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Mining Monitor (November 2017)
Strategic Research Division
7 November 2017
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
MUFG Union Bank, N.A.
Table of Contents
1. Overview 3
2. Iron Ore 5
3. Coal 8
4. Copper 11
5. Aluminum 14
Mining Monitor | 7 November 2017 2
6. Nickel 17
7. Zinc 20
8. Gold 23
Appendix 26
1. Overview
Mining Monitor | 7 November 2017 3
Souta Kanda
Strategic Research Division
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Mining Monitor | 7 November 2017 4
Mined Commodity Price Trends
The prices of steel raw materials declined while non-ferrous metals prices continued to increase in October 2017.
1. Overview
Mined Commodity Price Trends
The prices of steel raw materials
declined while non-ferrous metals prices
continued to increase in October 2017.
The prices of iron ore and coking coal
decreased by over 10% MoM as a
backdrop of production cutback for steel
mills in the northern part of China.
On the other hand, thermal coal price
stayed high due to concerns over tight
supply in China.
As for non-ferrous metals, the prices
continued to increase as a backdrop of
solid supply-demand situations.
In terms of copper and nickel, the prices
increased as a backdrop of demand
growth. As for aluminum, the expectation
about shutdowns of capacity in China
supported its price. In respect of zinc,
the price continued to increase strongly
due mainly to environmental restriction in
China.
Gold price pulled back late October,
pressured by USD strength on US tax
reform optimism and a solid US 3Q GDP
number. Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
2016 2017
Yr Avg 1H Avg Jul Aug Sep Oct
Iron Ore ($/t) 58 74 67 76 71 62
MoM - - 17% 14% -6% -13%
YoY 5% 43% 17% 25% 25% 4%
Coking Coal ($/t) 142 181 166 197 205 182
MoM - - 13% 19% 4% -11%
YoY 58% 113% 74% 73% 8% -22%
Thermal Coal ($/t) 65 81 84 95 96 97
MoM - - 6% 13% 2% 1%
YoY 13% 57% 33% 41% 33% 6%
Copper ($/t) 4,866 5,769 6,015 6,517 6,610 6,842
MoM - - 5% 8% 1% 4%
YoY -11% 23% 24% 37% 40% 44%
Aluminum ($/t) 1,605 1,879 1,903 2,030 2,096 2,131
MoM - - 1% 7% 3% 2%
YoY -4% 21% 17% 24% 33% 28%
Nickel ($/t) 9,605 9,753 9,491 10,890 11,216 11,336
MoM - - 6% 15% 3% 1%
YoY -19% 12% -8% 5% 11% 10%
Zinc ($/t) 2,091 2,686 2,787 2,981 3,117 3,265
MoM - - 8% 7% 5% 5%
YoY 8% 49% 28% 31% 36% 41%
Gold ($/oz) 1,250 1,239 1,238 1,284 1,315 1,281
MoM - - -2% 4% 2% -3%
YoY 8% 2% -8% -4% -1% 1%
2017
Chern Woon Lam
Strategic Research Division (Singapore)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
2. Iron Ore
Mining Monitor | 7 November 2017 5
6
Iron Ore Prices and Inventories
Prices continued to decline in October amid concerns over upcoming winter steel production cuts.
Inventory pressures are building up at Chinese ports.
2. Iron Ore
1) Price Trends
Mining Monitor | 7 November 2017
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China Iron Ore Port Inventory (RHS) Iron Ore Fines 62%, CFR China Import Spot Price (LHS)
($/t) (Mt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
In October, iron ore prices continued
their decline from the previous month
and ended at $59/t. The average price
was $62/t in October, down by -13%
from September.
Inventory pressures at Chinese ports
are building up; iron ore inventories
rose in a fourth week in five weeks to
136mn tons.
Iron ore prices were impacted by steel
production cuts in the northern part of
China. In addition, the concerns that
the upcoming operational regulation
for steel mills will weaken iron ore
demand, amid rising iron ore
shipments, affected iron ore prices. In
an early sign of the clampdown’s
impact, steel production in China fell in
September after hitting record levels.
There is a fair degree of uncertainty in
the market, as some investors are
betting that pent-up demand will lead
to a price rebound in spring after the
winter chill, resulting in an unusual
contango situation in the futures
market currently.
