SP Angel – Morning View – Wednesday 13 02 19
Australian flooding strikes zinc and lead shipments
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Australian metal shipments disrupted by flooding
- Floods in Australia's Queensland state are set to disrupt the rail delivery of zinc exports to the northern port of Townsville, with analysts reporting up to a month of inaction. The 1,000km (620m) rail line is used by miners including Glencore, MMG Ltd and South 32 to carry zinc and lead concentrate from the Mt Isa region, with at least one miner eyeing more expensive trucking.
- Townsville port ships about 40% of Australia's zinc production, equal to about 700,000tpa or 5% of global supply.
- Flooding rain raked the northern Queensland coast last week, before sweeping inland and submerging vast tracts of outback under record-breaking depths of muddy water.
- Line operator Queensland Rail said it was waiting for floodwaters to subside so it could assess the damage, with a 400 km stretch of track closed between the towns of Cloncurry and Hughenden.
- "First they have to wait for the flood waters to recede to assess the damage. And then it depends if it's damage to the rail line or damage to the embankments. If you've got serious earth moving to do, that takes time," said AME Group in Sydney.
- Glencore said its North Queensland operations were continuing and that it was monitoring the transport network situation, while MMG said it was considering the use of trucks. "We are aware of the impact to the rail logistics and are seeking alternative transportation arrangements involving the trucking of concentrate to the Port of Townsville," MMG said.
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Economics
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- “If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” Mr Trump said at the beginning of a cabinet meeting on Tuesday.
- MSCI Asia Pacific (ex Japan) climbed 0.6% to the highest level since early October while Japan’s Nikkei is up 1.3% at an eight-week high on the back of the news.
- S&P 500 futures are up 0.3% this morning close to the highest level since early December and building on a 1.3% increase on Tuesday.
- Another positive announcement came from Cleveland Fed Head Loretta Mester saying on Tuesday that the Fed will chart plans at coming meetings to stop running down its balance sheet – easing concern that the Fed would continue its $50bn per month reduction of the balance sheet until incoming economic data warranted it.
- On the Congressional border security deal, Trump expressed displeasure with the latest proposal and said he had yet to decide whether to support it.
China – Apple iPhone sales are reported to have dropped 20%yoy in Q4/18 amid slowing economic growth rates and increasing competition from local producers, industry research firm IDC said on Monday.
- A 19.9%yoy decline came amid a 23.3%yoy increase in Huawei sales with Apple market share reduced to 11.5% form 12.9% in the previous year.
- “Besides regular performance upgrades in 2018 and small changes to the exterior, there has not been any major innovation that supports users to continue to change their phones at the greatly increased prices,” the report read.
- “The severe macro environment in China and the assault of domestic brands’ innovative products have also been reasons for Apple’s continued decline.”
UK – Olly Robbins, PM’s personal Brexit advisor, suggested May would offer MPs an extension to the Article 50 as opposed to threatened no-deal scenario, according to ITV news.,
- Robbins was overheard in a Brussels hotel bar claiming that MPs are likely to be faced with a choice to support PM deal or face a delay to Brexit.
- “Got to make them believe that the week beginning end of March… Extension is possible, but if they don’t vote for the deal then the extension is a long one,” Robbins was reported as saying.
- The news undermines PM’s insistence that MPs need to support her proposal amid a potential for a no-deal exit.
- The pound is little changed this morning hovering around the 1.2905 mark.
- Inflation came back below the BoE 2% target for the first time in two years allowing the central bank to delay monetary tightening.
- CPI climbed a less than forecast 1.8%yoy in January, down from 2.1%yoy in December and 1.9%yoy expected, marking the slowest pace since January 2017.
- Weaker inflation has been driven by cheaper auto fuel as well as a sharp drop in gas and power costs after price caps were imposed by the energy regulator came into force on January 1.
- Core inflation (excl food, energy, alcohol and tobacco) stayed at 1.9%yoy, in line with estimates.
- Slowing inflation is also good news for consumers enjoying growth in real earnings which in turn bodes well for demand.
South Africa – The largest labour group staged a nationwide protest affecting eight major cities on Wednesday.
- The walkout was called by the 1.6m-member Congress of South African Trade Unions, which backs the ruling ANC.
- While unemployment remains the union’s primary concern – recent announcements made by President Cyril Ramaphosa on reforming of Eskom, the nation’s power supplier, is also regarded as a catalyst to the nationwide discontent.
- This in turn raises risks of further load shedding at Eskom that currently stands at Stage 3 should employees decide to abandon their posts or if there is an act of sabotage.
- Eskom is currently aiming to halt load shedding by the end of the week as a number of generating units went out of service due to breakdowns.