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Morning View - Palladium and platinum price parity draws nearer

Morning View - Palladium and platinum price parity draws nearer

Highland Gold (LON:HGM) – Belaya Gora/Blagodatnoye PFS and MRE update

Rio Tinto (LON:RIO) –Stronger commodity markets in FY17 drive a surge in Group earnings

 

Cape Town’s mining conferences, seminars and lunches are drawing to a close

  • The 10,000 miners, geologists, financiers, drillers and other services are packing up to return back to base.
  • Cape Town’s water shortage highlights the need to preserve scarce resources.
  • With the taps due to be turned off in April everyone is focussed on how to preserve supply.
  • Politics, as always, play the largest part with central government seemingly happy to do nothing despite warnings over many years, preferring to wait for the inevitable catastrophe which many will blame on local government which is no the ANC.
  • The water shortage is exacerbated by the influx of some 3,000 new families into the municipality each month and the refusal of some communities to cut back on usage
  • Similarities exist in the world of mining where financial liquidity is seemingly insufficient to fund many new mines and where the world risks shortages of most if not all metals even without rapid growth in Electric Vehicles
  • Politicians through regulators are restricting  reservoirs of liquidity managed by banks. Fortunately traders and other capital sources are funding the better projects while more forward looking juniors and miners are working on the next generation of new mines with the collaboration between Newcrest and SolGold showing the way ahead

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

-0.08%

at

24,893

Nikkei 225

 

+1.13%

at

21,891

HK Hang Seng

 

+0.42%

at

30,451

Shanghai Composite

 

-1.43%

at

3,262

FTSE 350 Mining

 

-1.41%

at

17,978

AIM Basic Resources

 

+1.84%

at

2,538

 

Economics

 

China – Exports and imports beat estimates in January on the back of the timing of New Year celebrations and higher oil prices.

  • Inbound shipments jumped 36.9%yoy with imports of crude oil coming in at a record 40mt, up 7m on December and a new record high in volume terms based on customs data from 1993.
  • Lunar New Year holiday fell in January in 2017 skewing numbers compared to this year’s celebrations which are scheduled for mid-February.
  • Exports (%yoy): 11.1 v 10.9 in December and 10.7 forecast.
  • Imports (%yoy): 36.9 v 4.5 in December and 10.6 forecast.

 

Germany – SPD members are due to vote on the third “grand coalition” with Merkel’s conservatives with results due on March 4.

  • Coalition partners have been offered a control over the finance ministry with the SPD leader suggesting to increase the government spending programme.
  • Trade levels climbed to record high levels last year with increase exports and imports recorded both inside as well as outside the EU bloc.
  • Exports climbed 6.3%yoy to €1.3tn, while imports were up 8.3%yoy to €1.0tn.
  • Exports (%yoy): 0.3 v 4.1 in November and -1.0 forecast.
  • Imports(%yoy): 1.4 v 2.2 in November and -0.7 forecast.

 

UK – The BoE is expected to vote unanimously to hold rates unchanged with a quarterly inflation report to provide MPC guidance on projected GDP and CPI growth rates.

  • Regions of the UK that voted Leave in the 2016 EU referendum are estimated to post the strongest declines in forecast growth rates, FT reported based on government data.
  • While nationwide losses in potential growth rates over the next 15 years varied from 2% to 8% depending on terms of the Brexit deal, London which voted heavily for Remain would be least affected with a forecast drop in rates of 1-3.5%; whereas, the north-east and West Midlands losses are estimated to range between 2.55 and 16%.
  • Property sales and buyer enquiries continued to decline at the start of 2018, according to the RICS data.
  • While prices climbed higher at the national level, regional price performances varied with London, the South East, East Anglia and the North East recording declines.
  • “Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way despite the downbeat headlines,” RICS reported.
  • The agency forecasts prices to be somewhat flat at a national level over the next three months, but to rise over the course of the year everywhere except London; although, the projected prices decline in the capital over the next 12 months is smaller than it had been predicted before.
  • Reuters forecasts prices to grow by 1.3%yoy in 2018, but decline by 0.3%yoy in London.

 

Currencies

US$1.2235/eur vs 1.2407/eur yesterday  Yen 109.63/$ vs 108.95/$  SAr 12.102/$ vs 12.084/$  $1.385/gbp vs $1.397/gbp  0.781/aud vs 0.787/aud  CNY 6.321/$ vs 6.276/$

 

Commodity News

 

Precious metals:         

Gold US$1,310/oz vs US$1,343/oz yesterday

  • Gold spot retreats toward $1,300 level to its lowest in almost one month, hurt by stronger dollar and bond yields holding around four-year highs. Bullion for immediate delivery lost as much as 0.7% to $1,309.83, the lowest since Jan. 10 as the dollar index climbed 0.6% to record its biggest one-day gain in more than three months. “The current weakness in gold is largely due to a recovery in the US dollar. We are also seeing some position-squaring in commodities ahead of the Lunar New Year holidays”.
  • The Federal Reserve will stick to its plan for “steady, gradual” interest-rate increases, despite market gyrations and strong data on US wage growth that has bond traders pricing in faster rising inflation. Chicago-Fed President Charlie Evans also notes that sustained inflation would warrant further rate increases, however sluggish price increases in the US give the reserve room to hold off on interest rate increases until at least mid-2018.