Fortescue is revising the size of its Iron Bridge project in Pilbara, Australia – 31 October, 2017
To tap rising demand for high-quality iron ore, Fortescue Metals Group is in talks with prospective customers in the Middle East and Europe for its
planned development of Australia’s largest iron ore resource. Chief Executive Officer Nev Power said Fortescue is revising the size of the Iron Bridge
project, but declined to reveal the expected capital expenditure. China’s Baowu Steel Group and Taiwan’s Formosa Plastics are partners in the
magnetite ore venture in the Pilbara region. A decline in Chinese domestic production of magnetite concentrate has led to rising import demand.
Hematite is the dominant ore mined in Australia and commands a premium for high-quality steel mills.
Evraz sees rising dominance in the iron ore market – 19 October, 2017
Concentration in the iron ore market is set to increase, according to Russia’s second-largest steel producer Evraz. It estimates that the top four iron ore
producers will account for 85% of the seaborne market in 2022 from 75% presently. The rising dominance of Vale, BHP Billiton, Rio Tinto Group and
Fortescue Group will allow them to push for higher prices to the steel producers, given that iron ore is a primary ingredient in steel production. Billions of
dollars in investments have been sunk by the major players to increase iron ore production scale to block new entrants.
Chinese steel output fell to six-month low as anti-pollution measures bite – 19 October, 2017
Chinese steel output fell in September to the lowest level in six months as President Xi Jinping’s anti-pollution measures start to bite. Steel output fell to
71.8mn metric tons in Sep 2017 from 74.6mn tons in Aug 2017. In his speech to the Communist Party Congress, the president reaffirmed his
commitment to curb environmental abuse. Production in the first nine months of the year are still 6.3% higher than that in the same period a year ago.
Although officials have shuttered some dirty mills, remaining producers boosted supplies in the run-up to winter where further curbs will fully kick in.
Mining Monitor | 7 November 2017 7
2. Iron Ore
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
William Cheung
Strategic Research Division (Hong Kong)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
3. Coal
Mining Monitor | 7 November 2017 8
Average global coking coal price
decreased to $182/ton in October,
down 11.3% from the last month.
The price decrease was mainly due
to fall in demand caused by
production cut of steel mills in the
northern part of China.
Average global thermal coal price
increased slightly by 0.9% from the
previous month to $97/ton in
October.
The price maintained at a high level
due to concerns over tight supply
amid inspection check of coal mines
in China.
Mining Monitor | 7 November 2017 9
Coal Prices
Coking coal price decreased in October due to fall in demand caused by production cut in China’s steel mills.
Thermal coal price stayed high due to concerns over tight supply amid inspection check of coal mines in China.
3. Coal
1) Price Trends
0
50
100
150
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300
350
Oct-
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Jan-1
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Jan-1
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Apr-
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Jul-1
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Oct-
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Apr-
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Jul-1
4
Oct-
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Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Spot Price (Coking Coal) Spot Price (Thermal Coal)($/t)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
China will take three measures to ensure thermal coal price stability in winter - 27 October 2017
China’s NDRC (National Development and Reform Commission) has determined to ensure the stability for domestic thermal coal price in winter season.
The NDRC has prepared three measures to prevent abnormal fluctuation in coal price. Firstly, it will closely monitor coal price and coal trading activity in
its major production centers and at major coal ports. Key market indicators such as coal price index, coal inventory level and coal inventory cycle will be
used. Secondly, it will punish illegal behaviors such as speculative activity and price control via monopolistic power. Blacklisting will be used for
companies who breach their business conducts. Lastly, the NDRC will send inspection teams to coal producing regions to ensure that coal miners are
complied with their business conducts.
China offers power plants incentive to sign long-term supply deals – 20 October 2017
Thermal coal price is going up gradually from $95/ton in September to nearly $100/ton this month. The rising price, together with increasing safety
check in China’s coal mines have added to concerns that supply may tighten in winter season. Against this backdrop, utilities in China are asked to sign
long-term purchase contracts with domestic coal miners as early as possible to secure enough coal supplies. According to China’s NDRC, long-term
supply contracts between utilities and coal miners could help stabilize thermal coal price, which is expected to fluctuate within a reasonable range
backed by mutual agreement. To speed up the process, NDRC will allow power plants to send more electricity to the grid if they sign more long-term
coal supply contracts with coal miners.
