Oil Rigs & LNG

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Coronavirus:
    • China is emerging from COVID-19, but its customer countries are still dealing with peak infections and restrictions, so a recovery in demand is lagging a potential supply recovery.  
        • i.e. The rest of the world is entering a high infection rate and fatality rate phase of the COVID-19 pandemic with rates escalating, particularly in countries that have not taken early enough nor aggressive enough precautionary actions.  
  • Gold – Central banks quandary with cancellation of passenger flights, there is more limited ability to transport gold bullion.  
  • Base metals:  
    • Right now base metals markets are still more focused on the collapse in global demand, both at the first-use fabricator and the end-use consumer stage.  However supply is being affected by travel and transport restrictions.  Development decisions are being deferred. 
    • Supply is prone to disruptions due to mining lockdowns and logistics bottlenecks are still playing catch-up with the demand shock rippling around the world.  Moreover, Chinese importers are probably carrying sufficient supplies of raw materials to ensure production over the short term. 
    • Matau adds, that while China is restoring industrial production operations, its major export customers are still in the throes of lockdowns attempting to contain the COVID-19 pandemic and presenting reduced demand until they do. 
    • Base metal prices are expected to languish until the world shows clear signs of recovery, or disruptions become severe.  
    • The novel coronavirus is rewriting the commodities’ rule-book, and possibly rewrite the supply response ‘rules’ as well.  
  • Oil markets have been roiled by recent abandonment of production agreements and inability of OPEC+ to fully agree on production constraints, at this week’s meeting.  
  • Investors should identify and evaluate commodities, and companies, that they plan to invest in when global economies and sectors recover.  
    • This environment is remarkably volatile with many jumping to conclusions on thinly detailed data.  
    • Analysis needs to be rigorous, and the commodities and companies robust.  
    • Turning points may be executed quickly, so investors need to have intended investment targets already understood.  
    • Whenever you forecast something you will be precisely wrong.  What matters is:  by how much; in which direction; and how robust your forecast really is. 

SUMMARY   

Copper  SFR announced Black Butte project has an approved RoD, (conditionally) approving mining.  

Cobalt  COB’s process achieves excellent recoveries, testwork on GEM’s Millenium project shows.   

Nickel  Philippines suspended some major Ni mine operations to comply with virus containment measures.

Zinc & Lead  Peruvian Govt extends state of emergency (COVID-19), affecting Zn & Pb mining.    

Tin  Alphamin [Bisie project in DRC] needs higher Sn prices in order to service debt at end of June.      

Aluminium  RIO’s NZ Tiwai Point smelter is struggling through an ops review.  Needs lower electricity prices.

*Gold  Russia’s (and others’) central banks struggling with transport issues and storage for gold bullion.  

Platinum & Palladium  IPT targeting attractive Broken Hill PGM project.  .

*Oil  OPEC+ meeting proposes to reduce 10mm bbls/day, … conditional upon Mexico also agreeing.   

*Coal  Beijing’s multiple injections may fail to revitalise the steel sector.  China is emerging from COVID-19, but its customer countries are still dealing with peak infections and restrictions.  

*Iron Ore  Chinese steel inventories dropped, but auto sales in China and Europe are down.  

Shipping  Cape rates down but Panamax rates up (on seasonal agri-shipments).  

General  

*Baker Hughes Rig Counts – Worldwide & North America:  The OPEC+ deal is not yet done. 

*Port Hedland – Iron ore exports:   Healthy growth reported for March exports, mostly to China. 

*Japan – LNG prices:  LNG prices very low, likely on reduction of demand.