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David Hargraves on Exchange Traded Metals, week 50 2011

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David Hargreaves

David Hargreaves

Hefty falls of 3-6% on the week and around 20% across the board for the year. Twelve months ago we were heralding continued recovery which indeed lasted through to mid-year. Just gold, silver and oil are higher than December 2010, but their trajectories are down. Not all is lost. Major Japanese trader Marubeni see an Aluminium supply deficit of 357,000t in 2013. That’s a tad precise and would hardly dent the 4.8Mt LME stockpile, but it is a start. They look for the price to start rising up towards $2800/t, compared with today’s $2000.

 

 

Metal stocks in LME warehouses and commodity price movements

Bulk Minerals

There are no strong markets. Spot coal, iron ore, steel industry additives, are all under attack. Now we hear it for potash. Fact is, some bulk minerals are less soggy than others.

Potash. The favourite fertilizer mineral (usage 55-60 Mtpy) differs from all others in the agricultural sector. Whereas you can switch from coffee to tea to cocoa, from barley to wheat and from apples to oranges, you have little choice about what makes them all grow. Added to its attractions as an essential ore, its relatively limited occurrences and its demand profile (an increasing population base seeking better nutritional standards), this does not present it behaving like any other commodity in an economic downturn. Plants will still grow if you miss a season’s dressing. Thus the price for standard grade potash, c. $500-600 per tonne, rose to $900 in 2008 only to fall to $300-350 as the last recession set in. Now it has slipped to c. $460, inventories are building up at the Canadian mines and short time working is in force. This may persist until nearer the March-April growing season. The longer term outlook promises a return to tight conditions in later 2012 and a strong run until new production comes on stream (UK, Brazil, Ethiopia) in 5 years time.

The underlying threat is that of an economic slowdown in China.

Iron Ore CFR Tiajin port 2011

Precious Metals

Not so Precious Eh? So what happened to the flight into Egypt? Sorry, to true stores of value? Gold for the affluent purists, silver for the wannabees and platinum for the cognoscenti? We devoted last week’s leader to warning that the bull run is – for the time being at least – running out of steam. There was a loud hiss of exhaust gases this week, so let’s perspectivise:

Minor metals

Views and forecasts abound. We had a chartist/technical analyst, Dr. Nu Yu, calling gold down to $1600 and lower. He is right so far. Then the not-shy Rob McEwan is going for $5000 – on this run we are with Nu Yu but don’t see $1000 being tested or the downside.

Another late entrant in the hedge betting stakes is Mr Murenbeeld of Dundee Wealth, he says there will be an upward explosion in the gold price (explosions do tend to go up) “at some point in time, but just when is difficult to judge”. Spot on.

Meanwhile his stable mate Frank Holmes of US Global Investors thinks $10,000/oz gold not unattainable. Slowly, painfully they are getting to our mark of $40,000 which is where all the gold would equal all the dollars and we would all live happily ever after.

Platinum deserves more attention because it is a real metal, like being used in industry as well as having decorative properties and a handle on non-destructibility. Then since over 70% of it comes from a tight corner of South Africa it doubly grabs the analyst’s attention. Output has fallen heavily in Rustenburg this year. They speak of 27% – 36%. The reasons? The Safety Inspectorate has caught up on the untenable accident rates and ordered increasingly frequent stoppages. Combined with overgenerous wage increases and allowances and a falling metal price, these are not happy days. Share prices speak loud.

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About David Hargreaves

David Hargreaves is a mining engineer with over forty years of senior experience in the industry. After qualifying in coal mining he worked in the iron ore mines of Quebec and Northwest Ontario before diversifying into other bulk minerals including bauxite. He was Head of Research for stockbrokers James Capel in London from 1974 to 1977 and voted Mining Analyst of the year on three successive occasions.

Since forming his own metals broking and research company in 1977, he has successfully promoted and been a director of several public companies. He currently writes “The Week in Mining”, an incisive review of world mining events, for stockbrokers WH Ireland. David’s research pays particular attention to steel via the iron ore and coal supply industries. He is a Chartered Mining Engineer, Fellow of the Geological Society and the Institute of Mining, Minerals and Materials, and a Member of the Royal Institution. His textbook, “The World Index of Resources and Population” accurately predicted the exponential rise in demand for steel industry products.

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Terrorattack och krig i mellanöstern, oljepriset har inte reagerat vidare kraftigt

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Thina och Gabriel diskuterar olja

Det är ett år sedan Hamas inledde sin stora attack på Israel vilket blev startskottet för ett regionalt krig. Trots detta har inte oljepriset inte reagerat vidare kraftigt. Thina Saltvedt kommenterar utvecklingen som varit och blickar framåt.

Nordeas energiexpert Thina Saltvedt kommenterar olja och energi.
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Equinor köper 10 procent av Ørsted för omkring 26 miljarder kronor

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Vindkraft till havs från Ørsted

Equinor har köpt 9,8 procent av aktierna i Ørsted. Transaktionen gör Equinor till den näst största aktieägaren i Ørsted, efter danska staten, som har en kontrollerande andel i bolaget.

”Equinor har ett långsiktigt perspektiv och kommer att vara en stödjande ägare i Ørsted. Detta är en kontracyklisk investering i en ledande utvecklare och en premiumportfölj av operativa havsbaserade vindkraftstillgångar. Exponeringen mot producerande tillgångar kompletterar Equinors portfölj med stora projekt under utveckling”, säger Anders Opedal, VD för Equinor.

Equinors ägarposition har byggts upp över tid, genom en kombination av marknadsköp och en blockaffär. Equinor avser att öka sitt ägande till 10%, men det finns för närvarande inga planer på att ytterligare öka ägarandelen. Equinor skriver att de stödjer Ørsteds strategi och ledning, och söker inte styrelserepresentation.

Baserat på fredagens stängningskurs så är det en transaktion på 26 miljarder SEK.

Affären kommer efter att Ørsted slaktat verksamheten

Ørsted är något av en katastrof både till aktie och verksamhet. Bolaget sålde fossilverksamheten och satsade på grön energi vilket fick aktien att lyfta högt. Men sedan kom verkligheten tillbaka och aktien kraschade. Sedan har Ørsted slaktat sin verksamhet hårt, man har lagt ner stora projekt och tagit enorma förluster. Bolaget har bytt strategi och vill inte alls sätta hela företaget på spel i en snabb grön omställning, utan vill mer vara med i en lugnare takt. Till den lägre värderingen och till med en lägre risk i verksamheten tyckte uppenbarligen Equinor att det var en tilltalande investering.

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Bjarne Schieldrop kommenterar oroligheterna som fått oljepriset att stiga

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Bjarne Schieldrop, chefsanalytiker för råvaror på SEB

Den högre nivån av konflikt i Mellanöstern har de senaste dagarna fått oljepriset att stiga. Bjarne Schieldrop, chefsanalytiker för råvaror på SEB, kommenterar utvecklingen. Han säger att uppgången betyder att marknaden är lite nervös, men inte jättenervös. Iran och Israel genomför attacker, men i sammanhanget begränsade insatser. Om Israel skulle attackera stora delar av Irans oljeproduktion kan Iran svara med att stänga Hormuzsundet och då kan priset stiga flera hundra procent.

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