World in Recovery Mode

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:    The world is recovering from a low disrupted space, and recovery is unlikely to be uniform, nor without volatility.  Raw materials are essential to maintain existing demand requirements, and for future growth.  Supply chains and demand levels have been disrupted differently, often according to regional epidemic outbreaks.  Timing and impacts of Covid-19 epidemics have been different in: China, vs USA, vs Europe, vs Africa, vs South America, and then South East Asia, and little old Australia. 

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.   Inventories at exchanges continue to reduce.  Copper price in particular breaking upward, on the pinchpoint graphs, as industry restarts post-Covid-19 in several areas.   Base metal inventory levels can now only be described as tight.  Any material supply disruption or surge in demand may trigger marked price responses. 
  • Iron ore demand remains firm with China’s surging steel output.  How long before China satiates domestic demand and resumes steel exports?  When will its (developed economy) export markets have recovered enough to resume import demand?
  • China’s freight & passenger transport showing good recovery post-covid.  China’s worst month was February (during Chinese New Year)
    • Demand for steel raw materials, Cu & Co is strong.
  • Japan’s industrial production is recovering.  Japan’s worst month was May 2020.  Its recovery is lagging China’s.
  • USA’s yield curves with yields below 1% out to 3 yr terms hint that is may be some time before USA really recovers.
    • Construction spending (July) was flat. 
    • Its PMIs (August) are very optimistic. 
      • Worth noting that PMIs are ‘soft’ data, reflecting managers’ ,expectations’ for the near future.  It remains to be seen how expectations are borne out.  In the past, correlations have been reasonable, though this time, there are marked inconsistencies.  July’s durable goods orders were not good, though vehicles orders soared.  July Housing Starts look to be recovering well, but Construction Spending is flat and faltering.
  • Oil demand for 2020 is forecast to face further (covid) reduced demand.  Rig counts do appear to have bottomed globally, though USA & mid east numbers reduced recently.  OK so energy ought to be cheap at least in the near future and not an impediment to (other) recovery.

SUMMARY  

*Copper  Global Cu market may be on the cusp of a supply squeeze.  

*Cobalt  Cobalt salt (OH & SO4) prices surged.  Supply disruption & strong demand from electronics. 

Nickel  SLN & Eramet seeking to revive New Caledonian Ni operations. 

*Zinc & Lead  Miners becoming more optimistic about outlook.  Though Zn is currently in surplus, for now.  

Tin  MLX plans to increase output at Renison, with new longer life plan.  Aust is a significant producer.     

Aluminium  Japan’s LME Al premium reduced in recent contract settlements. Will other regions follow?

*Gold  USA labor data softened Au price, though ahead are ample geopolitical risks and a USA election. 

*Platinum & Palladium  CLQ to drill a new Pt zone at its Sunrise project, including dunite targets.

*Oil  Global oil demand forecast to decline in 2020.  Russia supporting an OPEC+ response proposal. 

Coal  Metcoal prices up on demand.  China finessing its import sources.  Japan’s thermal imports up.

Iron Ore  FMG has approvals to expand output.  BHP launches LNG-fuelled bulk carriers.  Brazil blockchain.

Shipping  Freight rates reduced this week, across the board.  

General 

USA – Treasury Yields:  Low yields for up to 3yr terms.  Is USA’s recovery after 3 yrs?. 

*USA – Construction Spending:  currently very low growth – flat!

*USA – Purchasing Managers’ Index:  Strong outlook.  nb: this is a ‘soft’ index – opinions..

*Baker Hughes Rig Counts – World & North America:  Rig count appears to have bottomed.

*China – Transport – freight & passenger:  Traffic is recovering.  Passengers taking longer.

*Japan – Industrial Production:  Recovery has started.  May was Japan’s worst month.