SP Angel . Morning View . Wednesday 29 12 21
Lithium carbonate prices jump higher as gigafactories fight for raw materials
Anglo American (Anglo American PLC (LSE:AAL)) – Discussions with Vale over Serpentina project
Fresnillo (Fresnillo PLC (LSE:FRES)) - Fresnillo’s Juanicipio Mexico project sees delayed startup on grid connection issues due to Covid-related staff shortages at utility
IGTV: IG Outlook 2022, 23/12/21:: https://youtu.be/4w7nbjRdFyk
Interactive Investors: 22/12/21: https://www.youtube.com/watch?v=9xvA_3UXXYQ&ab_channel=interactiveinvestor
VOX Markets: 08/12/21: https://audioboom.com/posts/7993202- china-economy-plus-bluejay-centamin-cornish-metals
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts.
We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Catching omicron Covid variant may protect against delta
Good news at last, Omicron appears to be more mild and less deadly than the Delta variant
It also appears that catching Omicron should help protect against catching the Delta variant
Omicron is said to be a more complex virus with many more spikes to latch onto the cells it then invades to replicate.
Research done by the Africa Health Institute shows that “the antibody response to omicron rose fourteenfold two weeks after an infection, but were surprised to find that neutralising antibodies against delta also increased more than fourfold.” (The Telegraph).
“They also showed that vaccinated participants were able to mount a better neutralising response against delta, while the response in unvaccinated participants was more variable.”
“For most people, an omicron positive case will feel much more like the common cold, starting with a sore throat, runny nose, and a headache” according to Tim Spector, a professor of epidemiology at King’s College London and the lead scientist for the symptom study, told the BBC this week.
China braces for Omicron wave as Sinovac proves ineffective against new variant
Researchers at the University of Hong Kong and the Chinese University of Hong Kong have stated that 3 doses of the Sinovac vaccine are unable to produce the required amount of protective antibodies to protect against Omicron. (SCMP)
Officials are currently looking to boost imports and domestic production of BioNTech vaccines to boost immunity.
Beijing has announced plans to set up ‘buffer zones’ in border cities on the Myanmar and Mongolian borders to protect against further rises in cases.
Analysts expect China’s Zero-Covid policy to continue to impact key supply chains for raw materials, with Myanmar and Mongolia primary suppliers of ores and coal.
Whilst only 7 infections are recorded elsewhere in China, 810 cases have been registered in Xian, which is set to enter its 7th day of lockdown.
The Beijing commerce minister has announced plans to ensure supply chain security and boost spending and consumption.
Gold steadies on low volume trading and firmer dollar
Gold eased 0.2% to $1,803/oz following a monthly higher in its previous session.
Gold’s rally was capped by strengthening US 10-Year Treasury yields and a slightly stronger dollar.
Further bullish catalysts are expected for gold as economists look to downgrade their US growth expectations going into 2022.
Copper hits 1-month high despite profit-taking on other metals
Copper rose 1.6% to a monthly high of $9,707/t before sliding slightly to $9,668/t.
Traders pointed to an arbitrage opportunity between COMEX and LME as the reason behind the sudden rally. (Reuters)
Profit-taking was visible in other base metals following the LME Christmas holiday.
LME zinc fell 1.7% to $3,460/t.
Aluminium down 1.5% from a 2-month high on Dec. 24th.
Nickel down 0.4%.
Tin down 0.3% to $39,150t.
China copper smelters keep Q1 2022 treatment and refining charges flat on Q4 2021
China’s main copper smelters are keeping TC/RCs flat for Q1 2022 from Q4 2021 according to close sources. (Reuters)
Rates will likely stay at $70/t and 7c/lb, a 32% markup from $53/t this time last year reflecting the availability of ore supply and potentially some restrictions on smelter capacity.
The rates are 9.2% higher than the 2021 benchmark.
Spot treatment charges fell to $59.50/t this week but remain well up from April’s multi-decade lows of $30/t. (Asian Metal)
Iron ore, steel and coking coal futures slip as fears of oversupply heighten and slowing long-term demand
Chinese ferrous futures fell on weakening raw material prices amid oversupply concerns as mills look to ramp up production in the coming quarter.
The China Iron and Steel Association announced expectations of steel production at 1.03bn t in 2021, down from 1.065bn t in 2020.
The Minister for Industry stated the 5-year plan expects steel capacity to ‘only decrease’ by 2025.
Dalian iron ore futures down 3.4% to $106/t.
Coking coal futures down 3.3% with coke falling 4.4%.
Construction steel rebar down 1.5%.
HRC down 0.8%.
Stainless steel futures up 0.3%.
Palladium – Research shows nanoparticles of palladium can absorb hydrogen like a sponge
Nanoparticles of palladium are stabalised with a core of iridium attached to a graphene support (Eurekaalert.org).
