Commodity Review

Commodity Review 20210401 by ANdrew Pedler – Now Available

Commodity Review 20210401 by ANdrew Pedler – Now Available

OECD CLI’s, USA, Japan

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Most commodity markets are showing signs of increased tight (labour or raw materials) conditions.
    • Precious metals are under some pressure, though there are abundant geopolitical and other risks available. 
  • Gold price has been jittery, following USD variations.
  • A number of sound base metals projects are being advanced through toward production, as their respective markets continue to tighten.

SUMMARY  

*Copper  Evidence of constrained Cu supply is in spot Cu TC/RCs being at decade lows 

*Cobalt  EGC has been set up to buy all domestically (artisanal) produced Co in DRC, to improve standards.  

*Nickel  Indonesia is driving up its added value Ni processing capacity. 

*Zinc & *Lead  Zn & Pb TC/RCs.  Teck agrees to supply China’s largest Zn smelter with concentrate.  

Tin  South Korea is the main destination for Sn concentrates from Bangka-Belitung.      

Aluminium  Portland’s Al smelter (Vic) has won support from the Australian Federal Govt, till at least 2026.

*Gold  Gold Fields Australia is paying extra ‘allowances’ to retain its skilled workforce.  Demand is high!

Platinum & Palladium  WPIC reports Pt jewellery demand is expected to increase strongly in 2021.

*Oil  OPEC+ has agreed to gradually ease its oil output cuts from May.  Demand is increasing.

Coal  Aust. HCC is trading around China bans.  Thermal coal negotiations paused till supply stabilises.  

Iron Ore  Near term supply disruptions hit supply.  Longer term, prices are expected to stabilise lower.

Shipping  Asian freight rates eased this week, on lower global demand (for ships as Suez was unblocked). 

General 

OECD – Composite Leading Indicators:  .CLI’s all showed recovery from the depths of the Covid-19 pandemic is well under way.  Turning points suggest that improvements in GDP & IP should be in evidence about now.

Japan – Industrial Production:  An earthquake mid-month, & surge of Covid cases impacted IP.  An earthquake and a surge in covid-19 cases disrupted IP.

USA – Construction Spending:  Private & Residential was +ve.  Public & Non-Residential was -ve.

USA – PMI:  Most PMI segments report a strong +ve outlook.

Commodity Review 20210401 by ANdrew Pedler – Now Available

Commodity Review 20210326 by Andrew Pedler – Now Available

USA, Durables & Yields

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • USA economy recovery may be slowing a bit but is still basically positive. Vehicle orders backed off a bit in February.
  • USA bond yields continue to lift slowly.  Real USA 10yr bond yields are almost up to 0.0%.
    • USA real 10yr bond yield has just turned positive.  Still lower than the real Aust 10yr yield, hence a robust AUDUSD rate. 
  • Gold price has been jittery, following USD variations.
  • A number of sound base metals projects are being advanced through toward production, as their respective markets continue to tighten.

SUMMARY  

Copper  Copper prices following equities markets’ optimism over global economic recovery. 

*Cobalt  Cobalt consumption in 2020 up 29%.  Glencore – Murrin Murrin.  COB.  

Nickel  Chemistries of EV batteries.

Zinc & Lead  China’s Cu & Zn  smelters benefitting from byproduct H2SO4 sales.  EV batteries.   

Tin  Tin supply has reduced markedly, esp in Indonesia.      

Aluminium  Ship stuck in the Suez exacerbated Al billet shortage in Europe.

*Gold  Choppy trading this week, influenced by USD moves. 

Platinum & Palladium  Hydrogen fuel technologies anticipated to support platinum. 

*Oil  Oil prices (esp in Europe) increased on concerns of Suez disruption. 

*Coal  Unusual swaps being done in coking coal to get around China’s bans. 

*Iron Ore  Prices increased, supported by strong steel prices. 

*Shipping  Asian freight rates gained this week amid heavy rains and floods. 

General 

*USA – Treasury Yields:  slowly rising, with improving outlook.

*USA – Durable Goods, Vehicles & Electronics:  +ve growth for durables & electronics.

Commodity Review 20210401 by ANdrew Pedler – Now Available

Commodity Review 20210319 by Andrew Pedler – Now Available

Exploration, China, Shipping, USA

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • It is frustrating when companies are required to report data to the relevant exchanges, yet government statistics agencies’ rules prevent them from including those data in relevant categories.
  • Australian mineral exploration has clearly been on a surge.  Good!  More discoveries are needed to feed forecast demand growth.
  • Overall, while still jittery and volatile, the global economy continues to recover.  In this note that is evident in shipping data and in Chinese output data. 
  • USA economic housing and IP data again show some jitters. 
  • Supply (disruptions) and demand issues continue to compete (oil, metals).  
    • Covid containment issues are not helping.  It appears some countries are again in their own firing line in this regard.
  • Despite impediments, overall it appears the world industry and trade is growing back toward, though not yet up to, pre-covid levels. 

SUMMARY  

*Copper  Study shows REEs play important roles in formation of major (IOCG) style deposits.

Cobalt  Cobalt is largely a byproduct of Ni & Cu production.  Few mines have Co as their key product.   

*Nickel  Production of Ni matte from Ni-laterites is economic, but has its own issues.

Zinc & Lead  Nationwide transport strike in Peru likely to impact supply of Zn, & Cu concentrates.  

*Tin  Tightness on the London Metal Exchange (LME) tin contract remains acute.     

*Aluminium  Major Al inventory deliveries into Asian LME warehouses (appears it was planned).

