China: Industry , Energy & Transport. -World Steel

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to (stimulus driven) expectations of increased demand, and recognition of tight supply.   The markets are looking toward base metals’ supply for potential resumption of industries, supported by various stimulus packages (initially within China, the largest consumer of raw materials), and are beginning to recognise a) the tightness of the supply, and b) the risks that Covid in South America and Africa could seriously limit supply responses.  
    • Current conditions exemplify the saw that “whenever you forecast something you will be precisely wrong!”  … what matters is:  why,  by how much; and in which direction.
  • Gold prices jumped this week, in all the currencies that Matau tracks.  The USD had slumped somewhat but the gold price increase in USD terms (and other currencies was not due to FX changes.  
    • Oddly the conditions posed by Covid now have positive factors for both gold and equity markets:  geopolirical risk & stimulus.
  • World Steel output increased overall with widespread mo-on-mo growth as national output(s) begins to claw back and recover production.  Just how much depends on where each nation is in its Covid-19 epidemic phase. 
  • China’s industry & energy output illustrates a widespread recovery, including of transport parameters.  Freight was moderately hit, and passenger traffic was stopped by lockdowns, though that is now recovering. 
    • China’s trade with Australia means that iron or, at >USD 100/t cfr) has made a significant contribution to Australian accounts.  Australian Government forecasts are using a forecast price well below USD 80/t cfr.   

SUMMARY  

*Copper  Disruption to copper scrap supply is roiling the Cu market. 

*Cobalt  Increased uncertainty of sourcing of Co metal  & Co salts is leading to price rises in China.  

*Nickel  Stainless steel sector outlook is driving Ni demand, not EV markets.  Musk is short of supply..

Zinc & Lead  Sluggish markets (covid affected) leads to increased exchange stocks.  

*Tin  Indonesian supply remains the segment to focus on.  Demand is covid-affected.    

Aluminium  USA is suffering a ‘shortage’ of beer cans.

*Gold  The younger aged Au-Ag deposits could prove to be the ‘worst house in the street’. 

*Platinum & Palladium  WA developed new process for treating Pt ores may assist in Kimberley (WA) deposits. (PAN)

Oil  Oil prices rising on improving economic data but dampened by fears of covid impacts. 

Coal  China has yet to show any signs of easing import controls. 

Iron Ore  Chinese steel mills are facing squeezed margins due to rising cost of raw materials. 

Shipping  Cape rates are diverting demand to other vessel types.   

General 

*World Steel:  Global output for June recorded positive growth rates, as it starts to recover.  

*China – Industry & Energy output:  Generally a solid recovery post-Covid-19 is under way.

*China – Transport:  Freight is getting back to pre-covid levels.  Passenger traffic is still recovering.