mining monitor (november 2017) · nickel 17 7. zinc 20 8. gold 23 appendix 26. 1. overview ... in...

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


Souta Kanda

Strategic Research Division

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.


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)


2. Iron Ore


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

0

40

80

120

160

200

0

50

100

150

200

250

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Jul-1

3

Oct-

13

Jan-1

4

Apr-

14

Jul-1

4

Oct-

14

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

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.


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)


3. Coal


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.


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

200

250

300

350

Oct-

10

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Jul-1

3

Oct-

13

Jan-1

4

Apr-

14

Jul-1

4

Oct-

14

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.


3. Coal

2) News Flow


Katia Tavarez

Strategic Research (NY)

MUFG UNION BANK, N.A.

4. Copper


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.


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

400

600

800

1,000

1,200

0

2,000

4,000

6,000

8,000

10,000

12,000

Oct-

09

Jan-1

0

Apr-

10

Jul-1

0

Oct-

10

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Jul-1

3

Oct-

13

Jan-1

4

Apr-

14

Jul-1

4

Oct-

14

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

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.


4. Copper

2) News Flow

Source: Various sources, MUFG Union Bank Strategic Research

Tom Haddon

Strategic Research Division (London)


5. Aluminum


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.


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

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

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.


5. Aluminum

2) News Flow


Tom Haddon



6. Nickel


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.


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



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


6. Nickel

2) News Flow


7. Zinc


Tom Haddon



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.


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



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.


7. Zinc

2) News Flow


Katia Tavarez

Strategic Research (NY)

MUFG UNION BANK, N.A.

8. Gold


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


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


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

other products. Contents of the report are information as at publish date and are subject to change without notice. This report has not been

prepared to provide legal, taxational, financial, market-judgmental, or any other advises on propriety of any transactions. In taking any

action, each reader is requested to act on the basis of his or her own judgment upon consulting certified lawyers, accountants or other

professionals regarding the accuracy, validity and reliability of information appeared in this report.

Bank of Tokyo-Mitsubishi UFJ is regulated by the Financial Services Authority.

No part of this publication may be reproduced, stored in a retrieval system or transmitted without the prior written permission of The Bank

of Tokyo-Mitsubishi UFJ Limited.

Copyright© 2017 The Bank of Tokyo-Mitsubishi UFJ, Ltd. All rights reserved.

Publisher：The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division

2-7-1, Marunouchi, Chiyoda-ku, Tokyo 100-8388, Japan

Contact details for inquiries : Shino Yamamoto

(TEL：03-3240-7935、e-mail：[email protected])

mining monitor (november 2017) · nickel 17 7. zinc 20 8. gold 23 appendix 26. 1. overview ... in...

Documents