World Steel and China
Comments of particular interest are noted with ‘*’.
- There is a lot in this week’s issue … reading is recommended.
- World steel output continues positive growth, supported by expected Chinese infrastructure spending, and despite sanctions / tariffs.
- Chinese industry and energy output for June reported largely positive growth. Electricity generation remains strong. The rise of electricity and natural gas is closely connected in the industrial and residential sectors, as these energy sources provide a good match for the needs of lighter industrial sectors and for a population increasingly concerned about local air quality, according to IEA. It is estimated that by 2040, the average Chinese household will consume twice as much electricity as today.
- Base metal inventories continue to remain tight. Most prices are in the ‘nose of pinch-point graphs. Pinchpoint positions are mostly less than 1 week’s consumption. More media commentary is recognising this condition. However sentiment (geopolitical) continues to drive prices over fundamentals.
- The USA Fed meets Wednesday to consider rate cuts. A 0.25% cut is anticipated, however a 0.5% cut would likely change the USA yield curve back, from inverted, to normal. Gold bulls are hoping for the latter cut.
*Copper Concentrates penalised for As content. TC/RC’s strongly favour ‘clean’ concs.
*Cobalt International consortium plans large Ni-Co plant at Morowali in Sulawesi.
*Nickel Recent Ni rally on ‘not news’ easing. Potential medium term shortfalls for Co, Li, & Ni.
*Zinc & Lead Qld miners hit by anti FIFO rules. Neves Corvo Zn expansion delayed and increased cost.
Tin PT Timah expects to double Sn output in 2019. … may acquire output of illegal miners
Aluminium Canadian Al producers benefit from tariffs, USA consumers do not.
Gold Central Bank Gold Agreement (CBGA) to be discontinued upon expiry.
*Platinum & Palladium Zimbabwe talking (so far) of unwinding high political risk elements, to attract investment.
*Oil Natural gas gaining more traction as best on-demand energy production source.
*Coal Japanese utilities testing off-spec thermal coal products.
Iron Ore Expectations of Chinese infrastructure stimuli continues to support Fe ore prices.
Shipping Capesize & Panamax rates slipped this week.
*World Steel: positive growth continues led by China and other Asia.
Marine Traffic & Port of Singapore traffic: Tanker traffic +ve, Bulks & Containers -ve growth.
USA – Interest rates, yields: Fed to consider rate cuts on Wednesday.
USA – Durable Goods, Vehicles, Electronics & Computers: Durables -ve, Vehicles +ve, Elect +ve.
*China – Industrial & Energy Output: more positive than negative growth items.
USA – Japan
Comments of particular interest are noted with ‘*’.
Supply issues continue to abound, keeping some tension in most metals markets. However as China’ ShFE resumed trading, seasonal factors are reported to have led to significant increases in Cu and Zn stock on that exchange.
Geopolitical factors continue to daunt and disrupt global investment and industrial markets.
Copper Chile tightening use of water (by miners) in the Atacama.
Cobalt NGOs oppose LME plans for banning tainted (DRC) et al) cobalt.
*Nickel Ni deficits forecast to continue in 2019. Eramet to focus on reducing costs in New Caledonia
Zinc & Lead Zn TCs increased.
Tin Bolivia’s Huanuni Sn mine is now delivering concentrates.
Aluminium Chinese smelters appear to be struggling under low prices.
Gold Contradictory macro data and news flow have kept the commodity market volatile recently.
Platinum & Palladium AMCU has sent strike warnings to Sibanye-Stillwater, and six other companies.
Oil Prices rising on optimism on progress in China-USA trade talks.
Coal Coking coal prices remain in uptrend, despite Chinese port blocks.
Iron Ore Significant amounts of Vale’s export iron ore is at risk during 2019.
Shipping Freight rates recovering post Chinese NY.
General *USA – Treasury Yield Curves: quite flat but key curves not inverted.
*USA – Industrial Production & Capacity Utilisation: Positive growth at reasonable rates.
*USA – Durable Goods, Vehicles, Electronic goods:
*Japan – Orders to Machinery (segments): Orders fell in December but were +ve over 12 mo.
LME metal inventories continue to decrease, tightening base metal markets even more. A variety of issues are disrupting each of the commodity markets.
*Copper 2018 is turning out to be a surprisingly almost disruption-free year.