The hydrogen sticks to the nanoparticles' surfaces, and may then be released through the application of a small amount of heat.
Experts are considering using carbon sponges to host the palladium nanoparticles. The research is some years away from potential commercialisation.
Dow Jones Industrials +0.26% at 36,398
Nikkei 225 -0.56% at 28,907
HK Hang Seng -0.94% at 23,062
Shanghai Composite -0.91% at 3,597
Economics
China – The Regional Comprehensive Economic Partnership agreement set to boost global economic recovery
The partnership is said to provide strong support for expanding trade and investment.
Beijing warns of “drastic measures” if Taiwan provokes on independence
China has warned Taiwan against its policy of committing to independence, with experts suggesting that the conflict could heat up next year.
China said it will seek peaceful reunification with Taiwan but would act if any red lines on independence were crossed.
Over the past two years, China has stepped up military and diplomatic pressure to assert its sovereignty claim, fuelling anger in Taipei and concern in Washington.
Winter Olympics run from Friday 4th–20th February
The games will be held in Beijing, Yanqing and Zhangjiakou.
China’s authorities are looking to avoid a repeat of images of smog masks worn by athletes as they enter China.
Covid masks are likely to be mandatory for travellers and visitors as China works to control the spread of the Omicron variant
US - Biden administration being urged to take immediate action to cut global warming by the financial sector
The report is likely to focus on the power consumed by banks in their computing and trading.
UK – Surging energy prices and runaway inflation expected to squeeze households in 2022
The Resolution Foundation think-tank has painted a somewhat grim picture for 2022 as surging energy bills and faster inflation eat into incomes.
The Foundation said real wages will stagnate in 2022, rising just 0.1%, and in three years they’ll be £740 a year lower than if the pre-pandemic wage trend had continued.
Inflation surged by 5.1% in the 12-months to November, with some analysts expecting inflation to hit 6% early next year.
In April, energy companies can increase the price cap, the ceiling for what firms can charge most customers, which is on course to increase by 56% due to soaring energy production costs.
Currently 25 household energy suppliers have gone bust since early august amid the energy crisis in the UK.
HSBC predicts that UK GDP will rise by 4.7% in 2022.
The bank forecasts the GDP rises for the rest of G7 of between 2.2-4.3%
Egypt - BRICS New Development Bank (NDB) to add Egypt as a new member
The NDB is headquartered in Shanghai
Brazil - Two dams collapsed in Bahia, Brazil after weeks of heavy rain
China – China to cut production from polluting industries
China has long had a policy of forcing inefficient and polluting companies to shut down or shape up.
Renewed focus on anti-pollution and energy efficiency will likely force further cuts in steel and aluminium with both industries under pressure to cut pollution and reduce their demand on grid power.
China generates >50% of global coal-fired power and has just fired up the first 1GW unit of its new Shanghaimiao plant designed to deliver power to the eastern coastal Shandong province via a long-distance ultra-high voltage grid (Reuters).
The IEA estimate China raised coal-fired power generation by 9% through 2021 with plans to add a further 150GW of coal-fired power capacity from 2021-2025, bringing the total to 1,230 GW.
Indonesia - Workers cancel planned strike at Indonesia’s state energy firm PT Pertamina
A 10-day strike by workers at Indonesia’s PT Pertamina has been cancelled following an agreement facilitated by the government.
PT Pertamina is Southeast Asia’s largest fuel importer and plays a fundamental role in ensuring fuel supply across Indonesia.
Indonesia is a major supplier of refined tin and nickel.
Philippines – Nation lifts open-pit mining ban to boost industry
A 4-year-old ban on open-pit mining for gold, silver and complex ores has been lifted by the government. (Reuters)
The ban had been imposed by an anti-mining minister for the Mines and Geosciences Bureau.
Duterte lifted a moratorium on new mineral agreements that had been effective since 2012 in April.
The Philippines government is looking to boost investment in the sector to stimulate the economy hit hard by the pandemic.
The government expects the mineral extraction industry to boost export revenue by $2bn through to 2026.
The Philippines is China’s largest supplier of nickel ore and boasts substantial copper and gold deposits.
Only 5% of the country’s mineral reserves has been extracted to date, with 74.1mn acres being identifies as having ‘high mineral potential.’
Turkey – inflation rises to >30% as lira continues to fall
Central bank to support gold saving conversion to Lira
Turkey’s Central bank has announced it will make up for losses incurred by holders of lira deposits should lira’s decline against gold exceed bank interest rates.
This is a one-time support for depositors who converted their gold savings account.