   Gold ETFs 72.1moz vs US$72.4moz yesterday

Platinum US$974/oz vs US$998/oz yesterday

  • The platinum/palladium price parity is nearing as last year’s gains in palladium begin to unwind as the price falls below the $1,000 mark. Platinum recorded a limited 3% yoy gain in 2017, rocked by a decline in the popularity of diesel vehicles in Europe and therefore catalytic demand, while its frequent substitute palladium surged more than 50% on increasing demand in gasoline vehicles and supply constraints.
  • As both metals contract from highs on the resurgent dollar, head of Asia Pacific trading at Oanda Corp. foresees “more downside on palladium than platinum over the near term” as speculative long positions unwind. Money managers increased their net bullish bets on platinum futures in New York to the highest since 2016 in the closing week of January, while those on palladium dropped to the lowest since November. Further, refiner Heraeus Holding GmbH expects a rebound in industrial consumption and small shortage in platinum supply this year.
  • Russia is looking to capitalise on shortening supply to become the biggest producer of platinum and palladium to double the nation’s output. MNC Norilsk Nickel PJSC, Russia’s top platinum group metal (PGM) miner looks to joint develop three deposits with a local rival to access one of the world’s largest untapped resources. The $4 billion investment venture was sealed this week as Chief Executive Officer Vladimir Potanin signed the deal with Russian Platinum. The joint venture looks to deliver as much as 100 metric tonnes (3.5 million ounces) of palladium and platinum per year, approx. half of the output from South Africa, the world’s largest supplier.
  • The Maslovskoye deposit is also rich in nickel, copper and cobalt, positioning the project to capitalise on more stringent demand for catalytic converters and rising electric-vehicle production. The combined reserves at the three fields are an estimated 3,100 tonnes of palladium, 1,200 tonnes platinum, 2.7 million tonnes of nickel and 3.6 million tonnes of copper.

Palladium US$986/oz vs US$1,024/oz yesterday

Silver US$16.27/oz vs US$16.88/oz yesterday

           

Base metals:   

Copper US$ 6,832/t vs US$7,097/t yesterday

  • Copper prices dropped by almost 3% as broad base metals retreat during a week of volatile trading. Investor concerns are rising that fundamentals do not justify the current elevated price for the red metal with Julius Baer analyst commenting that “instead of just focusing on the global growth outlook, which is positive, you should keep an eye on what we call China’s old economy – the property market, the infrastructure segment. That’s where we expect a slowdown sometime this year”.
  • Concerns over supply disruptions from Chile, the world’s top supplier, extend beyond ongoing wage negotiations as copper shipments slump as heavy swells interrupt operations across the country’s main ports. The major copper-producing nation shipped $2.58 billion of the red metal during January, recording the biggest monthly decline of 33%. The Mejillones port, which serves copper mines in the Antofagasta region was closed from Jan. 20 to Jan 28. as stormy seas restrict operation.

Aluminium US$ 2,153/t vs US$2,189/t yesterday

Nickel US$ 12,905/t vs US$13,380/t yesterday

Zinc US$ 3,380/t vs US$3,481/t yesterday

Lead US$ 2,497/t vs US$2,615/t yesterday

Tin US$ 21,365/t vs US$21,635/t yesterday

           

Energy:           

Oil US$65.3/bbl vs US$66.9/bbl yesterday

  • Oil prices faltered as US crude oil production is set to increase by more than 1.2 million barrels per day in 2018 as oil exports spread to more than 30 nations. Since the repeal of a 40-year ban on oil exports two year ago, a flood of US shale oil has effectively undercut global crude prices and eroded the clout of the Organization of Petroleum Exporting Countries.

Natural Gas US$2.720/mmbtu vs US$2.777/mmbtu yesterday

Uranium US$22.15/lb vs US$22.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.0/t

  • China’s iron ore imports surge to the second highest levels on record in January as the world’s top buyer continues to enhance stockpiles ahead of the Lunar New Year holiday and the immanent lifting of the steel production curbs scheduled next month. Shipments of the steelmaking raw material rose 19% into the new year to 100 million tonnes, according to customs data. The delivery settles second on the highest delivery, with September 2017 figures recording 102.8 million tonnes.
  • There is also strong demand, restocking before the holiday and some mills were also preparing for restarts after the winter season”, according to CRU analyst. In mid-March China is set to lift steel production curbs across 28 cities as the winter heating season clears and air particulate levels subside.

Chinese steel rebar 25mm US$640.5/t vs US$645.0/t

Thermal coal (1st year forward cif ARA) US$78.7/t vs US$81.4/t

Premium hard coking coal Aus fob US$224.5/t vs US$221.9/t

 

Other:  

Tungsten APT European US$317-325/mtu vs US$315-320/mtu last week

 

Cobalt LME 3m US$80,750.0/t vs US$80,750.0/t

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