War is in fact good for gold prices, but how long will October\u2019s safe haven bump last?
\nUranium prices hit new 15-year high as the month draws to a close
\nLithium and coal among the worst performers as demand woes bite<\/p>\n
In Up, Up, Down, Down we track the commodities that won and lost the market in October.<\/em><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Price: US$1997.60\/oz Gold briefly rose above US$2000\/oz but can\u2019t seem to break the ceiling that would burst beyond all time highs from the post-Covid days of August 2020 of US$2075\/oz.<\/p>\n In Australian dollar terms it\u2019s paying well over $3100\/oz ATM, a price that should deliver margins of around $1000\/oz or above for unhedged gold miners.<\/p>\n At the same time it\u2019s unclear how long those prices will remain in place. Without a doubt the trigger for gold\u2019s latest price surge is the war in the Middle East, where Hamas\u2019 invasion of Israel has been met with an intensifying barrage of air strikes and now a limited ground invasion from the Israeli Defense Force over the past three weeks.<\/p>\n Safe haven rallies like these don\u2019t always last, as we saw with the run beyond US$2000\/oz after last year\u2019s invasion of Ukraine by Russia.<\/p>\n Hovering in the back of investors\u2019 minds still is the US rate hike cycle, which could yet persist longer than expected with inflation remaining a concern for key state banks.<\/p>\n When it comes to actual demand for bullion, the World Gold Council said in its latest demand trends report this week that remains strong.<\/p>\n \u201cCentral banks\u2019 gold buying maintained a historic pace but fell short of the Q3\u201922 record,\u201d the WGC said.<\/p>\n \u201cJewellery demand softened slightly in the face of high gold prices, while the investment picture was mixed.<\/p>\n \u201cGold demand (excluding OTC) in Q3 was 8% ahead of its five-year average, but 6% weaker y\/y at 1,147t. Inclusive of OTC and stock flows, total demand was up 6% y\/y at 1,267t.1<\/p>\n \u201cNet central bank buying of 337t was the third strongest quarter in our data series, although failed to match the exceptional 459t from Q3\u201922. Yet, demand from central banks YTD is 14% ahead of the same period last year at a record 800t.\u201d<\/p>\n Gold miners have responded to the strong demand and prices by producing 2744t of gold YTD.<\/p>\n \u201cThis puts a new annual record within reach for 2023. The YTD supply of recycled gold is also higher at 924t (+9%),\u201d the WGC said. <\/p>\n \u201cAlthough this element of supply has been supported by elevated gold prices, it has been capped by economic resilience in the US and a strong investment motive in the Middle East.\u201d<\/p>\n Pic: LBMA<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n Price: US$74.50\/lb Uranium hit a fresh yearly high on Tuesday of US74.50\/lb according to Numerco, as an increasing number of analysts and pro-yellowcake fundies say we could be at the start of a sustained bull market.<\/p>\n Sprott ETF product manager Jacob White said in a note in early October positive sentiment building toward nuclear energy was \u201clikely to persist in the decades to come\u201d.<\/p>\n \u201cWith support for the nuclear industry increasing, we expect that market participants will have to shift their psychology to contend with higher demand for uranium supporting higher prices,\u201d he said. <\/p>\n \u201cUtilities may not be able to complacently draw down existing inventories in the hope that uranium prices will come down. <\/p>\n \u201cOver the long term, increased demand in the face of an uncertain uranium supply may likely support a sustained bull market.\u201d<\/p>\n Uranium price monitor TradeTech said prices crossed their highest level since March 2008 on October 27 for a 50% YTD gain.<\/p>\n \u201cWith buyers seeking to secure material over the next several months and stretching beyond the spot market window into Q1 2024, sellers have responded to this new demand by raising offer prices for each successive sales opportunity. As a result, prices for material have risen in recent weeks,\u201d TradeTech president Treva E. Klingbiel said.<\/p>\n \u201cThere is a growing demand profile for nuclear power globally as licences are extended for existing nuclear power plants and new build plans continue to emerge in nations seeking clean, reliable, and secure energy supplies. In addition, advanced and small modular reactors are moving swiftly along the development path.\u201d<\/p>\n Paladin Energy (ASX:PDN)<\/a> plans to complete the US$118 million restart of the Langer Heinrich mine in Namibia early next year.