Commodity Review

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200925 by Andrew Pedler – Now Available

Australian Exploration – World Steel

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:     The world is recovering from a low disrupted space, and recovery is unlikely to be uniform, nor without volatility.  Raw materials are essential to maintain existing demand requirements, and for future growth.  Supply chains and demand levels have been disrupted differently, often according to regional epidemic outbreaks.  Timing and impacts of Covid-19 epidemics have been different in: China, vs USA, vs Europe, vs Africa, vs South America, and then South East Asia, Australia.   

  • Covid lockdowns have widely been the main drivers of very sharp declines, much sharper than prior economic or financial crashes, to deep levels, from which, in many cases recovery has yet to achieve prior levels.  For some economies it may be a matter of time required for recovery.  For some however, each past ‘crash’ has resulted in recovery to a slightly lower level. 
  • Base metals’ pinch-point graphs continue to show metal prices rising, copper in particular, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.  
    • Any material supply disruption or surge in demand may trigger marked price responses.   
    • Right now though activity appears to be slowing on several fronts. 
    • Total exchange base metal inventories reduced for each metal, though prices reduced in USD terms. 
  • China’s Golden Week commences 1st October, during which time Chinese commercial activity usually ceases with traders absent from the market. 
  • Australia’s exploration expenditure recorded modest growth in the Jun20Qtr, with positive growth only in minerals and in NSW, Vic and Qld, with WA expenditure being flat. 
  • This week the USD strengthened against a long downward trend, without particular support of notable economics. 
  • Gold price reduced again, in all currencies except ZAR in which it was flat.
    • No notable reductions in geopolitical risk, nor any escalations.

SUMMARY  

Copper  Cu demand is increasing.  Cu, supply is starting to recover. 

Cobalt  Research has discovered how to regenerate Li-Cobalt oxide within batteries!.  

Nickel  Tesla’s ‘Battery Day’  Tesla is reviewing battery manufacture.  Ni is a key metal.  .

Zinc & Lead  USA auto sales up.  USA premiums for Pb ingots up.  China’s refined Zn output up. 

Tin  Tin market to remain in deficit to 2023.  Electronics & semi-conductor demand are rising.   

Aluminium  Chinese imports of primary aluminium rose their highest in over two decades..

Gold  Price down in all currencies.  Central banks reluctant to buy at high prices.  Plus other factors?

Platinum & Palladium  WPIC sees resurgence in buying diesel vehicles will lift demand for Pt.

Oil  Iran’s oil exports noted as highest in ~18mo, in defiance of USA sanctions. 

Coal  China stocked up ahead of Golden Week.  Import restrictions may loosen afterwards. 

*Iron Ore  Japanese steel mills restarting.  China’s floods and holidays contribute to softer demand. 

Shipping  Rates for Capes & Supramax edged up while Panamax rates slid (a little). 

General 

*World Steel:  Slow positive growth with much of the world still recovering from Covid-19. 

*Australia – Exploration Spending:  iron ore, coal & gold +ve growth.  Also +ve NSW, Vic, Qld

*China – Transport – freight & passengers:  Freight rail & waterway +ve growth.

*USA – Durable Goods, Vehicles & Electronics:  Durables still down.  Vehicles & Electronics up.

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200918 by Andrew Pedler – Now Available

Work in Progress – Recovery Mode

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:    The world is recovering from a low disrupted space, and recovery is unlikely to be uniform, nor without volatility.  Raw materials are essential to maintain existing demand requirements, and for future growth.  Supply chains and demand levels have been disrupted differently, often according to regional epidemic outbreaks.  Timing and impacts of Covid-19 epidemics have been different in: China, vs USA, vs Europe, vs Africa, vs South America, and then South East Asia, and little old Australia. 