*Cobalt Cobalt supply growth might not be able to keep up with demand growth.
*Nickel It is easy to wax lyrical about reducing metal content in batteries. It has to be commercial, & work!
*Zinc & Lead Zn concentrate demand constrained by disrupted demand from smelters. Market is still tight.
Tin Sn solder expected to see boosted demand from ~2022-25 from EVs.
Aluminium WTO to consider opening investigation into USA’s section 232 Al & steel tariffs.
Gold Looking toward the G20 summit at end Nov, and potential for agreement between USA & China.
Platinum & Palladium Zimbabwe continues plans to build a refinery for PGMs & base metals.
*Oil G20 summit meetings may pre-empt the OPEC meeting in early Dec. US producers hit by prices!
Coal China’s port restrictions playing havoc with (spot) trade.
Iron Ore Falling Chinese steel prices reduced demand for high quality iron ore.
Shipping Bulk freight rates decline for a fifth week.
*USA TWI – correlations with commodity prices: Best for gold, and variable otherwise.
USA – Housing Starts: Down in the NorthEast and South regions in particular.
USA – Industrial Production & Capacity Utilisation: slowed a bit, but steady growth.
USA – Durable Goods, Vehicles & Electronics & Computers: growth in durables & vehicles.
China Freight, Industry and Energy, World Steel
The markets’ commentary increasingly flags the polarisation of fundamental factors vs sentiment drivers, that appear to be the dominant forces. What catalyst is necessary for the industry fundamentals to grab the attention of sentiment?
Copper Sentiment and fundamental conditions for Cu remain poles apart.
Cobalt Glencore resumed output from DRC operations at Katanga.
Nickel Eramet’s New Caledonia operations are struggling, under high costs (and protests).
Zinc & Lead Sentiment & analysts rate Zn’s outlook poorly, though fundamentals are tight. Pb – G1A & TKM. .
Tin Change from last week’s opinion. Now ‘increased difficulty’ in supply from Indonesia.
Aluminium Global aluminium production growth has ground to a halt this year. Outages, alumina (& tariffs).
Gold Bhar is “cautiously bullish” on gold prices.
Platinum & Palladium Amplats’ ouput of Pt increased on improved operations’ performance.
Oil Oil market in turmoil. Sanctions on Iran, China-USA trade war, sentiment. Potential for oversupply.
Coal Metallurgical coal tighter. Indian demand, Chinese port restrictions. Thermal better supplied.
Iron Ore Tightness in the iron ore market looks likely to persist.
Shipping Panamax rates down, while Cape rates stronger.
China – Transport: If Freight is a good indicator of economies, China’s growth is not slowing.
World Steel: Continued positive production growth overall, including from China.
China – Industrial & Energy Output: +ve growth for: rolled steel, gas, electricity, air-conditioners, colour TV, Li-batts, plain glass.
USA – Durable goods, Vehicles, Electronic goods. Strong positive growth
*Copper USA & China ended trade talks with no major breakthrough.
*Cobalt Delays in rollout of 811 NCM batteries. Expected some years away for major adoption.
Nickel Nickel market in deficit during Jan-Jun 18, and for all of 2017.
Zinc & Lead Global Zn concentrate inventories have been at low levels since early 2017. Pb market is in deficit.
Tin LME will require DRC produced copper to be audited to prove it is ethically sourced.
Aluminium In USA old Al smelters are being restarted. In Russia they are being closed. China is unaffected.
Gold Price holding above psychological USD 12,000/oz level after Fed Chairman’s remarks.
Platinum & Palladium Platinum industry marketing into jewellery markets, with some success.
*Oil Oil prices up on Iran sanctions taking effect and concerns about USA-China trade wars.
Coal Met-coal usually deals with cyclones & tight supply/demand. Trade wars add more uncertainty.
Iron Ore Singapore Exchange is adding a high-grade iron ore contract to its markets. BCI, MIN, BCK
Shipping Cape & Panamax rates up on demand. Bad weather has tightened availability of ships.
*Japan – Orders to Machinery. Japan’s industry is showing a recovery from post GFC events.
Pinch Point updates: Inventories continue edging downward. Contangos tighten. Prices up.
USA New Housing Starts: Down slightly in July but improved on June.
USA Durable Goods, Vehicles, Electronics: positive growth.