<\/p>\n Up 54.55% YTD in line with uranium prices, the returning yellowcake hopeful rose beyond a $3 billion market cap yesterday. <\/p>\n In a presentation to the Shaw and Partners uranium conference this week it said 48% of production from Langer Heinrich had been contracted to 2030, with 90% of output exposed to market linked pricing.<\/p>\n Pic: Numerco<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Price: US$119.25\/t After a stagnant October, iron ore has taken just one day to move back beyond the critical US$120\/t mark, a level that should support marginal iron ore players at home and abroad.<\/p>\n All of a sudden everyone\u2019s positive again. Citi\u2019s Paul McTaggart raised the investment bank\u2019s quarterly forecast for December to US$120\/t from US$100\/t, with a bull case upside of US$130\/t.<\/p>\n Brazil\u2019s Vale, which is ramping up plans to produce higher grade iron ore for use in lower emissions blast furnace steelmaking and DRI plants expanding in the Middle East and USA, says it sees a balanced market that supports \u201cupside risk\u201d.<\/p>\n Executive VP of ferrous minerals Marcello Spinelli told analysts on an earnings call this week the purveyor of top grade iron ore saw reasons to be optimistic on the Chinese steel market, saying the green energy transition was reinventing its manufacturing sector.<\/p>\n That and an infrastructure market being charged up by government stimulus are displacing demand from a weakening property sector.<\/p>\n \u201cThey are leading the green industry, turbines, all the equipments to support decarbonisation in the world are being produced in China to support their domestic demand and also the export,\u201d Spinelli said. <\/p>\n \u201cThey are in production of double digit for small appliance. EVs, they are flooding the world with their cars, and we see this in Brazil. So there is a new platform of manufacturing that is going on in China. And they need more high-quality steel to support that.\u201d<\/p>\n While a number of iron ore producers have long-term plans to ramp up output, including BHP (ASX:BHP)<\/a>, Mineral Resources (ASX:MIN)<\/a>, Rio Tinto (ASX:RIO)<\/a> and Vale, Spinelli said they were not seeing a big supply side increase with tonnages in India \u2014 the world\u2019s fastest growing steel producer \u2014 notably on the decline.<\/p>\n \u201cWe just signed a 5 million tonne contract to India to support them in this very high-speed growth,\u201d Spinelli said. <\/p>\n \u201cSo we see a tight market, a very balanced market in the supply side and demand side that can support this upside risk that Eduardo just mentioned.\u201d<\/p>\n Pic: SGX<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Price: US$71.26\/kg Non-Chinese buyers of rare earths oxides were delivered some relief as Lynas Rare Earths (ASX:LYC)<\/a> received approval to continue operating a refinery in Malaysia that had threatened a shutdown period at the end of the year.<\/p>\n The update of its licence conditions mean the ASX-listed miner will still be able to ship lanthanide concentrate for at least another two years, allaying concerns it would face a shutdown period amid potential ramp up delays at its new $575 million cracking and leaching plant in Kalgoorlie.<\/p>\n \u201cWe are excited to have now commenced the kiln heating cycle at the new Kalgoorlie Facility. This is the first step in production and will be followed by first production, and then ramp up over the next few months. Whilst the trajectory of this ramp up is inherently unpredictable, this is an exciting milestone,\u201d Lynas noted in its September quarter report.<\/p>\n Lynas owns the Mt Weld mine near Laverton, a hard rock deposit known as one of the largest deposits of rare earths for permanent magnets in the world. Products using NdPr and other magnet rare earths are key components of EV motors and wind turbines.<\/p>\n The approval will enable Lynas to ramp output eventually to 10,500tpa of NdPr oxide.<\/p>\n The company has been stockpiling uncontracted material owing to low prices, something that persisted throughout the September quarter as sale receipts fell from $188.9m in the June quarter to $128.5m.<\/p>\n But interest in rare earths deposits and gaining control over them remains strong. Fortescue Metals Group (ASX:FMG)<\/a> has extended its hunt for non-iron ore resources to rare earths in Brazil.<\/a><\/p>\n Meanwhile, Nick Curtis\u2019 Northern Minerals (ASX:NTU) <\/a>has called in the Foreign Investment Review Board, seeking a three-month delay on its AGM as it suggests a Chinese investor seeking a position on the Browns Range owner\u2019s board has been picking up stock on the sly.<\/a><\/p>\n Curious times to be a rare earths explorer indeed.