Same Same, but different – ShareCafe
Another week where different commodities told a different story to different listeners – oil rose due to the continued impact of Hurricane Ida on the US Gulf of Mexico coast, iron ore stabilized because the stricken real estate giant Evergrande continues to list but does not sink, gold fell as the Fed signaled a tightening in monetary policy, as did the Bank of England, while the central bank of Norway raised its key rate. But copper pulled away from gold and China and rose slightly, with demand for renewables signaling continued demand for metals and mining.
Glencore is closing in on the sale of its CSA copper mine to Cobar in west-central New South Wales after six years of testing.
It’s not that the copper price image has softened against a deal. During this period, world copper prices rose from around US $ 2.60 per pound to US $ 4.28 last week and an all-time high of US $ 4.88 per pound in May.
Copper prices stabilized towards the end of last week and ended up 1.2% after closing at US $ 4.28 a pound, a gain of 1% for the week.
Considering this rise, it remains strange that Glencore was unable to nab a buyer, despite several bites.
Reports from London indicate that Glencore should call on Bank of America and UBS to help with the sale of the mine which began in 2015, when Glencore was in the midst of a major debt crisis.
The mining and commodities giant approached selling CSA to small Australian Aeris Resources (which owns the Tritton mines south of Cobar) in 2019, but the deal fell apart.
Aurelia Metals was also engaged in negotiations around a possible acquisition of the mine, but this came to naught.
Glencore said on Friday that the latest talks were at an early stage and there was no guarantee that a deal would happen. There was no idea who the potential buyer might be.
We know Sandfire Resources is not a buyer given its surprise A $ 2.5 billion decision last week to buy a major Spanish copper mining and processing complex.
But there are two other major copper miners in the area – Newcrest in Cadia and Evolution in Lake Cowal.
The Cobar mine produces over 1.1 million tonnes of copper ore and 185,000 tonnes of copper concentrate. Last year it was around 46,200 tonnes of copper.
Gold prices ended the week with little change in the day, and little change from the previous Friday close.
But the metal faces a big test to stay above US $ 1,700 an ounce following the Fed’s decision to give a big hint on monetary policy tightening at the end of this year or early next year.
Evergrande’s troubles in China haven’t helped gold, and news of China’s cryptocurrency crackdown came too late to impact trading on Friday night.
Comex came in at US $ 1,751.70 an ounce, up 0.2% for the week, while silver Comex rose 1.3% to US $ 22.39.
U.S. Treasury yields rose sharply to 1.46% -1.47% – where they were in July and before the full impact of Covid Delta began to be felt around the world.
The US dollar is on a stronger track following the Fed statement and forecast and this will make it difficult for gold and could very well see if it tests the US $ 1,700 level this week .
But to compensate for this, the shift in focus will shift to the debt ceiling debate, with U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell continually emphasizing the urgency of the issue.
Progress around the Biden administration’s infrastructure package will also be on the radar.
Meanwhile, oil prices rose further last week.
Brent crude futures rose more than 1% to exceed US $ 78 per barrel on Friday, the highest since October 2018 and widening a weekly gain to 3.6% amid concerns over global supply at the aftermath of storms in the United States that damaged facilities on the Gulf Coast.
Brent ultimately came in at US $ 77.23 per barrel.
Disruptions to production on the US Gulf Coast following Hurricane Ida and other storms have resulted in sharply declining US and global inventories. EIA data showed U.S. crude inventories fell 3.5 million barrels to 414 million last week, the lowest since October 2018.
US production is still around 400,000 to 500,000 barrels per day lower than it was before Ida’s coup in late August / early September.
The cap on some gains was China’s first public sale of state oil reserves. State-owned PetroChina and private refiner and chemicals producer Hengli Petrochemical purchased four shipments totaling approximately 4.43 million barrels.
It has no impact on world prices.
West Texas Intermediate jumped 3% to US $ 73.98 for the 5th consecutive weekly gain. Prices are up 7.7% for the month.
The number of US rigs increased again – the total (including gas) increased from 9 to 521, and the number of oil rigs increased from 10 to 421.
And iron ore prices appeared to have bottomed out on Friday after falling sharply in the past two months.
The fine price of 62% Fe ended at US $ 113.33, up US $ 2.66 per tonne on Friday for a gain of more than 11% for the week.
The price of 58% Fe fines rose US $ 3.54 per tonne on Friday to US $ 83.08.
The price during the week rose 13% as buyers sought cheaper mid-strength ore blends.
Premium 65% Fe fines from Brazil increased by US $ 1.30 on Friday to end at US $ 135.90. This only increased by 6.5%.
Prices rebounded after China’s exit from the long Mid-Autumn Festival which continued to trade low on Monday and Tuesday.
At the same time, investors were worried about the fall in output in the construction sector after data showed that China’s home sales fell 20% year-on-year in August, along with fears of ‘a crisis of the real estate developer Evergrande.
Evergrande and the power shortage remain big threats to iron ore prices.