Japan – USA

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  This week, Friday to be specific, the global markets sense of un certainty jumped, because something that was not supposed to happen, did!  To date news flow from the USA has done little to really clarify the condition of the President, and the time-lines of his COvid-19 infection.  The status of the executives of the administration of the world’s biggest economy is in a state of flux, at best.

In Australia the outlook is for internal borders and some select international ‘travel ‘biubbles’ to open up progressively through the next six months or so.  That should improve the respective economic activities.

  • 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.   
    • Right now though activity appears to be slowing on several fronts. 
    • Total exchange base metal inventories reduced for each metal, though prices reduced in USD terms. 
  • China’s Golden Week commenced 1st October, during which time Chinese commercial activity usually ceases with traders absent from the market.  However our observation is that the iron ore markets appeared to continue to be attended to.  Until China fully returns to markets after Golden week (next Friday) the markets might not fully reflect ‘normal’ conditions. 
  • Japan’s Orders to Machinery have been reflecting a slowing industrial activity since about 2018.  Covid-19 caused a sharp drop, followed in most segments by a quick recovery  (yet to return fully to pre-covid levels.   
  • Last week the “USD strengthened against a long downward trend, without particular support of notable economics”.   This week it fell markedly due to the President’s news. 
  • Gold price rebounded somewhat this week. 
    • No notable reductions in geopolitical risk, nor any escalations.  UAE & Bahrain appear to be achieving benefits of a local outbreak of peace.

SUMMARY  

Copper  A near term (market) jolt, but outlook is strong on demand growth.

Cobalt  COB progressing its Broken Hill cobalt project pilot plant.  Aiming at battery Co precursor products.

*Nickel  Tsingshan Grp has withdrawn request for deep ocean tails disposal in Indonesia.

*Zinc & Lead  Zn prices to recover near term, though longer term outlook, beyond 2021, is to soften.  

*Tin  Tin prices are due to extend their rally next year, as demand for electronics grows.     

Aluminium  Market is expecting exemptions on Al exports to USA for Bahrain and UAE.

*Gold  Markets were in turmoil on Friday as something not expected, nor supposed to, happened. 

*Platinum & Palladium  Great Dyke clears diligence on the major Darwendale PGM project, a Russia-Zimbabwe JV.

*Oil  Crude oil is one of the most sensitive commodities to geopolitics and the USA economy. 

Coal  Covid-driven outlook for coal is sombre, though Chinese met-coal ports remain congested. 

*Iron Ore  Brazilian iron ore exports are recovering strongly. 

Shipping  Cape rates up on iron ore demand.  Panamax rates stable.

General 

*Port Hedland – Iron ore export:  +ve growth for August and for 12 mo to August.

*Japan – Orders to Machinery:  Broadly -ve growth, though have been declining since 2018

*USA – Purchasing Managers’ Index:  key segments positive, though lower than prior month.

*USA – Construction Spending:  Modest +ve growth, skewed to Public & Residential spending.