Steel

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Key drivers for 2020 remain 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.   However overlying these factors, the coronavirus – covid-19 outbreak which has created a whole new level of uncertainty. 
  • From a marketplace perspective covid-10, or coronavirus, situation is remains very fluid regarding the economic impact on major world economies.   While recent reports have Chinese spread of infection slowing, infection rates are accelerating in the rest of the world.  
    • Oddly, traders and investors in the USA appear to have only recognised the potential risks of this epidemic within the past few days, which has had significant negative impact on global markets.  Traders and investors continue to vacillate daily on impact of the potential pandemic.  
    • We expect this uncertainty will continue to support buying interest in safe-haven assets, the likes of gold, USA Treasuries and the USD, and the movement of money out of riskier assets like equities.  Again oddly, gold price drew back this week.  
    • Manufacturing indexes from the major world economies are starting to show the negative effects of the covid-19 outbreak.  
    • It appears that the extensions of China’s New Year holiday period travel restrictions, and further requirements for additional 14 day quarantine periods for workers returning from visits ‘home’ will further delay ramp-up of Chinese industry to full production for perhaps a further month (or two). 
  • Interestingly the Baltic shipping indices are recovering for Panamax ships but still reducing for cape-size ships. 
  • Base metal markets remain fundamentally tight, and are incrementally continuing to tighten.  Most prices fell this week (on new USA fears).  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. 
  • USA’s general population’s grasp of the risks of the coronavirus appears poor.  A survey showed that about 38% of USA now is now reluctant to drink Corona beer!  An AFR journalist entering USA last week noted that upon passing through USA’s Border Security procedures he had to put all ten fingers on a panel (to record finger prints), and commented that the panel had not been wiped or cleaned, and that this procedure is at risk of spreading any virus (everyone entering touching the same spot).  

*Copper  RIO is committing significant capital to copper projects and exploration.  SVY.  Chile’s outlook.

*Cobalt  Battery makers are juggling metal content to optimise performance vs raw material costs.   

*Nickel  Indonesia to regulate selling prices for Ni ores.

*Zinc & Lead  This year’s benchmark treatment charges (TCs) for zinc & lead concentrates are expected to rise.   

Tin  Global production of refined tin in 2019 fell on low Sn prices.  Production discipline is needed.   

Aluminium  A re-opened USA Al smelter, based on Trump tariffs, is losing money and likely to close.

*Gold  It is an odd moment for the price of gold to have fallen.  

Platinum & Palladium  Concerns about impact of coronavirus on global growth (as with many other commodities).

*Oil  Concerns about coronavirus impact on Chinese demand for oil vs precarious supply.  

Coal  Asian coal markets affected by China’s import controls & coronavirus impacts on travel & trade.  

*Iron Ore  Robust iron ore trade tempered by coronavirus, which in China appears to be slowing its spread.    

Shipping  Stable freight rates in Asia.  Demand for Panamax improved.  Demand for Capes reduced.

General  

*World Steel:  good production growth in China, USA in particular.  Expect lower output in Feb.  

*USA – Durable Goods, Vehicles, Electronics:  negative growth for durables & vehicles.