Industrial Production

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Key drivers for 2020 are likely to be the same ones as for 2019:  outlook for growth in developing economies and sustained health of advanced ones, set against potential supply disruptions and other geopolitical risks.  
  • The China-USA phase-1 agreement for tariffs  is in principle a welcome start point, though market participants indicate there are several gaps and holes.  Matau cannot forget the Chinese comment of a couple of months ago that they were not confident of the robustness of any agreement signed by the current USA Administration. 
  • EV market news is currently led by manufacturers continuing to seek key raw materials (Li, Co, graphite, et al). This is a year or two earlier than we expect for a real demand growth to impact prices et al, but the manufacturers do need to get their supply lined up and confirmed, else production output growth will not meet their own forecasts.  
  • Base metal markets have been mixed this week, though mostly remain fundamentally tight, and are incrementally continuing to tighten.  Watch for supply disruption(s).  In 2020 there are numerous key labour negotiations at operations in Chile.  Supply disruptions such as these, in absence of dramatic (geopolitical) drivers are likely to drive price responses.  
  • The USA-China phase-1 agreement for China to buy a huge amount of energy commodities from USA appears difficult to satisfy without disrupting the global oil markets. 

SUMMARY   

*Copper  USA-China phase-1 agreement spurred prices.  Dedziwa Cu-Co mine opened in DRC. . 

*Cobalt  Tesla is in talks for supply of Co from Glencore.  COB & BPL sign binding HoA re: Thackaringa.   

*Nickel  Ni inventories on LME have doubled in a month.  Watch price spreads.  

Zinc & Lead  Low LME inventories (Zn & Pb) are likely to spur price volatility.   

*Tin  Foreign and domestic firms increasing applications for Myanmar mining permits under new law.      

Aluminium  Aluminium smelters struggling to remain viable under higher power charges. 

Gold  … some discussion on central banks’ holdings (see also last week’s issue).  

Platinum & Palladium  Palladium prices surge on demand squeeze.  … higher emission standards to be met.

*Oil  Geopolitical risk not removed.  USA-China trade agreement to shake up the global oil market.  

Coal  Mar20Qtr LVPCI prices settled (by a few parties).  Trade slow ahead of Chinese New Year (25/01). 

Iron Ore  USA-China agreement still leaves issues to be resolved. .  

Shipping  Freight rates stable in Asia and increased this week.  

General  

USA – Electricity End-Use:  USA data shows declining demand except from residential.  

UK – Industrial Production:  With Brexit under-way, confidence ought to see investment recover.

Germany – Industrial Production:  IP falling, though durable goods and construction are positive. 

USA – New House Starts:  Strong positive jump in Dec, though permits issued not matching this.

USA – Industrial Production & Capacity Utilisation:  -ve growth and sub-optimal utilisation.