Currencies
US$1.1287/eur vs 1.1322/eur last week. Yen 114.96/$ vs 114.27/$. SAr 15.744/$ vs 15.752/$. $1.342/gbp vs $1.338/gbp. 0.723/aud vs 0.723/aud. CNY 6.372/$ vs 6.370/$.
Commodity News
Precious metals:
Gold US$1,803/oz vs US$1,807/oz last week
Gold ETFs 97.7moz vs US$97.9moz last week
Platinum US$972/oz vs US$974/oz last week
Palladium US$1,985/oz vs US$1,862/oz last week
Silver US$23.12/oz vs US$22.87/oz last week
Base metals:
Copper US$ 9,668/t vs US$9,638/t last week
Aluminium US$ 2,813/t vs US$2,845/t last week
Nickel US$ 20,230/t vs US$20,065/t last week
Zinc US$ 3,502/t vs US$3,548/t last week
Lead US$ 2,291/t vs US$2,321/t last week
Tin US$ 39,200/t vs US$38,825/t last week
Energy:
Oil US$79.4/bbl vs US$75.1/bbl last week
Natural Gas US$4.166/mmbtu vs US$3.893/mmbtu last week
Uranium UXC US$43.95/lb vs $43.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$118.3/t vs US$123.2/t
Chinese steel rebar 25mm US$743.8/t vs US$761.7/t
Thermal coal (1st year forward cif ARA) US$123.0/t vs US$128.2/t
Thermal coal swap Australia FOB US$171.5/t vs US$177.7/t
Coking coal swap Australia FOB US$352.0/t vs US$350.0/t
Other:
Cobalt LME 3m US$70,500/t vs US$70,500/t
NdPr Rare Earth Oxide (China) US$131,443/t vs US$132,254/t
Lithium carbonate 99% (China) US$39,629/t vs US$36,184/t
China Spodumene Li2O 5%min CIF US$2,510/t vs US$2,410/t
Ferro-Manganese European Mn78% min US$1,800/t vs US$1,806/t
China Tungsten APT 88.5% FOB US$315/t vs US$314/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Europe Vanadium Pentoxide 98% 8.7/lb vs US$8.7/lb
Europe Ferro-Vanadium 80% 32.75/kg vs US$32.75/kg
China Ilmenite Concentrate TiO2 US$384/t vs US$381/t
Spot CO2 Emissions EUA Price US$83.1/t vs US$90.6/t
Battery News
Northvolt produces first battery cell from Swedish Gigafactory
Northvolt reported this morning that its gigafactory in northern Sweden has assembled its first battery cell, making it the first European company to design and manufacture a battery on the continent.
The company expect commissioning and upscaling of the factory will continue into 2022, when the first commercial customer deliveries will be made.
Northvolt is aiming for the Skelleftea plant to achieve production capacity of 60GWh as it aims for at least a 20-25% market share in Europe by 2030.
The battery maker has received over $30 billion worth of contracts from customers such as BMW, VW and Volvo.
Company News
Anglo American (Anglo American PLC (LSE:AAL)) 3,041p, Mkt Cap £37bn – Discussions with Vale over Serpentina project
Anglo American this morning confirms that it has been in preliminary discussions about the potential to jointly develop Vale's Serpentina iron ore resource next to Anglo American’s Minas-Rio iron ore operation in Brazil.
Vale comments that it despite no agreement being made, it seeks to leverage existing processing and logistics infrastructure at Minas-Rio and Vale’s operations, according to a filing.
Last week it was widely reported that Vale is considering acquiring a stake in Minas-Rio, in order to fulfil its goal of increasing annual production capacity to 400mt.
Minas-Rio is expected to produce 26.5mtpa of high-grade iron ore, and cost Anglo about $14bn to buy and build.
Fresnillo (Fresnillo PLC (LSE:FRES)) 888p, Mkt cap £6.5bn - Fresnillo’s Juanicipio Mexico project sees delayed startup on grid connection issues due to Covid-related staff shortages at utility
Fresnillo and MAG Silver’s Juanicipio project in Mexico has experienced delays in starting production on grid connection issues.
Mexico’s state-owned electricity provider CFE has stated it is unable to grant approval for completion of the tie-in to the national power grid.
The mill commissioning timeline will be forced to extend another 6-months as a result.
The CFE has been hit by the Covid-19-related staff shortages.
Fresnillo expects full load commissioning activities to be approved in May 2022.
No.1 in Copper: “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”
No1. In Gold: “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”
The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk - 0203 470 0474
Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk - 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
SP Angel
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Gold, Platinum, Palladium, Silver
BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel
Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
LME
Oil Brent
ICE
Natural Gas, Uranium, Iron Ore
NYMEX
Thermal Coal
Bloomberg OTC Composite
Coking Coal
SSY
RRE
Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite
Asian Metal