Coking coal price slide again as concerns over China’s demand – 19 October 2017
Price of coking coal fell by 2.6% from a day ago to $177/ton on 19 October 2017 due to worries over slower demand as China’s steel mills are required
to reduce output to fight against smog. Steel mills in the northern part of China are expected to cut output by half from mid-November this year to mid-
March next year at the request by the Chinese government to reduce pollution. However, some cities such as Tangshan have already implemented the
steel output cut since the start of this month, due to high geographic concentration of steel mills.
China makes a better-than-expected progress in overcapacity cuts – 11 October 2017
China has made better-than-expected progress to reduce excess capacity in coal industry, driven by the Chinese government’s commitment on
industrial restructuring. According to the NDRC, a total of 128 million tons of outdated coal capacity was forced out of the market by the end of August,
accounting for 85.0% of the annual target of this year. NDRC expects that the capacity cut target of 150 million tons could be accomplished ahead of
original schedule.
Mining Monitor | 7 November 2017 10
3. Coal
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Katia Tavarez
Strategic Research (NY)
MUFG UNION BANK, N.A.
4. Copper
Mining Monitor | 7 November 2017 11
Copper prices rallied steadily in
October from around $6,500/t
($2.95/lb) to just above $7,000/t
($3.20/lb). Prices were lifted by
positive news out of China (strong
copper import data and a sharper-
than-expected increase in PPI,
both for Sep).
A modest pullback to around
$6,800/oz ($3.10/lb) materialized
late-in-the-month on profit-taking
and a strong USD. Even so,
copper closed the month higher
(+4.6% m-o-m).
Corroborating the move up is
CFTC data that showed that, as of
24 October, net length for
managed money rose above the
100,000 lot mark again.
Inventories at warehouses remain
high, but continue to descend as
seasonal demand picks up in
China and as scrap supply tightens.
Mining Monitor | 7 November 2017 12
Copper Prices and Inventories
Copper prices rallied steadily to $7,000/lb on positive news out of China.
4. Copper
1) Price Trends
0
200
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COMEX Inventories (RHS) SHFE Inventories (RHS)
LME Inventories (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, MUFG Union Bank Strategic Research
Copper miners to see higher profits in 2018 – 2 November, 2017
According to analysts at S&P Global Market Intelligence, the profit of copper miners will improve further in 2018. As of 30 October, copper prices are up
c.24% since the beginning of 2017. Higher prices has provided some respite to miners, which had previously been forced to cut costs and capex in a
low-price environment. According to calculations by S&P Global Market Intelligence, total cash costs in the industry are expected to be only c.6%
higher this year than they were in 2016. Essentially, even though the cost curve is shifting up this year, prices are moving up at an even faster rate,
which should translate to an improvement in miner margins in 2017.
BHP is expanding copper mines and exploring new deposits – 2 November, 2017
BHP Billiton is expanding existing copper mines and exploring new deposits in Latin America, North America and Australia. According to BHP, the
reason are forecasts of increased copper demand due to greater electric vehicles (EVs) production and increased use of renewable energy. BHP also
said that the number of EVs globally is estimated to rise to around 140 million by 2035, up from one million now. There is around 80kg of copper in an
electric car (a number that could rise to 105kg) compared to 20kg in conventional ones. This level of consumption may require approximately 12Mt of
copper annually by 2035, which is more than half of today’s market for refined coper.
Freeport says Grasberg stake would eventually fall to 29% – 25 October, 2017
According to Reuters, Freeport-McMoRan said in a conference call that its stake in PT Freeport-Indonesia (PT-FI) would fall first to 49% and then to
29% under the deal it is currently negotiating with the Indonesian government. According to Richard Adkerson, President and CEO of Freeport, although
the company’s participation in Grasberg would be diminished, Freeport "would be receiving cash from that interest, which would reduce [its] exposure to
Indonesia. There’s positives and negatives to that.” In a press release from late-August, Freeport outlines that PT-FI agreed to a final ownership share
of 49% Freeport and 51% Indonesian government. In addition to selling the 51% stake, Freeport agreed to construct a new smelter in the next five
years. As part of the agreement, Freeport will be able to extend its license to 2041. These latest news on the Freeport-Indonesia negotiations sent
Freeport’s stock tumbling.