Gold  Gold price appears to be being held hostage by USA real 10 year note yields again. 

*Platinum & Palladium  Norilsk is working toward restoring capacity to its flooded mines in the next 3-4 months.

Oil  Oil price is roller-coasting on supply constraints and increased demand vs fears of slowdowns. 

Coal  SSCC Mar21Qtr (lagged) contract pricing settled.  

*Iron Ore  Vale is looking to develop a major port to increase competitiveness in shipping to Asia. 

Shipping  Asian freight rates increase with demand for grain, iron ore & scrap metal. 

General 

*Australia – Exploration Spending:  There is a surge in activity under way.

Port Hedland – Iron Ore shipments:  Growth has slowed in the past four months. 

Singapore – Port traffic:  Growth is improving post-covid. 

*China – Transport:  Transport (& other data) shows recovery toward pre-pandemic levels.

*China – Industry & Energy Output:  Feb 2020 was peak month for China’s effort to control Covid19

*Baker Hughes – Rig Counts:  Rig counts are increasing, lagging oil price increases.

*USA – House Starts:  negative growth for a 4th month.

*USA – Industrial Production & Capacity Utilisation:  negative growth and reduced capacity use.

Commodity Review 20210401 by ANdrew Pedler – Now Available

Commodity Review 20210305 by Andrew Pedler – Now Available

USA, PMI, Yields & Construction

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • The USA Federal Reserve Chairman has not indicated any more central bank support, and has not reversed the prevailing USA central bank settings.  
    • Bond yields have lifted upon interpretation of his speech as a signal that the USA central bank may have reached some limits of monetary policy expansion, resulting in a selloff of bonds. 
    • The Chairman said the banks is monitoring financial conditions, and that the USA economy is a long way from recovery..  His view is that prices will rise but any increase in inflation will be transitory, and does not expect inflation to exceed 2%.
  • Increased oil prices also contributed to bond market nerves, worrying some about prospect of inflation (which is usually not good for bonds).
  • USA PMI indicates a strong outlook. USA bond yields starting to lift. 
  • Overall, while still jittery and volatile, the global economy continues to recover.   
  • A number of sound base metals projects are being advanced through evaluation toward production, as their respective markets continue to tighten.

SUMMARY  

*Copper  May be some weakness ahead, though economies outside China are recovering. 

Cobalt  Co price holding ground amid others’ declines.  

*Nickel  Tesla to take stake in Goro mine with Trafigura.  Tesla needs security of Ni supply. 

Zinc & Lead  China’s Zn production to increase in 2021.  TC’s for Zn & Pb concs are stable..  

*Tin  Boom in demand for electronic products.      

Aluminium  China-Inner Mongolia to cap aluminium production.

Gold  Fitch forecasts avg 2021 Au price higher than current spot price.  

*Platinum & Palladium  Palladium price forecast to hit all-time highs in 2021.  (CHN, IPT)

*Oil  OPEC+ extends production cuts by a month, into April.  LVPCI / SHCC to be revised / to come.  

Coal  HCC Dec20Qtr contract price established.  

Iron Ore  Australia reports record iron ore shipments. 

Shipping  Panamax rates fell this week while Capes and Supramax rates increased.

General 

*USA Treasury Yields:  Yields lifting – USA Fed Chair indicates limits of monetary policy expansion.

USA PMI:  Strong outlook as key first four segments have positive growth and are .50.

USA Construction Spending:  Broadly positive growth.

Commodity Review 20210401 by ANdrew Pedler – Now Available

Commodity Review 20210226 by Andrew Pedler -Now Available

USA Durables and Singapore Ships

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • USA economy appears to be recovering with data including durable goods. Vehicle orders with good positive growth rates.
  • USA bond yields starting to lift.
    • USA real 10yr bond yield has just turned positive.  Still lower than the real Aust 10yr yield, hence a robust AUDUSD rate. 
  • Overall, while still jittery and volatile, the global economy continues to recover.   
  • A number of sound base metals projects are being advanced through toward production, as their respective markets continue to tighten.

SUMMARY  

*Copper  Cu demand is forecast to stretch supply capacities over the next few years.  SFR, Glencore

Cobalt  Asian Co & Ni cathode-precursor producers are concentrated and tend to integrate operations.  

Nickel  POS & BSX working to develop their respective Black Swan and Ta Cuong projects.

Zinc & Lead  ORN is well placed to progress development of its Prieska Cu-Zn project.  

*Tin  Tin’s tight squeeze continues!  Inventories are very low, notably in USA & Europe.      

Aluminium  China’s Al sector mulling closure of 47 GW of power to reduce carbon output.

Gold  .Prices lower on positive USA economic news.   

*Platinum & Palladium  PGM supply demand should recover to pre-covid levels in 2021. 

*Oil  China’s oil stockpiles have increased to ~100 days of imports. . 

Coal  Coal trading softer this week, pre-Indian monsoon, post China holiday.  Chin AusT ban to stay. 

*Iron Ore  Uncertain future as different tailwinds and headwinds collide. 

Shipping  Cape rates softened.  Panamax rates strengthened.

General 

*Singapore Port – ship traffic:  Segments recovering from pandemic in 2020, at different rates.

*Base metal Pinch-point graphs:  Prices responding to low stocks and growing demand. 

*USA – bond yields:  10yr real rates lifted in the past month, and 3yr term rates lifted a little.

*USA – Durable Goods, Vehicles, Electronics orders:  Durable, vehicles & electronics all +ve.

Commodity Review 20210401 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.