  • Covid lockdowns have widely been the main drivers of very sharp declines, much sharper than prior economic or financial crashes, to deep levels, from which, in many cases recovery has yet to achieve prior levels.  For some economies it may be a matter of time required for recovery.  For some however, each past ‘crash’ has resulted in recovery to a slightly lower level. 
  • Base metals’ pinch-point graphs continue to show metal prices rising, copper in particular, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.  
    • Any material supply disruption or surge in demand may trigger marked price responses. 
  • Iron ore demand remains firm with China’s surging steel output.  
    • How long before China satiates domestic demand and resumes steel exports? 
    • When will its (developed economy) export markets have recovered enough to resume import demand? 
      • Matau suggests a further 4-6 months may be required for the lagging economies, though these need to gain control over Covid infection rates.
      • Widespread availability of vaccines may be about 12 mo away (if a successful one is generated) according to epidemiologists.
  • China’s industry and energy output is broadly recording positive growth.  China’s worst month was February (during Chinese New Year), eight months ago.
    • Demand for steel raw materials, Cu & Co is strong. Nickel is likely the next to respond, as Zn & Pb are reported in surplus. 
  • Singapore shipping data supports the Chinese data with positive growth in bulk materials, fuels, and a return to positive growth in container shipping.
    • Passenger shipping traffic however was flattened, and perhaps may not recover in its original format, and is likely to take a long time to recover to original levels, if it does.
  • Germany’s industrial production is recovering, with positive growth in several segments
  • UK’s industrial production is recovering from its low, though most segments have yet to record positive growth. 
  • As noted two weeks ago, USA’s yield curves with yields below 1% out to 3 yr terms hint that is may be some time before USA really recovers.
    • The USA Federal Reserve has now said that it expects yields to remain low for about 3 years. 
  • Oil demand for 2020 continues to be forecast to face further (covid) reduced demand.  OPEC+ is working, with variable success to corral its members to maintain discipline.

SUMMARY  

*Copper  Demand to rise from USA investment in infrastructure and global investment in green technology.

*Cobalt  China’s SRB expected to add to significant purchases of Co for stockpiles.   

Nickel  MCR restarting and progressing Kambalda area Ni project(s).

Zinc & Lead  IGB progressing Citronen Zn-Pb.   Zn & Pb markets in surplus.   

Tin  Indonesia & ITA expecting a material decline in world tin production this year.    

*Aluminium  USA withdrawing plans to impose tariffs on imports of Al from Canada.

*Gold  USA Fed expecting low yields for 3 years, though economic growth forecasts are looming.   

Platinum & Palladium  Industry giving consideration to substitution from palladium back to platinum for auto-catalysts.

*Oil  Oil supply is currently excessive.  OPEC+ trying to corral its members.. 

Coal  LVPCI settlement for Dec20Qtr.  South Korea to reduce thermal power capacity (over time). 

Iron Ore  Chinese port inventories increasing.  Brazil’s Vale production looking to increase.  

Shipping  Cape rates increased while Panamax rates reduced.  

*General 

Port of Singapore – Shipping traffic:  Freight has good growth.  Passengers still suffering.

China – Industry & Energy Output:  Broadly positive growth across the segments.

Germany – Industrial production:  IP is struggling though durables are positive.

UK – Industrial Production :  recovering though still struggling.. 

USA – Industrial Production:  struggling to recover though durables & construction are positive.

USA – New House Starts: growth positive but subdued after a burst in July. 

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200911 by Andrew Pedler – Now Available

Comments of particular interest are noted with ‘*’.

Matau’s Comments:

*        Base metals’ pinch-point graphs continue to show metal prices are tight though only copper is responding in this confused market. as industry restarts post-Covid-19 in several
areas. 
*        Copper recycling and scrap availability has suffered through the Covid epidemic. 
*        Iron ore demand remains firm with China’s surging steel output.

