Author: Marg

Commodity Review 20210219 by Andrew Pedler – Now Available

Commodity Review 20210219 by Andrew Pedler – Now Available

USA IP, Houses, Yields & Gold

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Market activity continues to refocus from sentiment to fundamentals. 
  • Base metal markets continue to tightening further. (pinch points & prices.
  • A brutal cold snap in the northern hemisphere continues, notably this week affecting oil output in Texas.
  • For this week also … Aside from China, industrial demand is increasing (recovering slowly) in key nations (USA, Japan & Europe), as well as in the emerging economies. 
    • Industry is recovering, and its outlook is tempering gold outlook somewhat.   
      • However there remain abundant gold price triggers:  geopolitical (China trade, Iran, Venezuela); fiscal (equity markets, bond yields); National stimulus policies (USA, Europe, other)..
    • This week we review Real interest rates and yields, and touch on relationships with gold price and AUDUSD.
  • Covid-19 is far from peaking, as more is learned about emerging mutating strains, and is still disrupting transport and commercial businesses.
    • Markets are placing inordinate belief that vaccines will solve things (it appears many expect life to return to ‘normal’}, however epidemiologists maintain that while an important tool, vaccines are but one of the tools (hygiene, distancing / isolation, contact tracing) that are already in use, and have successfully contained epidemics, before the advent of specific vaccines.

SUMMARY  

Copper  Cu prices highest since 2011.  Inventories are low.  Mixed views on outlook.   

Cobalt  Increased EV adoption rate is driving the increasing demand for lithium, nickel and cobalt,.  

Nickel  Ni prices highest since Sept 2014.  Outlook based on EV uptake.  Tesla plant coming to India.

Zinc & Lead  Teck’s Red Dog mine Zn output fell in 2020, on restrictions on water handling.  

Tin  Sn exchange inventories critically low, now.  Deficit forecast for 2023.  The market is not waiting.  

Aluminium  USA needs to revisit and revamp its aluminium tariffs.  Nothing has really been achieved with them.

Gold  Gold has lost some investor interest, yet there are several factors that may boost it.  

Platinum & Palladium  Platinum price is breaking upward in contrast to other precious metals.

Oil  The deep freeze in southern USA (notably in Texas) has curtailed production. 

Coal  Markets were quiet during China’s New Year holidays and are re-emerging now. 

Iron Ore  Iron ore prices just off the highest price since Sept 2011.  Activity is picking up again post Lunar NY

Shipping  Rates for Capes & Panamax both increased this week, despite Lunar New Year holidays.

General 

USA – Treasury Yields:  Still low out to 3 yr terms.  Relationship with gold prices real & nominal.

USA – Industrial Production:  remains mildly negative, though a market improvement on April 2020.

USA – New Housing Starts:  Growth is back into negative rates.  Could be a bit bumpy ahead.

Commodity Review 20210212 by Andrew Pedler – Now Available

Rigs, Iron ore, UK & German IP, Japan 

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Market activity continues to refocus from sentiment to fundamentals. 
  • Base metal markets are tightening further. (pinch points & prices.
    • Pinchpoint graphs (based on exchange stocks) continue to highlight tightness in markets for Cu & Ni in particular.
    • Reports highlight tight markets in: Cu, Co, Ni, Sn, Zn & Pb
      • Inventories are low in most base metals, some excruciatingly.
  • A brutal cold snap in the northern hemisphere is having (somewhat) unexpected side effects in commodities availability and pricing.
  • For this week also … Aside from China, industrial demand is increasing (slowly) in key nations (USA, Japan & Europe), as well as in the emerging economies. 
    • Industry is recovering, and its outlook is tempering gold outlook somewhat. 
      • However there remain abundant gold price triggers:  geopolitical (China trade, Iran, Venezuela); fiscal (equity markets, bond yields); National stimulus policies (USA, Europe, other)..
    • Key battery minerals (Li, Co, Ni, graphite) are forecast to become tighter.   Matau considers really tight conditions from ~2023-ish, if EV demand forecasts are borne out, depending on the resource industry’s ability to discover, evaluate and develop new supply to match optimistic demand forecasts.
  • Covid-19 is far from peaking, as more is learned about emerging mutating strains, and is still disrupting transport and commercial businesses.
    • Markets are placing inordinate belief that vaccines will solve things, however epidemiologists maintain that while an important tool, vaccines are one of the toolkits (hygiene, distancing / isolation, contact tracing) that are already in use and have successfully contained epidemics, before the advent of specific vaccines.

