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.
Steel and Gold
Comments of particular interest are noted with ‘*’.
Supply issues continue to abound, keeping some tension in most metals markets.
While much is made (fears) of slowing Chinese output data, freight traffic (this week) shows material being transported about the country is growing at pace. Also (see last week’s issue) electricity output/demand continues to grow strongly.
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*Copper “Don’t listen to what miners say. Look at what they do”. Cu outlook is tight!
*Cobalt Co sales from DRC delayed further, on government concerns of U-removal technology.
*Nickel Ni market slowly tightening. Analysts continue to see deficits ahead.
Zinc & Lead AZI’s progressing eval’n of Zorzone. Zn prices high on concerns of weak Chinese refined output.
Tin Alternative Sn supplies drawn down as Indonesian uncertainty continues.
Aluminium Chinese smelters alternately are re-opening and shuttering capacity. Electricity prices becoming an issue.
Gold Central Bank buying at 2nd-highest levels on record, highest since 1971.
*Platinum & Palladium WPIC outlook for refined Pt output to grow on increased South African and USA production.
Oil America is producing the wrong kind of oil, for many refineries, and limiting global heavy oil output.
Coal China’s import controls disrupting only Australian coal, so far.
*Iron Ore Iron ore market forecast to move into deficit this year on Brazilian supply issues. Price up on Brazilian dam breaches.
Shipping Rates impacted by looming Chinese New Year (5 Feb) and Brazilian dam breaches.
*World Gold Council: Gold Supply & Demand – Dec Qtr is often a high demand Qtr.
*World Steel: positive growth continues, for the world, driven by the few.
*China – Freight traffic: strong growth. A lot of material is being moved in China.
USA – Construction Spending: growth is positive, slower, (and more sustainable).
Global steel production reflects industrial and economic activity. For October the highlights are a surge from China and more widely, including from “other world”.
Pinch point graphs for the base metals continue to show tightening markets with reduced exchange inventories, with perhaps the beginnings of price responses.
This week’s comments of particular interest are noted with ‘*’.
*Copper The big guys, FMG, BHP, RIO all increasing focus on copper exploration (and discoveries).
Cobalt Industrial customers working toward better conditions for DRC miners.
Nickel Ni market described as tight in China. Demand increasing.
*Zinc & Lead Zn: stocks falling, backwardation deepening. ORN discovery. Pb – China now a net importer.
Tin If MIT is right in its findings, there is a slow-burn bull fuse smoking away in the tiny tin market.
Aluminium Primary Al production will not meet demand in 2019 say Norsk Hydro.
*Gold The China-USA G20 ‘agreement’ is not so much an agreement as a 90 day ‘ceasefire’.
Platinum & Palladium WPIC increased its forecast for a Pt surplus.
*Oil USA about to become a net energy exporter. OPEC and others considering restrictions.
*Coal Tariffs and Trade-wars: Jobs are created with fanfares. Jobs disappear quietly.
Iron Ore High grade ore premia have been hit hardest in China.
Shipping Capesize rates rebounded on iron ore and agri-trade.
*World Steel: Strong growth, particularly a surge in growth from China, and globally more widely.
*Copper Copper’s current positive internal dynamics are increasingly at odds with its price. It is not alone.
*Cobalt DRC cobalt is favoured because of availability, and low As levels.
*Nickel International consortium looking to produce Indonesian Ni for EV batteries.
Zinc & Lead Zn Air batteries – developed and in use, for stationary storage.
Tin ITA forecasts a slowdown In Sn demand growth, due mainly to Chinese growth rate expectations.
Aluminium Notes at Metal Bulletin’s Aluminium Conference – Berlin. Tariffs will not solve China’s overcapacity.
Gold Prices are seeing little reaction & remain below key psychological level of USD 1,200/oz.
Platinum & Palladium Zimbabwe’s policy changes aimed at attracting investment. More change may be needed.
*Oil The OPEC agreement has been well managed. But, more oil needs to be discovered.
*Coal Fire at North Goonyella! South Africa’s new Mining Charter may need further revision(s).
Iron Ore Chinese policy of shutting inefficient polluting mills drives demand for high grade feed materials.
Shipping Panamax rates up while Cape rates flat, ahead of China’s October week holidays.
*South American Exchange Rates: Chile, Peru, Argentina, Brazil.
*Base Metal PinchPoint graphs: Inventories continue to reduce (except Sn).
*World Steel: Healthy August yr-on-yr and 12-month yr-on-yr growth.
*Seaborne Coking Coal: Australia dominates seaborne coking coal supply but patterns are shifting.
USA – Durable Goods, Vehicles, Electronic goods: strong positive growth.
Copper Cu set for price increases from several factors.
Nickel Metal Bulletin opens a price spec for China ex-works NiSO4.
Zinc & Lead Zn short-sellers may have hit a bear trap. G1A drilling to complete in August.
Tin ELT MOU in Malaysia.
Aluminium Gyrations on US tariff changes/retractions. Pressure off Rusal. Deficit ahead.
Gold Price may endure a seasonal ‘lull’ then rise in September. Autumn in China is high-demand.
Platinum & Palladium Unprofitable SA shafts closed. Mines not expected to close near term.
Oil Global oil consumption increased to a new record high in 2017.
Coal Coking coal markets seeking direction. Thermal prices down on reduced interest (on low CNY?)
Iron Ore Iron ore markets relatively calm, despite Trump’s tariff threats.
Shipping Capes upon iron ore demand, and Panamax rates also up.
World Steel: broadly positive growth including a surge in Chinese output.
PinchPoint updates: Ni, Zn, Pb then Cu positions in particular, indicate tight markets.
USA – Durable Goods, Vehicles, Electronic Products: good growth.