SUMMARY
*Copper:  Recycling of copper scrap has suffered during Covid. Chinese scrap imports reduced.
*Cobalt: China stockpiling cobalt.
*Nickel:  Mincor’s Cassini North is can add materially to MCR’s Resources.
Zinc & Lead:  Zn outlook improving through 2021, then moderating through 2024.
Tin:  n/a
Aluminium:  Al’s aims of reducing carbon footprint will likely shift the industry’s structure..
Gold:  Unusually, both equities and gold prices are rising and falling together.
Platinum & Palladium:  A hydrogen energy and fuel cell evolution may support Pt markets. .
*Oil: Price slips on higher US stocks, and weak demand.
Coal: Sep20Qtr coking coal settlements.
Iron Ore: Reports that China’s iron ore imports increased by 11% from Jan-Aug20.
Shipping:  Cape rates reduced while Panamax rates increased.
General
Port Hedland – Iron ore shipments:  still strong levels of exports.

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200904 by Andrew Pedler – Now Available

World in Recovery Mode

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:    The world is recovering from a low disrupted space, and recovery is unlikely to be uniform, nor without volatility.  Raw materials are essential to maintain existing demand requirements, and for future growth.  Supply chains and demand levels have been disrupted differently, often according to regional epidemic outbreaks.  Timing and impacts of Covid-19 epidemics have been different in: China, vs USA, vs Europe, vs Africa, vs South America, and then South East Asia, and little old Australia. 

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.   Inventories at exchanges continue to reduce.  Copper price in particular breaking upward, on the pinchpoint graphs, as industry restarts post-Covid-19 in several areas.   Base metal inventory levels can now only be described as tight.  Any material supply disruption or surge in demand may trigger marked price responses. 
  • Iron ore demand remains firm with China’s surging steel output.  How long before China satiates domestic demand and resumes steel exports?  When will its (developed economy) export markets have recovered enough to resume import demand?
  • China’s freight & passenger transport showing good recovery post-covid.  China’s worst month was February (during Chinese New Year)
    • Demand for steel raw materials, Cu & Co is strong.
  • Japan’s industrial production is recovering.  Japan’s worst month was May 2020.  Its recovery is lagging China’s.
  • USA’s yield curves with yields below 1% out to 3 yr terms hint that is may be some time before USA really recovers.
    • Construction spending (July) was flat. 
    • Its PMIs (August) are very optimistic. 
      • Worth noting that PMIs are ‘soft’ data, reflecting managers’ ,expectations’ for the near future.  It remains to be seen how expectations are borne out.  In the past, correlations have been reasonable, though this time, there are marked inconsistencies.  July’s durable goods orders were not good, though vehicles orders soared.  July Housing Starts look to be recovering well, but Construction Spending is flat and faltering.
  • Oil demand for 2020 is forecast to face further (covid) reduced demand.  Rig counts do appear to have bottomed globally, though USA & mid east numbers reduced recently.  OK so energy ought to be cheap at least in the near future and not an impediment to (other) recovery.

SUMMARY  

*Copper  Global Cu market may be on the cusp of a supply squeeze.  

*Cobalt  Cobalt salt (OH & SO4) prices surged.  Supply disruption & strong demand from electronics. 

Nickel  SLN & Eramet seeking to revive New Caledonian Ni operations. 

*Zinc & Lead  Miners becoming more optimistic about outlook.  Though Zn is currently in surplus, for now.  

Tin  MLX plans to increase output at Renison, with new longer life plan.  Aust is a significant producer.     

Aluminium  Japan’s LME Al premium reduced in recent contract settlements. Will other regions follow?

*Gold  USA labor data softened Au price, though ahead are ample geopolitical risks and a USA election. 

*Platinum & Palladium  CLQ to drill a new Pt zone at its Sunrise project, including dunite targets.

*Oil  Global oil demand forecast to decline in 2020.  Russia supporting an OPEC+ response proposal. 

Coal  Metcoal prices up on demand.  China finessing its import sources.  Japan’s thermal imports up.

Iron Ore  FMG has approvals to expand output.  BHP launches LNG-fuelled bulk carriers.  Brazil blockchain.

Shipping  Freight rates reduced this week, across the board.  

General 

USA – Treasury Yields:  Low yields for up to 3yr terms.  Is USA’s recovery after 3 yrs?. 

*USA – Construction Spending:  currently very low growth – flat!

*USA – Purchasing Managers’ Index:  Strong outlook.  nb: this is a ‘soft’ index – opinions..