<\/p>\n Pic: Shanghai Metals Market<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Price: US$18,130\/t A diplomatic storm is brewing in the nickel market as Indonesia\u2019s dominant producers look to gain access to the US EV industry.<\/p>\n Nickel Industries (ASX:NIC)<\/a>, an Aussie nickel stock which has leveraged connections in Indonesia and China to become the largest pure play nickel producer on the ASX in just five years, reckons Joko Widodo is working hard to get a free trade agreement sorted.<\/a><\/p>\n That would make Indonesian metal IRA compliant, a nightmare for Australian nickel sulphide producers given the incredible speed with which Indonesian producers and their Chinese backers can scale up production.<\/p>\n While a supply glut has sent prices falling back to Earth this year after an extraordinary 2022, BHP remains bullish on the long term outlook for nickel.<\/p>\n Its chair Ken MacKenzie and CEO Mike Henry told shareholders at the big miner\u2019s AGM yesterday they were still keen to grow the company\u2019s nickel division, saying its Australian nickel suphide operations were more sustainable and could produce battery nickel at a lower carbon intensity than Indonesia\u2019s laterite converters.<\/p>\n \u201cOur ambition there is to continue to grow our nickel position,\u201d Mackenzie said.<\/a><\/p>\n \u201cNow in the case of Indonesia, it does have significant nickel reserves and we\u2019ve seen a big rise of late in nickel production out of Indonesia, but the Indonesian reserves are typically laterite ore rather than what we have, which is sulphide ore in Western Australia, which is used for batteries.<\/p>\n \u201cSo to convert Indonesian ores into battery-grade materials requires significantly more processing and energy, and as a result of that has significantly greater carbon footprint.\u201d<\/p>\n Pic: LME<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Price: US$8111\/t Copper has great long term fundamentals and any doofus could work out it\u2019s nigh on impossible for the primary market today to fill the 50Mtpa demand outlook S&P projects for 2050.<\/p>\n That will need new mines and higher prices to achieve, along with a bit of inventive exploration.<\/p>\n But for the next year or so the market could be a lot tougher.<\/p>\n Much of that is macro and sentiment driven in nature. Once interest rates start coming down, the US dollar softens and China really kicks its economic growth into gear, some of the slack will be picked back up.<\/p>\n But much of it is supply based.<\/p>\n We, currently, have too much of it, which sounds like a funny problem when you think about the future needs of the green transition.<\/p>\n Copper warehouse stocks are well shy still of historical levels, but LME stockpiles were up around 90% between December 2022 and October 22 this year, when they peaked at just short of 192,000t.<\/p>\n The International Copper Study Group last month updated its forecasts as well, projecting a 467,000t surplus in 2024, up from prior estimates of 298,000t.<\/p>\n Chile\u2019s output lifted 4.1% in September (reporting is lagged) after a year of disappointments. Top global producer and serial problem child to the South American country\u2019s government Codelco finally got its s**t together, lifting mined tonnes 2.1% in the September quarter.<\/p>\n But still, we point you to the long term tailwinds.<\/p>\n The world\u2019s largest copper mine, BHP\u2019s US$46 billion Escondida, will need US$8b of investments to keep up a 1.2Mtpa production rate into the next decade.<\/p>\n A brownfields expansion, Goldman Sachs estimates, would need an incentive price there of US$3.60\/lb (US$7920\/t). And that\u2019s for a mine that\u2019s already been operating since the early 1990s.<\/p>\n Build a new one and you\u2019ll need US$9460\/t.<\/p>\n Pic: LME<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Price: US$23,613\/t A great cognitive dissonance has consumed the lithium market.<\/p>\n Prices are on the way down, with October\u2019s 15% tumble in lithium hydroxide prices the second major decline in a row.<\/p>\n Remember, lithium chemicals were paying over US$80,000\/t late last year. Not overly sustainable, unless you were cool with only ever seeing EVs in the Golden Triangle.<\/p>\n That wasn\u2019t going to work since, eventually, just about everyone will need one. But the current situation isn\u2019t the best for producers.<\/p>\n They\u2019re still making solid profits, but the volatility of the lithium price is creating havoc.<\/p>\n Mineral Resources (ASX:MIN)<\/a> has seen prices fall 28% in the past quarter to US$1870\/dmt. Pilbara Minerals (ASX:PLS)<\/a> suspended plans for a one-off special dividend after a 31% QoQ drop to US$2240\/t.