SUMMARY  

*Copper  Stocks of copper across the LME, Comex and ShFE markets are at multi-year lows 

*Cobalt  End-user demand in China and low inventories provoked Co price increases.   

*Nickel  CZN & LEG each drilling-out to define / expand Ni-Cu Resources.

Zinc & Lead  Chinas’ Zn smelter output is down in January.  Peru’s Zn output was down in 2020.  Spot TC’s low. 

*Tin  Tin continues a huge physical short position (last week’s report).  Backwardation increased again.      

*Aluminium  China’s Al & Cu scrap imports were threatened by semantics (now sorted) and are yet to recover.

Gold  Gold price marking time.  Support from several price drivers likely to support prices near current.  

Platinum & Palladium  Pt price at highest level in 6 yrs, up on increased industrial demand outlook.

Oil  Australia’s 90-day stockpile needs, in future may need to be all imports of refined product. 

Coal  USA met-coal producers taking advantage of Australian limitations but not prepared to invest more. 

Iron Ore  Iron ore demand is included in an outlook for a new commodity super cycle.  

Shipping  Ahead of Chinese New Year demand for Capes reduced while demand for Panamax increased. 

General 

*Port Hedland – Iron ore shipments:  Iron ore shipments continue to grow.  Not only to China.

Baker Hughes – Drill Rig Counts:  Rigs are increasing #s following oil price recovery.

United Kingdom – Industrial Production:  Recovering from Covid, slower than Germany.

Germany – Industrial Production:  Recovering from Covid but still small -ve growth

*Japan – Orders to Machinery:  Orders are turning to an upward trend, in most segments.

*Japan – LNG prices:  Massive price spike due to a brutal cold snap.  Supply is tight.

Commodity Review 20210219 by Andrew Pedler – Now Available

Commodity Review 2021 0205 by Andrew Pedler – Now Available

USA, Japan, Silver

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Market activity continues to refocus from sentiment to fundamentals. 
  • Base metal markets are tightening further. (pinch points & prices.
    • Pinchpoint graphs (based on exchange stocks) continue to highlight tightness in markets for Cu & Ni in particular.
    • Reports highlight tight markets in: Cu, Co, Ni, Sn, Zn & Pb
  • Aside from China, demand is increasing (slowly) in key industrial nations (USA, Japan & Europe).   
    • Most recently Tesla is having to slow its rollout of some models (trucks) as it is short of key battery minerals (Li, CO, Ni, graphite). 
  • Covid-19 is far from peaking, as more is learned about emerging mutating strains, and is still disrupting transport and commercial businesses.

SUMMARY  

*Copper  Cu is forecast to outperform other commodities in 2021.  

*Cobalt  Outlook for cobalt production is good, particularly as Co is usually a co-product.  

*Nickel  Tesla to join Indonesia’s plans for an EV battery supply chain in-country.

*Zinc & Lead  Zn & Pb TCs down on limited concentrate supply.  

*Tin  Tin is currently subject to a ‘physical’ supply squeeze, driving prices up.    

Aluminium  Chinese plants planning holidays during CNY.

Gold  Selling pressure attributed to strong USD & increasing yields. 

Platinum & Palladium  Northam Platinum considering acquisition of the Bokoni mine (Sth Africa).

*Oil  Economic revival hopes and OPEC supply curbs are supporting oil prices. 

Coal  Coking prices remain strong.   Thermal prices softened ahead of Chinese New Year. 

Iron Ore  China plans to moderate steel output, but current momentum is strong. 

Shipping  Shipping rates declined this week, ahead of Chinese New Year.

General 

Silver:  A mis-conceived ‘squeeze’.  The Redit call was never about silver.

*USA – Purchasing Managers’ Index:  Strong outlook (new orders, production)!  Sustainable?

*USA – Construction Spending:  Positive growth, though not in Non-Residential.

*Japan – Industrial Production -segments: Recovering.  Some segments yet to record +ve growth.