*Baker Hughes Rig Counts – World & North America:  Rig count appears to have bottomed.

*China – Transport – freight & passenger:  Traffic is recovering.  Passengers taking longer.

*Japan – Industrial Production:  Recovery has started.  May was Japan’s worst month.

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200828 by Andrew Pedler – Now Available

World Steel & China

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.   Copper price in particular breaking upward, on the pinchpoint graphs, as industry restarts post-Covid-19 in several areas. 
  • Iron ore demand remains firm with China’s surging steel output.
  • China’s industrial & energy output showing good recovery post-covid.
    • Demand for Cu & Co is showing strong growth in China.
  • USA’s vehicles & electronics orders showing decent recoveries, though durable goods are slower to recover.
    • Some insights into statistical manipulation regarding USA’s CPI numbers.

SUMMARY  

*Copper  China’s demand for Cu is rising.  Inventories are falling.  

Cobalt  China’s Co imports are jumping.    

*Nickel  EV batteries should be known as Ni-graphite batteries, not Li-ion. 

Zinc & Lead  Zn & Pb posted surpluses for Jun20HY, though inventories are falling, again.  

Tin  DRC providing miners waivers on export bans (across several segments).     

Aluminium  Al sector struggling to agree on consistent environmental emissions standards.

*Gold  USA Fed has now officially moved its price inflation goalpost.  Beware statistical methods in USA.

Platinum & Palladium  PGI is looking to a recovery in jewellery fabrication post-covid.

*Oil  Saudi Arabia has lost market share in China to Russia & USA.   

Coal  Brazilian steel mills seeking 2021 supply of met coal, coming back on line. 

Iron Ore  Iron ore market well supported by ongoing supply issues.   

Shipping  Typhoons and heavy rain in China tightened the availability of shipping. 

General 

World Steel: World Steel output slower in July, with few positive growth rates. 

China – Industry & Energy Output:  Broadly positive growth across segments.

USA – Durables, Vehicles & Electronic products:  Vehicles bounced, but Durables lagging

Commodity Review 20200925 by Andrew Pedler – Now Available

Commodity Review 20200821 by Andrew Pedler – Now Available

Singapore Shipping – USA (House Starts)

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.   Copper price about to break upward, on the pinchpoint graphs, as industry restarts post-Covid-19 in several areas. 
  • Iron ore demand remains firm with China’s surging steel output.
  • Singapore shipping shows bulk commodity demand and tanker traffic is strong, reflecting Asian industrial & economic activity.

SUMMARY  

*Copper  Supply side issues less than expected.  Price expected to hold above USD 6,000/t through 2020.

*Cobalt   Supply chain is facing challenges. Prices and inventories beginning to move.

Nickel  Philippines’ miners do not expect further major mine disruptions this year.  Ore supply is tightening.

Zinc & Lead  Zn’s performance appears due to supply-side issues.  Price anticipated to be static.  

Tin  Tin supply has taken some heavy knocks from COVID-19-related lockdowns.     

Aluminium  Trump’s aluminium pillar of the “America First” policy is wobbling.

*Gold  Gold’s market fall described as an “over-priced market”, “cleaning itself out”.  “No fear present now”.

Platinum & Palladium  Auto markets including diesel heavy Duty Vehicles (HDV), starting to support Pt outlook

Oil  There are five major factors that usually go into a report on a major oil spill.   

Coal  Major Chinese domestic HCC miner slashing prices to compete with imports. 

*Iron Ore  Chinese demand strong and well managed supply from Australia & Brazil maintained prices. 

Shipping  Cape rates down, Panamax rates rose, Supramax rates up. 

General 

*Port Hedland – Iron ore exports:  Demand from China reduced, but remains strong. 

Germany – Industrial Production:  Negative growth, but improving on the prior 2-3 months.

United Kingdom – Industrial Production:  Negative growth, but improving on the prior 2-3 months. 

USA – Industrial Production – Capacity Utilisation:  -ve growth but improving.  Low utilisation.

*USA – Yields:  Bond market does not appear to expect recovery for three years.