USA – Housing Starts, Industrial Production, Electricity End-Use, Bond Yields
- USA is slowing! Data this week reinforces last week’s OECD CLI implications.
- 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. However sentiment (geopolitical) continues to drive prices over fundamentals.
- Several metals (Ni & Co this week) are showing signs that reduced supply is likely to lead to higher prices.
- Outlook is for ‘not enough’ new mine supply in coming years (the next decade), for several key commodities.
The theme of the Resources Rising Stars conference at the Gold Coast earlier this year is appropriate: “Pick the stock, not the market”.
*Copper Codelco optimistic about long term price for Cu. Short term prices pressured by growth concerns.
*Cobalt Co price is up on news that Glencore is shutting its large DRC mine.
*Nickel Philippines’ largest exporter of ‘high’ grade Ni laterite ore is to shut upon depletion of its Reserves.
*Zinc & Lead ORN calling for ongoing need for more Zn & Cu production. Nyrstar Pb smelter stopped again.
*Tin Trump acknowledges that tariffs increase domestic prices. Delays new tariffs till after Christmas.
Aluminium Beijing announced additional import scrap quotas.
*Gold Gold price gains as faith in Central Banks is about to be tested again.
Platinum & Palladium Progress … of sorts … being made in wage negotiations with AMCU..
*Oil .Russia & China have stuck by Venezuela, though that may change.
Coal A weaker CNY, a safety campaign, shipment restrictions, though premium HCC is preferred.
Iron Ore Beijing’s stimulus restraint driven by low infrastructure spend, impacting prices.
Shipping Baltic indices, Cape, Panamax & Handymax up this week.
Port Hedland – Iron Ore shipments: Shipments down in July after a bumper June effort.
USA – Electricity End-Use: Total demand slowing, mostly in residential demand.
USA – Bond Yields: A historical review + Current 10yr-2yr curves ‘almost’ inverted. 10yr-3mo is!
USA – Industrial Production – Capacity Utilisation: Really slow IP growth. Cap Util is sub optimal.
USA – Housing Starts: House starts almost stalled.
Yields – USA
Comments of particular interest are noted with ‘*’.
- USA Yield curves are an odd shape in the current form, with a huge sag in the middle. A review of current and pre-GFC curves shows some differences. Some commentators consider the current duration has not been long enough. Others comment on the ‘shape’ of the curves. Opinions are invited.
- 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 met last week and cut rates a bit. Trump took umbrage and announced further “taxes” (tariffs) on Chinese imports. The markets took this hard, as a further level of uncertainty and volatility, and parts of the market appear to have capitulated. Base metals’ contangos is one example.
*Copper The size of the world copper market has been progressively underestimated.
*Cobalt Indian JV Co formed to seek sources of Li, Co, et al. Volvo cars with recycled Co produced.
*Nickel BHP Group plans to start production of nickel sulphate in the Jun20Qtr.
Zinc & Lead ZMI’s Kildare Zn project. Pb supply improving (for now).
Tin China switched to being a net exporter of refined tin last year.
*Aluminium: quote: “Trump’s trade war with China is backfiring and impacting the US economy”.
Gold Central Banks adding to holdings. Trump vows more tariffs on China. Global uncertainty increases.
Platinum & Palladium WPIC upbeat on surge in Pt EFT holdings.
*Oil USA share of growth is strong, with light crude; heavier Iranian and Venezuelan output is down..
Coal China again planning to limit imports, after a strong start to the year.
Iron Ore China prices fell as Brazilian exports picked up, on Vale restarts.
Shipping Freight rates slowed from a peak earlier in July.
*USA – Yield Curves: an examination of the current and an earlier period. A signal not a cause.
USA – PMI: Still positive, though still slower outlook.
*USA – Construction Spending: -ve growth for Total and Private & Residential spends.
Japan – Industrial Production: slow down for IP and several segments.
China – Interest Rates
This week’s comments of particular interest are noted with ‘*’.
Copper Concerns of impact of trade tensions continue to ease.
Cobalt Low cost of mining in DRC provides buffers against new high royalties for strategic minerals.
Nickel Inventories continue to fall. Prices yet to really recover from the trading war rout.
Zinc & Lead Zn market deficit deepens. G1A and PMY developing Pb-Ag deposits.
Tin Tin usage growth is slowing as tariffs compound longer term weaknesses in the Sn usage profile..
Aluminium Japanese premiums reduced slightly. Global output increasing.
Gold Indian dowrys.
Platinum & Palladium Pd outperform short term. Pt outperform long term.
*Oil Russia’s oil production increased to a new post-Soviet high, ahead of OPEC meeting.
Baker Hughes Rig Counts:
*Coal NipponSteel benchmark metallurgical coal settlements.
Iron Ore China’s iron ore (physical) trading platform seeing record volumes.
Shipping Demand eased for Capes and increased for Panamax.
*Interest Rates/Yields – Australian and USA: comparisons link short term differentials to FX
*PinchPoint updates: Holidays are now over. Inventories are falling with some price responses.
*China – Industry and Energy Output: slower but positive for energy, & other select areas.
USA – New Housing Starts: strong positive growth.