates jumped this week, with Cape rates unchanged. 

General 

*Pt Hedland – iron ore exports:  China’s steel industry is surging.  Iron ore export levels are high.  

*Pinch-point graphs – Base metals:  Prices are rising while inventories return to low levels.

*Australia – Mineral and Petroleum Exploration Spending:  Growth in spend on Au & Cu.

*Japan – Orders to Machinery:  negative growth for total orders.  Limited positive segments.

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Regards,

Andrew

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Andrew Pedler

Matau Advisory Pty Ltd

Resources & Finance – Research & Analysis

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Matau Advisory is a resource-finance consultancy, offering consulting services in resources finance, research, analysis and advice, including bespoke reports or published research.  Matau Advisory also monitors and evaluates key commodity and currency markets and economic metrics.  The principal of Matau Advisory, Andrew Pedler, has a strong background in research and analysis of resource companies, including technical and financial evaluation, sensitivities, capital structure and requirements.  Andrew has been involved in capital raising for companies including for IPO’s, funding of expansions and for existing operational growth.  His background includes experience as an exploration and mine geologist, and in financial analysis specialising in resources, including in project (debt) finance and in equities (resources).  

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Commodity Review 20191018 by Andrew Pedler – Now Available

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 20191018 by Andrew Pedler – Now Available

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 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.