Commodity Review 20191004 by Andrew Pedler – Now Available

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. 


*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.


*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.

Commodity Review 20191004 by Andrew Pedler – Now Available

Commodity Review 20190308 by Andrew Pedler – Now Available

Australia Exploration,  USA

Comments of particular interest are noted with ‘*’. 

Matau’s Comments:  

Australian exploration spending is recovering, showing confidence in the medium to longer term, despite current geopolitical and sentiment noise.  The world is still looking for resolution to trade and tariff wars, and is starting to look through the noisy rhetoric of political announcements for the likely real impacts.  

This week, analyst comments on China see through the high level PMI numbers, showing that commodities imports are in fact growing.  

Toyota’s thinking on EVs is more commercial than most.


*Copper  China’s imports of Cu ‘concentrates’ at new highs, though import of ‘refined’ Cu dipped.

*Cobalt  Lesson in boom-bust, though the Co outlook remains good.  It is all the timing of supply & demand.

*Nickel  Toyota’s battery philosophy!  INSG forecasts a fourth year of deficits for Ni.

Zinc & Lead  Glencore agreed Zn TCs with subsidiary Noranda Income Fund.  Secondary Pb to be ShFE listed.

Tin  Suspension of PT Surveyor Indonesia has ended, and it is able to export again.

Aluminium  Aluminium Bahrain (Alba) ramping up its line-6 potline.

*Gold  Monetary tightening expectations eased.  USA February jobs data is encouraging (patience).

Platinum & Palladium  Details of the world’s eight largest palladium producers.  Pd price is approaching 2x Pt price !

*Oil  A myriad of factors:  Expect USA to be disciplined by prices, and Saudi & Russia balance the mkt.

Coal  Seaborne HCC prices buoyant.  Thermal negotiations under way.  USA coal shipments hindered.

Iron Ore  China’s iron ore imports at a 10 mo low in February.

Shipping  Cape rates still suffering.  Panamax & Supramax rates are up.


*Australia – Mineral & Energy Exploration:  Mineral & Petroleum spending continued recovery.

*Port Hedland – Iron ore shipments:  Small positive 12 mo growth for yr to February.

*China:  Caixin & NBS PMIs & GDP – Clyde says ‘look at commodity imports’.

*USA – House Starts:  Negative growth though better than December’s fall.

*USA Construction Spending:  slow positive growth but residential spend is down.

Commodity Review 20191004 by Andrew Pedler – Now Available

Commodity Review 20190301 by Andrew Pedler – Now Available

World Steel,  USA

Comments of particular interest are noted with ‘*’.

Matau’s Comments:

Geopolitical factors continue to drive uncertainty in global investment and industrial markets.  However there are signs that some of the key factors:  Trade / tariff wars, and some sanctions may abate in the near term (USA-China, USA North Korea, USA sanctions on Rusal).  Others remain:  (Venezuela, Brexit).

CRU’s analysis of the iron ore  / steel industry highlights China’s structural reform of its steel industry, reducing capacity from 1,250 Mtpa to 1,000 Mtpa but becoming profitable.  According to CRU, shifts in demand for steel raw materials will also be driven by forecast increased scrap steel usage in China, offset somewhat by demand growth from SE Asia-Five. 

World steel production clearly shows that virtually all the growth in production has been from Asia, rather than the developed world.  That is not forecast to change.  

Base metals’ fundamentals are tight, and getting tighter, and sentiment appears to be starting to refocus, (or is it just a glance), on the state of supply / demand. 

Matau’s expectations are for a broadly sluggish 2019, by weak growth from advanced economies, offsetting growth from emerging economies, with stronger pickup in fundamentals broadly occurring in 2020 (as outlined by OECD CLI).  We believe this is influenced also by the fact that most global news systems are from advanced economies, whose own lethargic performances may be ‘news’ ahead of more distant ‘emerging’ economies where the real growth is from.  We need to be watching the news from emerging economies:  economics, elections, major holidays, political policies and shifts in direction. 

We believe much will hinge on when and how the current suite of geopolitical uncertainties are resolved. 

Commodity Review 20191004 by Andrew Pedler – Now Available

Commodity Review 20190208 by Andrew Pedler – Now Available


Comments of particular interest are noted with ‘*’.

Supply issues continue to abound, keeping some tension in most metals markets.  This week it is copper.

While much is made (fears) of slowing Chinese output data.   Michael Pettis – professor of economics at Beijing University, has written a note “What Is GDP in China?” detailing the various ways of recording GDP, and how China reports. He suggests China’s actual GDP growth rates may be quite different, and lower, than are reported.  To better understand reporting of GDP everyone should read this note.  It is also available in Andrew’s Blog on the Matau website.

Matau has, in recent issues, noted slower (negative) growth in Chinese industrial output, though quite healthy growth rates in electricity demand and in freight (all modes) within China, among other select data, air conditioners, colour TVs, and bullet trains,, which suggest that these reflect aspects of growth that is not being captured in the other data Matau collects.  


*Copper  Chile:  rain suspends output.  DRC: Glencore shedding labour.  (affects Co as well).