China copper imports rise for the second time in nearly a year – 12 October, 2017
In September, China imported 480Kt (+10.3% m-o-m, +26.5% y-o-y) refined copper. This is the second month showing a positive year growth rate
since September 2016 amid improving CIF dollar premiums, stricter controls on scrap, and a stronger RMB versus USD. YTD imports totaled 3.44Mt
(-9.4% y-o-y), a decline from last year on increased scrap availability.
Mining Monitor | 7 November 2017 13
4. Copper
2) News Flow
Source: Various sources, MUFG Union Bank Strategic Research
Tom Haddon
Strategic Research Division (London)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
5. Aluminum
Mining Monitor | 7 November 2017 14
Post the jump in August past $2,000
per ton, on clarification of China’s
winter capacity shutdowns, prices have
trended higher each month including
October. Month close prices were 3%
higher than September’s close.
Prices have now moved into a range
above $2,150 per ton which has not
been seen since 2012, showing the
limiting of production capacity in China
is having a real impact on market
sentiment.
Whether it has a real impact on
fundamentals is yet to be seen. The
International Aluminium Institute’s (IAI)
latest data shows global production in
September was only 0.2% lower than a
year ago at 164.2 thousand tons/day.
Although with winter restrictions kicking
in from Oct or Nov, the fundamental
picture might not look too different in
Sept, however the data does show that
Chinese producers haven’t drastically
raised production before cuts come
into force, which was a suspicion the
market had held.
Mining Monitor | 7 November 2017 15
Aluminum Prices and Inventories
Prior to winter capacity cuts in China, smelters have not drastically increased production which has kept prices
moving upwards.
5. Aluminum
1) Price Trends
0
2,000
4,000
6,000
8,000
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Jan-1
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pr-
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4A
pr-
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Jul-1
4
Oct-
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Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7A
pr-
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Jul-1
7
Oct-
17
LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
Rio Tinto adds alumina refineries to aluminium smelters sale – 31 October, 2017
Rio Tinto is attracting renewed interest in selling its Pacific Aluminium smelting unit by adding two alumina refineries in Australia to the portfolio,
according to three sources familiar with the matter. Rio Tinto had tried to sell the division minus the refineries in 2011 and again in 2015 without
success. Switzerland-headquartered Glencore, Liberty House of Britain, and Russia’s Rusal have all expressed interest, according to the sources. By
including the refineries, Rio could potentially double the original $1 billion price tag for Pacific Aluminium, the sources said. Pacific Aluminium originally
included Rio Tinto’s Bell Bay, Boyne Island and Tomago smelters in Australia, and the Tiwai Point smelter in New Zealand.
China's aluminium demand growth to stay ahead of GDP - Chinalco chairman – 21 October, 2017
China’s biggest state-run aluminium producer said consumption of the metal is set to increase by 9-10 percent this year on the back of strong
downstream demand, and keep growing at a faster rate than the country’s gross domestic product (GDP) in 2018. Rising prices of alumina, carbon and
power have pushed up primary aluminium production costs by 14 percent this year, Ge said. Aluminium demand from China’s packaging sector was up
by 20 percent in January-September, according to Ge, while demand from real estate, transportation and electronic products grew by 8 percent and the
power sector by 5 percent, he said.
China's winter cuts heat up aluminum market – 17 October, 2017
The Chinese government’s campaign to reduce smog pollution and whittle down excess production is set to take around a tenth of its aluminum
smelting capacity out of the market by the year-end, potentially adding fuel to a months-long price rally. A Reuters survey of six consultancies and
brokerages last week, before the Hongqiao news, showed that up to 1 million tonnes of the light metal, used in making cars and white goods, could be
cut during the 4-month heating season in northern China, which begins in mid-November, in the country’s first winter restrictions on aluminum. That
works out at as much as 3 million tonnes on an annualized basis and is on top of the 3-4 million tonnes of annual capacity estimated to have closed
permanently this year as part of a crackdown on facilities built without necessary permits.
Mining Monitor | 7 November 2017 16
5. Aluminum
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Tom Haddon
Strategic Research Division (London)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
6. Nickel
Mining Monitor | 7 November 2017 17
Nickel prices performed strongly
through October with near constant
gains pushing the closing price to over
$12,250 per ton, 18% higher than
September’s close.
This price performance is being
supported by Chinese data showing
September nickel imports rose 14%
year on year.
