Work in Progress – 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. 

  • Covid lockdowns have widely been the main drivers of very sharp declines, much sharper than prior economic or financial crashes, to deep levels, from which, in many cases recovery has yet to achieve prior levels.  For some economies it may be a matter of time required for recovery.  For some however, each past ‘crash’ has resulted in recovery to a slightly lower level. 
  • Base metals’ pinch-point graphs continue to show metal prices rising, copper in particular, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.  
    • 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? 
      • Matau suggests a further 4-6 months may be required for the lagging economies, though these need to gain control over Covid infection rates.
      • Widespread availability of vaccines may be about 12 mo away (if a successful one is generated) according to epidemiologists.
  • China’s industry and energy output is broadly recording positive growth.  China’s worst month was February (during Chinese New Year), eight months ago.
    • Demand for steel raw materials, Cu & Co is strong. Nickel is likely the next to respond, as Zn & Pb are reported in surplus. 
  • Singapore shipping data supports the Chinese data with positive growth in bulk materials, fuels, and a return to positive growth in container shipping.
    • Passenger shipping traffic however was flattened, and perhaps may not recover in its original format, and is likely to take a long time to recover to original levels, if it does.
  • Germany’s industrial production is recovering, with positive growth in several segments
  • UK’s industrial production is recovering from its low, though most segments have yet to record positive growth. 
  • As noted two weeks ago, USA’s yield curves with yields below 1% out to 3 yr terms hint that is may be some time before USA really recovers.
    • The USA Federal Reserve has now said that it expects yields to remain low for about 3 years. 
  • Oil demand for 2020 continues to be forecast to face further (covid) reduced demand.  OPEC+ is working, with variable success to corral its members to maintain discipline.

SUMMARY  

*Copper  Demand to rise from USA investment in infrastructure and global investment in green technology.

*Cobalt  China’s SRB expected to add to significant purchases of Co for stockpiles.   

Nickel  MCR restarting and progressing Kambalda area Ni project(s).

Zinc & Lead  IGB progressing Citronen Zn-Pb.   Zn & Pb markets in surplus.   

Tin  Indonesia & ITA expecting a material decline in world tin production this year.    

*Aluminium  USA withdrawing plans to impose tariffs on imports of Al from Canada.

*Gold  USA Fed expecting low yields for 3 years, though economic growth forecasts are looming.   

Platinum & Palladium  Industry giving consideration to substitution from palladium back to platinum for auto-catalysts.

*Oil  Oil supply is currently excessive.  OPEC+ trying to corral its members.. 

Coal  LVPCI settlement for Dec20Qtr.  South Korea to reduce thermal power capacity (over time). 

Iron Ore  Chinese port inventories increasing.  Brazil’s Vale production looking to increase.  

Shipping  Cape rates increased while Panamax rates reduced.  

*General 

Port of Singapore – Shipping traffic:  Freight has good growth.  Passengers still suffering.

China – Industry & Energy Output:  Broadly positive growth across the segments.

Germany – Industrial production:  IP is struggling though durables are positive.

UK – Industrial Production :  recovering though still struggling.. 

USA – Industrial Production:  struggling to recover though durables & construction are positive.

USA – New House Starts: growth positive but subdued after a burst in July.