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Commodity Super-Cycle and Decline

Commodity prices are moving up. Is this the start of a supercycle? – by David Berman (Globe and Mail – December 2, 2020)

https://www.theglobeandmail.com/

Copper, soybeans, wheat and gold have enjoyed spectacular run-ups this year, reigniting interest in commodities as the global economy recovers from the pandemic. More than a snapback, the gains are raising the question of whether a commodities supercycle is now in the works.

The mere mention of a supercycle – where prices for a swath of commodities remain elevated for many years, as demand outpaces supply – is sure to lift the spirits of Canadian investors with money tied to the country’s major benchmark.

The S&P/TSX Composite Index is still heavily dependent on miners, energy producers and other resource developers. The exposure has weighed on the benchmark in recent years, but could deliver it back to glory if some of the more bullish forecasts come true.

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Bull market for base metals likely to remain intact, says David Rosenberg at the Global Mining Symposium – by Trish Saywell (Northern Miner – November 15, 2020)

https://www.northernminer.com/

The Northern Miner’s Global Mining Symposium virtual conference this week – the second one this year – was yet another resounding success, with thousands of viewers tuning in from around the world to hear the views of some of the industry’s leading visionaries and entrepreneurs.

From Haywood Securities co-founder and Canadian Mining Hall of Fame inductee David Elliott to Rob McEwen of McEwen Mining and Serafino Iacono of Gran Colombia Gold, the two-day conference offered unparalleled insight into the current state of the global economy and how it is impacting metals and mining.

One of the most widely anticipated sessions was the discussion Northern Miner group publisher Anthony Vaccaro had with David Rosenberg, president, and chief economist and strategist of Rosenberg Research & Associates, an economic consulting firm he set up in January 2020.

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How Biden’s Win Affects Commodities Hit by Trade Wars, Tariffs – by Joe Deaux (Bloomberg News – November 8, 2020)

https://www.bnnbloomberg.ca/

(Bloomberg) — It’s been a tumultuous four years for U.S. commodity industries that found themselves a key focus of the White House through its aggressive trade policy agenda.

From steel and aluminum tariffs to grain subsidies to boosting exports of liquefied natural gas, very few corners of the global commodities market eluded Donald Trump’s attention.

There was at least one memo, executive order, pronouncement or tweet bringing some sort of attention to uranium, soybeans, and rare earths, the kinds of materials that haven’t received attention from American presidents in years.

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China’s new infrastructure plan to boost metal demand – report – by Editor (Mining.com – October 26, 2020)

https://www.mining.com/

China’s acceleration of its ‘new infrastructure’ plan will support the government’s beneficiation ambition in the metals industry, boosting production of high-end metals as opposed to primary metals, industry analyst Fitch Solutions finds in its latest report.

Despite this being a long-held strategy as part of the Chinese government’s shift away from export-oriented growth and the pivot towards domestic consumption, the focus on high-tech infrastructure has been more concerted in 2020 following a slowdown in economic activity arising from the covid-19 pandemic as well as heightened tensions between the US and China, the report reads.

Fitch predicts this new infrastructure plan work in tandem with China’s other industrial policies such as Made in China 2025 and China Standards 2035 Plan – which together signal China’s ambitious long-term strategy of becoming the global leader in high-tech and innovative industries of the future.

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Market caps decline in metals, mining due to US dollar strength, ESG issues – by Taylor Kuykendall and Gaurang Dholakia (SP Global.com – October 6, 2020)

https://www.spglobal.com/

BHP Group and Rio Tinto continued to dominate the list of top metals and mining companies by market capitalization in September, as the sector collectively lost value against a strengthening U.S. dollar and reports of numerous environmental, social and governance issues.

The 25 largest companies in the space held a total market cap of US$817.07 billion as of Sept. 30. Rio Tinto and BHP Group had an aggregate market value of $220.39 billion, more than a quarter of the combined total of the 25 companies.

Market cap percentage changes were calculated based on reported currencies, while the analysis bases company rankings on market values converted into U.S. dollars.

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NEWS RELEASE: License to operate remains top mining risk, with high-impact risks a close second (EY Mining and Metals Survey – September 29, 2020)

LONDON, Sept. 29, 2020 /PRNewswire/ — Global mining executives rank license to operate (LTO), high-impact risks1, productivity and rising costs as the top three risks facing their business over the next 12 months, according to EY mining and metals survey, Top 10 Business Risks and Opportunities – 2021.

The survey of more than 250 global mining executives shortlists the most significant risks shaping the industry, and the reshuffled ranking reflects how the COVID-19 pandemic has unexpectedly disrupted commodity demand and prices and reframed the risk landscape. LTO, disruption, environment and geopolitical risks are all becoming more prominent as social responsibility and broader stakeholder demands intensify during the COVID-19 pandemic.

The survey highlights the way in which the pandemic has heightened stakeholder expectations around safety, environmental management and corporate responsibility. This is driving the urgency to address external perceptions of the industry, as investors look to understand value beyond the financials.

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The next wave of the global recovery could send commodity prices soaring – by Sam Meredith (CNBC.com – September 28, 2020)

https://www.cnbc.com/

The next phase of the economic recovery is likely to be driven by commodity-intensive infrastructure investment, analysts have told CNBC, potentially setting the stage for further gains across the industrial space in the coming months.

The prediction comes at a time when market participants are closely monitoring the strength of the global economic recovery, as many countries grapple with an upsurge in the number of reported Covid-19 infections.

The coronavirus pandemic has prompted forecasters to issue dire economic projections this year, with the OECD warning on Wednesday that the outlook remains “exceptionally uncertain.”

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China Is on a Building Binge, and Metal Prices Are Surging – by Matt Phillips (New York Times – September 25, 2020)

https://www.nytimes.com/

The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again — and global prices of metals are reflecting that renewed appetite for growth.