However prices may have overshot
fundamentals as ore exports from
Indonesia have surged recently to as
high as 570kt in August vs 99kt in
January. The latest data also shows
August exports from the Philippines
being the highest of any month so far
this year. This indicates mine closures
may not have materialized despite
government threats.
Therefore the push to get prices 18%
higher may have been sentiment
powered with electric vehicle
announcements (e.g. China
introducing EV production quotas)
increasing expectations of higher
future demand of battery grade nickel.
Mining Monitor | 7 November 2017 18
Nickel Prices and Inventories
Some supportive import data has helped prices during October but current fundamentals are unlikely to have
produced an 18% monthly price increase.
6. Nickel
1) Price Trends
0
100
200
300
400
500
0
10,000
20,000
30,000
40,000
Oct-
09
Jan-1
0A
pr-
10
Jul-1
0
Oct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3A
pr-
13
Jul-1
3
Oct-
13
Jan-1
4A
pr-
14
Jul-1
4
Oct-
14
Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7A
pr-
17
Jul-1
7
Oct-
17
LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
Subsidies help China sell the most electric cars – 24 October, 2017
Electric vehicles (EVs), both fully electric and hybrids, are part of a new industrial policy known as Made in China 2025, by which year Beijing wants to
have national champions in 10 high-tech industries, including robotics, semiconductors and electric vehicles. To achieve this, local and central
governments have allotted subsidies that last year were worth up to Rmb100,000 ($15,000) per vehicle, according to Yale Zhang of Auto Foresight, a
Shanghai consultancy specialising in the car industry. Fitch, the rating agency, has found that average electric vehicle subsidies in China are the second
most generous in the world after Norway. China has also introduced a preferential vehicle licensing system in several cities. Licence plates are given
out either by auction, lottery or after payment of a high fee in an effort to halt car congestion, but EV buyers get licence plates free and without a wait in
at least six Chinese cities. These centres account for 70 per cent of domestic EV purchases, Fitch says.
Nickel the latest metal to feel the electric vehicle buzz – 25 October, 2017
First it was lithium. Then it was cobalt. And now it is nickel’s turn in the electric vehicle spotlight. Nickel is just as important as the other two metals in
manufacturing the batteries that will power the green technology revolution. Growing demand from battery-makers will exacerbate “the predicted
structural shortage of nickel between now and 2025,” according to research house Wood Mackenzie. The outlook for nickel, it said, “is one of deepening
deficits, falling stocks and rising prices.” (“A demanding supply problem for nickel”, October 2017) It’s exactly the sort of rallying cry that frustrated nickel
bulls have been awaiting and has helped keep London nickel bubbling around the $12,000 per tonne level.
PT Antam approved to export another 1.25m tonnes of nickel ore from Indonesia – 24 October, 2017
Indonesian state-owned miner Aneka Tambang (PT Antam) has received clearance to export an additional 1.25 million tonnes of laterite ore over the
next 12 months, its chief executive officer (CEO) Arie Prabowo Ariotedjo said. PT Antam now has permission to export a total of 3.95 million tonnes of
low-grade nickel ore. The miner received initial approval to export 2.7 million tonnes of laterite ore in March, Metal Bulletin previously reported. “There
is more nickel ore export quota on its way to PT Antam,” a senior nickel analyst familiar with the situation said
Mining Monitor | 7 November 2017 19
6. Nickel
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
7. Zinc
Mining Monitor | 7 November 2017 20
Tom Haddon
Strategic Research Division (London)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
During October zinc prices overall
retained gains of the previous few
months to finish over 3% higher than
September’s close at $3,320 per ton.
However this masks some large intra-
month volatility with prices falling 7% in
just three trading days mid month,
before gradually recovering.
The continued reliance of Chinese
smelters on zinc concentrate imports
has kept prices elevated. Imports have
ballooned by 33% year on year for the
first 9 months of 2017. This is due to
tight environmental restrictions on
mining in China, coupled with low ore
grades restricting domestic ore supply.
With prices so elevated against recent
historical ranges, with some fears of
overheating, short term zinc prices are
prone to jitters. Rising dollar strength
kicked of small corrections across
most base metals during mid-October
but zinc felt it the most causing the
volatility. However, fundamentals soon
took over, helping lost ground to be
recovered.