*Cobalt  LME proposal re: Co contract (free of human rights abuse) needs a better audit process.

Nickel  BHP revitalising its Nickel-West operations.   China-USA trade talks ahead of 02Mar19 deadline.

Zinc & Lead  ORN: Prieska BFS due June19Qtr.   G1A:  40% stake sale to Toho Zinc.

Tin  Sn market deficit for Jan-Nov18.  Chinese & Japanese demand reduced.

Aluminium  Global Al market to see a number of deficits over the next few years.

*Gold  Bank of England withholds Venezuelan (Maduro’s) request to release Venezuelan Au on deposit.

Platinum & Palladium  Sth Africa to launch national Pt strategy, to support its economy.

*Oil  Venezuelan tankers anchored off USA pending payment (into ‘blocked’ accounts).

Coal  Expect Chinese market support post Chinese New Year.  Level of support is currently not certain.

Iron Ore  Price jumped post Brazilian dam failures.  Expect clearer price signals post Chinese New Year.

Shipping  Cape rates fell on dam breaches.  Panamax and Supramax rates down this week also.


*Pt Hedland Iron ore shipments:  Positive growth at slow rates.  Strongest to India & Sth Korea.

*USA PMI:  continues with a strong outlook.

*Japan – Industrial production, vehicles and electricity:  negative growth


Caixin Survey: China’s Manufacturing Shrinks at Steepest Pace in Nearly Three Years

This item from the Caixin site provides insights into what each of the different China PMI and other indices report on.  Broadly the Chinese indices are reporting on slower growth (approximately two -three year lows, which may be stabilising, as the economy grows at its slowest rate in 28 years.


Chinas’ growth rate was always forecast to slow as the economy has been grown to become one of the world’s largest, so the fact that growth is slowing is not terrible, unless someone is planning for growth to remain constant.   Remember that the major developed economies (USA, Europe, Japan) consider say +3.0% to +4.5% p.a. to be healthy manageable growth rates … China at ~ +6.5% is still operating at a high rate.

Feb 01, 2019 09:45 AM


Caixin Survey:  Manufacturing Shrinks at Steepest Pace in Nearly Three Years

By Lin Jinbing

China’s manufacturing activity contracted at the steepest pace in nearly three years in January, with weak domestic demand blunting the effect of improved foreign demand amid positive signs in Sino-U.S. trade talks, a Caixin survey showed Friday.

The Caixin China – General Manufacturing Purchasing Managers’ Index (PMI), which gives a snapshot of operating conditions in the manufacturing sector, dipped to 48.3 in January from 49.7 the previous month, marking the weakest level since February 2016.  The Caixin index, one of the earliest available monthly indicators showing China’s latest economic conditions, is closely watched by investors. A reading of 50 divides expansion from contraction. The higher above 50 the faster the expansion, while the further below 50 the greater the contraction.

The downbeat PMI data came after the world’s second largest economy grew at its slowest pace in 28 years in 2018, amid a debt-cutting campaign and the ongoing trade conflict with the U.S.  “On the whole, countercyclical economic policy hasn’t had a significant effect,” said Zhong Zhengsheng, director of macroeconomic analysis at consultancy CEBM Group, a subsidiary of Caixin Insight Group.  Over the past months, Beijing has made multiple efforts such as increasing government spending and cutting taxes in a bid to counter economic headwinds.

In January, new export orders received by manufacturers increased for the first time since March, when the U.S. threatened to levy additional tariffs on Chinese products following an investigation into China’s intellectual property practices.  Zhong attributed the uptick in foreign demand to the recent truce in the China-U.S. trade war.

Yet amid muted domestic demand, total new orders decreased at the steepest rate in 40 months, while manufacturers’ production declined for the first time in 31 months, the survey showed.  Soft demand also led to the first reduction in purchasing activity for 20 months.

On a positive note, the gauge for business confidence toward the 12-month outlook for production remained in expansionary territory and continued to rise, hitting its highest point in eight months.  The employment subindex edged up despite staying in contractionary territory, reaching its highest level in nine months, according to the survey.  China has recently issued multiple preferential policies to stabilize the job market, including cash rewards for companies that lay off zero or few workers.

“China is likely to launch more fiscal and monetary measures and speed up their implementation,” Zhong said.  “Yet the stance of stabilizing leverage and strict regulation hasn’t changed, which means the weakening trend of China’s economy will continue.”

China’s official manufacturing PMI, released by the National Bureau of Statistics on Thursday, picked up to 49.5 in January, just off a 34-month low of 49.4 the month before.   Manufacturing accounts for roughly 30% of China’s gross domestic product (GDP), according to official data (link in Chinese).

The Caixin manufacturing PMI, sponsored by Caixin and compiled by data analytics firm IHS Markit Ltd.,  focuses on light industry,
while the official survey focuses on heavy industry.
The geographic distributions of the companies covered in the two surveys are different.

The Caixin China General Services Business Activity Index for January, which tracks the growing services sector, will be released on Sunday. The services sector, also known as the tertiary sector, contributes more than half of China’s GDP.

Contact reporter Lin Jinbing (