China consumes roughly half of the world’s industrial metals, according to analysts. As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country. As a result, the prices of iron ore, nickel, copper, zinc and other metals used to build infrastructure have surged in recent months.

Since late March, prices of iron ore — the key ingredient in steel — have risen more than 40 percent. Nickel, needed for stainless steel, and zinc, used to galvanize metal, are up more than 25 percent.

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Reopening of economies boosting metals prices – by Marleny Arnoldi (MiningWeekly.com – July 3, 2020)

https://m.miningweekly.com/

Since lockdown measures to contain Covid-19 around the world have eased, ratings and research agency Standard & Poor’s Global (S&P Global) says the reopening of economies, combined with monetary stimulus by banks and governments, has allowed industrial metal prices to rise.

However, even though industrial metal prices have risen from the lows experienced in the first quarter of the year, there remains a possibility of a second wave of Covid-19 infections as lockdowns are eased.

“It nevertheless remains a significant downside risk to industrial metal prices for the rest of the year, despite local supply-side impacts that could provide some price support for particular commodities,” the agency states.

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‘Yes’ to commodities, ‘no’ to real estate as investors brace for the rest of 2020 – Wells Fargo – by Anna Golubova (Kitco News – June 23, 2020)

https://www.kitco.com/

(Kitco News) When considering investment choices for the rest of 2020, look at commodities and not real estate, stated Wells Fargo’s 2020 Midyear Outlook Spotlight report.

The coronavirus crisis has turned the investment world upside down. And as economies begin to recover, Wells Fargo is making significant changes to its investment outlook — saying “yes” to commodities and “no” to real estate.

“As 2020 has unfolded, much has changed, and many investment strategies had to be retooled. In the real assets space, we made two important tactical tweaks. We downgraded real-estate investment trusts (REITs) to unfavorable, and we upgraded commodities to favorable,” said Wells Fargo head of real asset strategy John LaForge.

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Mining resumes under COVID-19 but faces slow return: GlobalData – by Greg Klein (Resource Clips – April 28, 2020)

http://resourceclips.com/

As of April 27 some 729 mines worldwide remain suspended, down from more than 1,600 shutdowns on April 3. The numbers, released by GlobalData, reflect government decisions to declare the industry an essential service, as well as implementation of new health standards and procedures. Those efforts, often involving staff reductions, contribute to “a slow return for the industry,” stated the data and analytics firm.

“Silver production is currently being severely damaged by lockdown measures,” pointed out GlobalData mining analyst Vinneth Bajaj. “As of 27 April, the equivalent of 65.8% of annual global silver production was on hold.

Silver mining companies such as First Majestic, Hochschild, Hecla Mining and Endeavour Silver have all withdrawn their production guidance for 2020 in the wake of the outbreak.

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Major miners braced to weather coronavirus, but cash-poor minnows in peril (Reuters U.S. – April 22, 2020)

https://www.reuters.com/

MELBOURNE (Reuters) – Major miners are better positioned to weather the coronavirus disruption compared with previous downturns, having drastically reined in debt-fueled buying and operating costs amid investor scrutiny and pressure.

But smaller players could find themselves adrift as capital dries up. The International Monetary Fund predicted the coronavirus pandemic could cause the steepest downturn since the Great Depression of the 1930s.

An exception will be companies that have already secured tie-ups with majors on development projects, in arrangements that see investment step up if richer veins are found, according to interviews with a dozen industry executives, investors and analysts. But that is just a tiny fraction of the junior market.

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Explainer: How global pandemic jeopardizes China’s metals supply chain (Reuters U.S. – April 22, 2020)

https://www.reuters.com/

BEIJING (Reuters) – Mines around the world are cutting output due to the coronavirus pandemic, leaving top metals consumer China fretting over supply as it recovers from the initial demand shock that the outbreak inflicted on its economy.

China boosted copper imports year-on-year in March as it looks to reboot industrial activity across the country, but potential shortages of key metal-making raw materials create risks to production of everything from home appliances to electric vehicle batteries.

Below is a list of minerals for which China has a high import dependence.

COPPER CONCENTRATE

Key suppliers: Chile, Peru

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Column: How low can we go? Analysts slash base metals forecasts – by Andy Home (Reuters U.K. – April 14, 2020)

https://uk.reuters.com/

LONDON (Reuters) – Three months can be a very long time in markets, the last three months particularly. COVID-19 has upended the world as we know it, forcing millions of people into lockdown, wiping out global economic growth and triggering a massive government response, most recently in the form of a historic multilateral deal to prop up oil prices.

In the world of industrial metals, the coronavirus has generated an unprecedented demand shock and, as ever more mines close, a lagging supply shock.

Pity the analysts who have to try to make sense of this chaotic world. Unsurprisingly, base metals forecasts have been slashed in the latest Reuters analysts poll relative to January.

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Pressure builds on China’s raw materials supply chains – by Andy Home (Reuters U.S. – April 2, 2020)

https://www.reuters.com/

LONDON (Reuters) – China is ready to move on from the coronavirus and get back to business as usual. “With the spread of COVID-19 under control, we should actively carry out the resumption of work and production,” President Xi Jinping said this week.

Xi’s comments, reported by state media under the headline “Chinese president unpauses China’s economy”, were made during a tour of Zhejiang province. (CGTN, part of China Media Group, April 2, 2020)

As ever, Xi’s whistle-stop tour was an exercise in subliminal messaging. Those comments were made during a visit to an auto parts supplier in the Daqi industrial park in the city of Ningbo. He also dropped in on Ningbo Zhoushan port, one of the world’s busiest, and praised it for getting throughput back to pre-coronavirus levels.

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