Mining Monitor | 7 November 2017 21
Zinc Prices and Inventories
Strong Chinese zinc import growth is keeping prices around multi year highs but volatility is still present in pricing.
7. Zinc
1) Price Trends
0
500
1,000
1,500
2,000
0
1,000
2,000
3,000
4,000
Oct-
09
Jan-1
0A
pr-
10
Jul-1
0
Oct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3A
pr-
13
Jul-1
3
Oct-
13
Jan-1
4A
pr-
14
Jul-1
4
Oct-
14
Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7A
pr-
17
Jul-1
7
Oct-
17
LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
Zinc inventories plunge on positive arbitrage – 31 October, 2017
Zinc stocks in the Shanghai-bonded area dropped by more than a third in October as arbitrage opportunities encouraged more metal out of warehouses.
Metal Bulletin assessed Shanghai-bonded zinc stocks at around 55,000-60,000 tonnes at the end of October, down 34.3% from the previous month and
65.8% from last year. “The market grabbed the last opportunity to import amid supply tightness in both metal and concentrates,” a Shanghai trader said.
Zinc Producers in Spotlight as Demand Powers Past Supply – 31 October, 2017
Zinc prices have doubled since January 2016, and while global supplies are at multiyear lows, demand is predicted to grow steadily in upcoming years.
With the outlook on zinc in favorable territory, exploration companies and active producers are poised to capture their share of market growth. Chinese
environmental inspectors have targeted zinc mines in Sichuan province, restricting or stopping some production. Meanwhile, cities in Anhui province
have issued plans to curb production in the steelmaking, non-ferrous smelting, cement and coal-fired power sectors
Vedanta reports 42% rise in mined metal production at Zinc India – 10 October, 2017
Mining company Vedanta Resources said mined metal production at its Indian zinc unit rose 42% in the first half of the year, lifted by strong demand in
China for the metal used in steel production. Zinc demand in China, the world’s top steel producer, has been strong as steel makers in China ramped up
production ahead of government curbs this winter. Demand for the metal, which is used to galvanise steel, is expected to slow in the fourth quarter as
Chinese regulators crack down on steel mills that fail to comply with environmental rules. China has been pushing to clean up its inefficient
manufacturing sectors for years as part of its war on smog and supply-side reform.
Mining Monitor | 7 November 2017 22
7. Zinc
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Katia Tavarez
Strategic Research (NY)
MUFG UNION BANK, N.A.
8. Gold
Mining Monitor | 7 November 2017 23
Mining Monitor | November 2017 24
Gold Prices, ETF Holdings, DXY Index and 10Yr US TIPS Yield
Gold prices rally back to $1,300/oz before pulling back modestly.
8. Gold
1) Price Trends
Gold prices rallied back to the
$1,300/oz level in mid-October
before coming under pressure in
the subsequent weeks to close the
month down slightly (-0.6% m-o-m)
just north of $1,270/oz.
The mid-month run-up in gold was
triggered by low-inflation concerns
in the US, especially after a below-
expected Sep CPI print (2.2% vs.
2.3% consensus), which reduced
rate hike expectations. Gold prices
pulled back though, pressured by
USD strength on US tax reform
optimism and a solid US 3Q GDP
number (3.0% vs. 2.6%
consensus).
In this context, funds cut back net
longs, with money manager net
length at the COMEX falling for
five-straight weeks in the week
ended 24 October to under
200,000 contracts. Gold ETF
holdings remained unchanged
near 12-month highs.
600
900
1,200
1,500
1,800
2,100
2,400
2,700
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Oct-
09
Jan-1
0A
pr-
10
Jul-1
0O
ct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
11
Jan-1
2A
pr-
12
Jul-1
2O
ct-
12
Jan-1
3A
pr-
13
Jul-1
3O
ct-
13
Jan-1
4A
pr-
14
Jul-1
4O
ct-
14
Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6A
pr-
16
Jul-1
6O
ct-
16
Jan-1
7A
pr-
17
Jul-1
7O
ct-
17
(t) ETF Holdings (RHS) Gold Price (LHS)($/oz)
Source: World Gold Council, GFMS, Bloomberg, MUFG Union Bank Strategic Research
Note: ETF Holdings are expressed in aggregate tons.
