Commodity Review 20210723 by Andrew Pedler – Now Available
China Industry & Energy, USA IP & House starts
Comments of particular interest are noted with ‘*’.
Matau’s Comments:
- China’s Henan (industrial and iPhone production centre) was belted by heavy flooding last week. Another typhoon is right now approaching Shanghai. Anticipate further disruption to transport, and possibly to industry.
- Base metal pinch-point graphs remain very tight. Markets are now considering something they have ignored for years … the “fundamentals”, which are carrying more weight than the other market force: “sentiment”.
- OPEC+ continues to consider raising output. Supply is forecast to remain tight.
- Iron ore prices remain high, despite China’s steel output restriction plans. China’s steel mill capacity utilisation has reduced. China’s iron ore output has reduced, somewhat in line with its oft repeated calls to reduce steel output, but demand remains strong and prices have only drifted off a little (i.e. remain high).
- Droughts in China (Yunnan province) continue to impacting production of Al, Zn & Sn due to hydro-power restrictions (at least for now).
- Newmont has flagged that the lockdowns and restrictions brought on by the Covid-19 pandemic is increasing business and operating costs. Expect that factor to be widespread.
- As previously … April through June, for most key countries, the base months in 2020 were the lowest base-readings data during the initial Covid-19 wave, meaning that yr-on-yr growth numbers are strongly influenced by the low bases. Do not be impressed by such big positive numbers. It may not be till the Dec21 Qtr when yr-on-yr growth calulations are more meaningful. Look instead at recent data relative to pre-covid levels, and trends, as a guide to performance.
Copper China to release more SRB metal stockpiles, attempting to influence prices.
*Cobalt First Cobalt successfully recovers metals from recycled Li-ion batteries. Technical success.
*Nickel BHP signs Ni supply agreement with Tesla.
Zinc & Lead Flooding in Henan disrupts transport but less so for output of key commodities.
Tin Sn prices at all time highs! Pandemic shutdowns are hindering supply chains.
Aluminium Al production growth has slowed markedly, on drought / power constraints.
*Gold Gold price has not really changed since January. Seek quality production growth.
Platinum & Palladium World’s major Pt producers turn to renewable energy to offset unreliable Eskom power supply.
*Oil Expectations that supply will remain tight through 2021.
Iron Ore China continues to attempt to limit production to 2020 levels. Demand is driving prices up.
Shipping Cape rates up, Panamax down.
General
China: Another Typhoon approaching Shanghai
*China – Industry & Energy Output: Steel and energy output positive growth.
*USA – Housing Starts: Positive growth (recovery from covid), rates are moderating.
*USA – Industrial Production: Growth strong yoy but flat mo-on-mo.