<\/p>\n IGO\u2019s (ASX:IGO)<\/a> Greenbushes prices were higher, owing to its higher concentrate grade and lagging price mechanism. But that has thrown up issues as well since its partner Tianqi doesn\u2019t want all of its offtake now that margins on lithium chemicals are being squeezed. IGO has flagged a 25% drop in its sales from the world\u2019s largest lithium mine.<\/p>\n MinRes executive James Bruce memorably implied paper trading was manipulating market prices for lithium, though physical evidence of softening demand in China would suggest there are more concrete reasons for chemical and spodumene prices are dropping.<\/p>\n At the same time, billionaires and majors are battling it out for supremacy, offering massive premiums for lithium juniors and explorers.<\/p>\n Gina Rinehart\u2019s buying spree killed hopes of Albemarle completing a $6.6 billion deal to acquire Liontown Resources (ASX:LTR),<\/a> while she has also been active buying up Azure Minerals (ASX:AZS) <\/a>shares in a potential blow to the Pilbara explorer\u2019s $1.63 billion sale to SQM.<\/p>\n The $3.52 offer from SQM, a massive 44.3% premium on the Andover owner\u2019s pre-bid closing price, was all the more remarkable since Azure is yet to post a maiden resource. <\/p>\n Another lithium multi-bagger could be a future takeover target as well after Chris Ellison\u2019s MinRes spent over $150 million to acquire a near 20% stake in Tabba Tabba owner Wildcat Resources (ASX:WC8)<\/a>.<\/p>\n Pic: LME\/Fastmarkets<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Price: US$123.50\/t Thermal coal miners spent much of 2022 laughing heartily in the face of greenies who once said they were on death\u2019s door as a rapid uptick of demand from Russia-reliant Europe sent prices surging.<\/p>\n But the gods had another trick in store, delivering a mild winter that left European generators with too much of the stuff. Coal prices are now sitting on a 61% 12-month loss, hitting a year low of US$123.50\/t at the end of October.<\/p>\n The impact on stocks has been swift. TerraCom (ASX:TER)<\/a> this week dumped its quarterly dividend on the back of weakening market conditions for energy coal.<\/p>\n Reading the tea leaves, one of Australia\u2019s largest listed thermal coal producers Whitehaven Coal (ASX:WHC)<\/a> moved to acquire BHP\u2019s Daunia and Blackwater steelmaking coal mines for a total fee of up to US$4.1 billion ($6.4b).<\/p>\n Adding around 17Mtpa of coking coal capacity to the primarily thermal coal exporter\u2019s production profile, the purchase will see it shift 70% of its revenues to the premium coal product.<\/p>\n Premium hard coking coal was fetching around US$333\/t on Tuesday, though intermediate coal grades and PCI steelmaking coal products are trading at growing discounts to the top end product.<\/p>\n Pic: Trading Economics<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n Prices correct as of September 29, 2023.<\/em><\/p>\n Silver<\/strong><\/p>\n Price: <\/strong>US$23.15\/oz<\/em> Tin<\/strong><\/p>\n Price:<\/strong> US$24,079\/t Zinc<\/strong><\/p>\n Price:<\/strong> US$2429.50\/t Cobalt*<\/strong><\/p>\n Price:<\/strong>\u00a0US$33,420\/t *Cobalt has traded sideways for several months with liquidity virtually at a halt on the LME. Battery cobalt prices are lower.<\/em><\/p>\n Aluminium<\/strong><\/p>\n Price:<\/strong> US$2251.5\/t Lead<\/strong><\/p>\n Price:<\/strong> US$2085\/t <\/span><\/p>\n The post Up, Up, Down, Down: War stirs gold rally as uranium hits a new 15-year high<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"WINNERS<\/h2>\n
Gold<\/h2>\n
\n% Change: +6.79%<\/strong><\/p>\nGold miners share prices today:<\/h2>\n\n
Uranium (Numerco)<\/h2>\n
\n% Change: +1.92%<\/strong><\/p>\nUranium share prices today:<\/h2>\n\n
LOSERS<\/h2>\n
Iron ore (SGX Futures)<\/h2>\n
\n% Change: -1.27%<\/strong><\/p>\nIron ore miners share prices today:<\/h2>\n\n
Rare Earths (NdPr Oxide)<\/h2>\n
\n% Change: -1.62%<\/strong><\/p>\nRare Earths share prices today:<\/h2>\n\n
Nickel<\/h2>\n
\n% Change: -3.01%<\/strong><\/p>\nNickel miners share price today:<\/h2>\n\n
Copper<\/h2>\n
\n% Change: -1.93%<\/strong><\/p>\nCopper miners share prices today:<\/h2>\n\n
Lithium (Fastmarkets Hydroxide CIF China, Japan and Korea)<\/h2>\n
\n% Change: -15.09%<\/strong><\/p>\nLithium stocks prices today:<\/h2>\n\n
Coal (Newcastle 6000 kcal)<\/h2>\n
\n% Change: -21.01%<\/strong><\/p>\nCoal miners share prices today:<\/h2>\n\n
OTHER METALS<\/h2>\n
\n%:<\/strong> -0.30%<\/em><\/p>\n
\n%:<\/strong> +0.56%<\/em><\/p>\n
\n%:<\/strong> -8.30%<\/em><\/p>\n
\n%:<\/strong> +0.00%<\/em><\/p>\n
\n%: <\/strong> -4.07%<\/em><\/p>\n
\n%:<\/strong> -3.96%<\/em><\/p>\n