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
9
10
11
12
13
14
15
Oct-
09
Jan-1
0A
pr-
10
Jul-1
0
Oct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3A
pr-
13
Jul-1
3
Oct-
13
Jan-1
4A
pr-
14
Jul-1
4
Oct-
14
Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7A
pr-
17
Jul-1
7
Oct-
17
Index DXY Inverse (LHS) 10Yr US TIPS Yield (RHS) (%)
Source: Bloomberg, MUFG Union Bank Strategic Research
Mining Monitor | November 2017 25
8. Gold
2) News Flow
Chinese gold demand rises again – 1 November, 2017
Gold demand in China increased markedly in the first nine months of 2017, according to data from the China Gold Association. Total gold consumption
(ex-central bank purchases) rose 16% to 816 tons in the period, which compares to a 13% decline during the same time last year. Demand for gold bars
surged c.45% to 222 tons, fueled by increased demand for safe-haven investments. Jewellery consumption rose c.7% to 504 tons. China accounts for
c.30% of global jewellery demand and c.25% of bars and coins purchases.
Gold exploration budgets boosts mining pipeline – 20 October, 2017
According to S&P Global Market Intelligence, for the first time in five years, greater exploration in gold is driving up global non-ferrous exploration
budgets in 2017. Higher gold prices have boosted exploration efforts by gold miners, whose aggregate budget has increased by 22% this year to
US$4.05Bn. The budgets of junior miners have increased the most, up by 41%, and have raised their share of the total global gold budget from 25% in
2016 to 29% now.
AngloGold Ashanti sells some South African assets to Harmony Gold – 31 July, 2017
AngloGold Ashanti agreed to sell various assets in the Vaal River region of South Africa to Harmony Gold Mining for US$300mn cash. This deal is part
of AngloGold’s strategy to improve its global portfolio and extend the life of its mines and grow margins. The remaining operations in South Africa will
account for under 15% of AngloGold total annual production.
Source: Various sources, MUFG Union Bank, Strategic Research
Mining Monitor | 7 November 2017 26
Appendix : Mined Commodities Price Forecasts by Strategic Research Division as of 12 October 2017
Yr Avg 1Q 2Q 3Q 4Q (f) 1H (f) 2H (f) 1H (f) 2H (f)
Iron Ore ($/t) 58 86 63 71 64 61 59 57 55
YoY 5% 78% 13% 22% -9% -18% -13% -6% -6%
QoQ - 21% -26% 13% -10% - - - -
Coking Coal ($/t) 142 167 192 189 153 121 118 116 114
YoY 58% 112% 111% 42% -42% -33% -31% -4% -4%
QoQ - -37% 15% -2% -19% - - - -
Thermal Coal ($/t) 65 82 79 92 92 82 70 67 64
YoY 13% 62% 51% 36% 0% 2% -24% -18% -9%
QoQ - -10% -4% 17% 0% - - - -
Copper ($/t) 4,866 5,846 5,688 6,384 6,221 6,038 6,078 6,160 6,272
YoY -11% 25% 20% 33% 18% 5% -4% 2% 3%
QoQ - 11% -3% 12% -3% - - - -
Aluminum ($/t) 1,605 1,851 1,907 2,010 2,107 2,117 2,032 2,170 2,122
YoY -4% 22% 21% 25% 23% 13% -1% 2% 4%
QoQ - 8% 3% 5% 5% - - - -
Nickel ($/t) 9,605 10,281 9,232 10,532 10,691 10,925 11,424 11,975 12,339
YoY -19% 20% 4% 3% -1% 12% 8% 10% 8%
QoQ - -5% -10% 14% 2% - - - -
Zinc ($/t) 2,091 2,779 2,593 2,962 3,180 3,244 3,284 2,947 2,800
YoY 8% 65% 35% 32% 26% 21% 7% -9% -15%
QoQ - 11% -7% 14% 7% - - - -
Gold ($/oz) 1,250 1,220 1,258 1,279 1,265 1,261 1,277 1,280 1,278
YoY 8% 3% 0% -4% 4% 2% 0% 1% 0%
QoQ - 0% 3% 2% -1% - - - -Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division, MUFG Union Bank, Strategic Research
20192017 20182016
Disclaimer
Mining Monitor | 7 November 2017 27
This report is intended only for information purposes and is not intended to constitute an offer or solicitation to buy or sell securities or any
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