Commodity Review 20210219 by Andrew Pedler – Now Available

Commodity Review 20210129 by Andrew Pedler – Now Available

World Steel – USA

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Market activity is refocussing on fundamentals with clear responses in prices of select commodities that are in demand. 
  • Base metal markets are tightening further. (pinch points & prices).  Notably Ni & Cu.  Sn is starting to move too.
    • Pinchpoint graphs (based on exchange stocks) continue to highlight tightness in markets for Cu & Ni in particular.
  • Gold data shows the impact of Covid-19 on demand segments, notably jewellery, which is now recovering.  Central banks had also stopped buying as the price increased, and in fact some lightened holdings.
  • Demand is increasing in key industrial nations (USA, Japan & Europe … in addition to China’s already demonstrated domestic recovery … with further potential pending its export customers’ recoveries).   
    • Most recently Tesla is having to slow its rollout of some models (trucks) as it is short of key battery minerals (Li, CO, Ni, graphite). 
  • Covid-19 is far from peaking, as more is learned about emerging mutating strains, and is still disrupting transport and commercial businesses.

SUMMARY  

*Copper  Market focus in 2021 will move to world ex-China demand and supply risks.

*Cobalt  Battery metals (Li, Co, Ni, graphite) supply is tight as battery demand surges at Tesla.  

*Nickel  Outlook for near term demand surge from stainless steel, an mid-term from EVs.

Zinc & Lead  Zn price hit by huge inventory surge (from shadow stocks) onto LME.  Pb’s USA price premiums surged on demand.  

*Tin  Price increased on a shortfall due to demand for solder.  Forecast deficit for 2021. 

Aluminium  Japan’s Al production down for the third year. Imports of ingots also fell.

*Gold  Jewellery demand hit by Covid mid-2020, but is recovering (WGC data). 

Platinum & Palladium  Demand for platinum is poised to outstrip supply.

*Oil  Biden Administration has ‘paused’ oil & gas permitting, though permits continue to be awarded. 

Coal  Bans on imports from Australia identified as being political, not economic in origin. 

Iron Ore  Prices are high though have dipped from peaks, ahead of Chinese New Year (11-17 Feb). 

Shipping  Freight rates were mixed this week. 

General 

*World Steel:  China remains a major growth source, but the rest-of-world has positive growth too.  As elsewhere this week, the world ex-China deserves monitoring as it is beginning to move.

*Singapore Shipping traffic: Containers & Tankers positive growth,  Bulks negative growth.

*USA – Electricity End Use & Bond Yields:  Electricity has plateaued.  Bond yields low to 2023.

*USA – Housing Starts:  Positive growth, back to approximately pre-covid levels.

*USA – Durable Goods, Vehicles & Electronics:  Durables growth was down (negative), Vehicles up.   Durable goods orders are traditionally a leading indicator for industrial activity & production.

Commodity Review 20210219 by Andrew Pedler – Now Available

Commodity Review 20210122 by Andrew Pedler – Now Available

China, Industry & Energy & Transport

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Base metal markets are tightening further. (pinch points & prices).  Notably Ni & Cu.
  • Demand is increasing in key industrial nations (USA, Japan & Europe … in addition to China’s already demonstrated domestic recovery … with further potential pending its export customers’ recoveries).   
  • Covid-19 is far from peaking, as more is learned about emerging strains, and is disrupting transport and commercial businesses.
  • Pinchpoint graphs (based on exchange stocks) continue to highlight tightness in markets for Cu & Ni in particular.  

SUMMARY  

*Copper  Cu market is tight, but Chinas’ imports of Cu conc from key supplier (Australia) have stopped.

*Cobalt  Price rising on expectations of EV demand.  Cobalt in batteries helps protect from corrosion & fire.

*Nickel  Rally in Ni price considered over-hyped (not on fundamentals). Supply is expanding.  High-nickel batteries can store more energy and provide greater EV driving range.

Zinc & Lead  Vedanta has resumed mining at Gamsberg.  Trevali plans to restart Caribou. 

Tin  ELT buoyed by Sn intercepts at Oropesa, and economic study.     

Aluminium  UAE is producing aluminium with solar power.

Gold  Conflicting drivers continue for gold.  Watch FOMC & Biden stimulus plans. 

Platinum & Palladium  Li battery designs that include PGMS are being patented, but may take time to commercialise. 

*Oil  EIA expects 2021 demand to exceed supply.  Prices are forecast to increase only modestly. 

Coal  Asian market: supply of thermal coal remained tight across Asia. 

Iron Ore  China’s crude steel output exceeded a record billion tonnes in 2020. 

Shipping  Shipping rates in Asia eased on slowing demand for iron ore this week. 

General 

*China – Transport – Freight & Passengers:  Freight growth is strong.  Passengers is slower, recovering from almost total lockdown 11 months ago. 

*China – Industry & Energy Output:  largely positive growth in most areas (notably except wine & beer).