China, Singapore

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:

  • Sorry Gold Bugs!” A major investment house has sold its interests in gold, assessing that the returns in such a low interest rate environment from a non-earning risk protection investment, do not justify holding costs.  Matau prefers to hold gold interests in equities that have production growth.  Production growth (along with other key criteria being met) assures better cash flow growth in all phases of price cycles, than non-growth entities.
  • While the world is progressively recovering from the Covid-19 pandemic, Covid is still seriously impacting shipping causing meaningful delays and cost increases.  An example here shows the impact and delays in shipping a container of shoes (per shoe) from China to Los Angeles.
  • Singapore shipping traffic shows a reduction in traffic in July & August, notably in bulk commodities, with recent reductions also in tankers.  Container traffic is also affected but less do than other segments.
  • In the light of the above, and China’s trade battles, China’s Industry and Energy data is worth examination, as it provides granularity to what is otherwise usually highly generalised statements.  
  • Base metals’ pinchpoint graphs continue to highlight tight markets.  Matau believes such short supply is ill-positioned to feed supply into the strong growth forecasts for uptake (particularly manufacture) of ‘new-energy’ goods.  

SUMMARY  

*Copper  Concerns over labour action in Chile is dissipating, as labour contracts are agreed. Chile’s miners have widely settled labour contract agreements (ranging fro 3-5 yrs) without notable strike action.

*Cobalt  China plans to encourage mergers in the NEV segments to achieve size (market power).   This is consistent with China’s other campaigns (iron ore & other) to merge intra-segment entities to generate larger companies with more global market power. 

Nickel  Nickel mine production is forecast by Fitch to grow strongly from 2021-2023.

*Zinc & Lead  Zn mines recovering from Covid (ex China).  Covid outbreaks in China are threatening mine growth.

*Tin  New tin supply is not keeping pace with growing demands.     

*Aluminium  A disruption to bauxite supply from Guinea remains a concern, particularly for China & Russia.

*Gold  “Sorry gold bugs!”.  World’s largest fund manager steps away from gold.

Platinum & Palladium  Of the PGE’s Pd has is in the best position for price recovery.

*Oil  Iran plans to boost oil exports despite remaining USA sanctions. 

Iron Ore  Reduced Chinese steel output drives less iron ore imports and lower prices. 

Shipping  Baltic indices show that shipping is in strong demand.  Possibly tightness due to covid delays. 

General 

*Singapore Shipping:  Traffic generally slowed down for the past couple of months. Passenger shipping traffic has recovered (oddly in total gross tonnage terms, though the numbers of ships reported have dropped markedly, implying that it is only the big ships that are returning … so far).

*China – Industry & Energy Output:  Steel down markedly, manuf. goods mixed, generally up.