Mining Monitor (February 2018)
Strategic Research Division
14 February 2018
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 | 14 February 2018 2
6. Nickel 17
7. Zinc 20
8. Gold 23
Appendix 26
1. Overview
Mining Monitor | 14 February 2018 3
Ryosuke Ohno
Strategic Research Division
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Mining Monitor | 14 February 2018 4
Mined Commodity Price Trends
The prices of mined commodities went up in January 2018.
1. Overview
Mined Commodity Price Trends
In January 2018, the prices of mined
commodities went up from December
2017.
Iron ore price maintained strength as
market expects demand snapback after
steel production curbs end.
Average coking coal price was flat,
however the spot price fell sharply due to
concern for easing of supply disruption.
Thermal coal price rose as blizzards in
China cut off critical supply.
The advance of Copper price was
supported by week dollar.
Aluminum price was volatile, but went up
as protectionist trade policies in the US
came closer to fruition.
Nickel price surged late in January on the
back of demand growth, however the
price remains low against historical levels.
Zinc price continued to rise with Chinese
minded concentrate imports surging and
refined stocks becoming depleted.
Gold price rose further with US dollar
support.
2017 2018
Yr Avr Jul Aug Sep Oct Nov Dec Jan
Iron Ore ($/t) 71 65 77 73 62 63 69 73
MoM - 17% 19% -6% -15% 2% 10% 6%
YoY 22% 14% 27% 27% 5% -14% -14% -9%
Coking Coal ($/t) 189 166 197 205 182 190 239 240
MoM - 13% 19% 4% -11% 5% 26% 0%
YoY 33% 74% 73% 8% -22% -37% -10% 30%
Thermal Coal ($/t) 88 84 95 96 97 95 99 105
MoM - 6% 13% 2% 1% -2% 4% 6%
YoY 34% 33% 41% 33% 6% -2% 17% 26%
Copper ($/t) 6,192 6,015 6,517 6,610 6,842 6,854 6,850 7,118
MoM - 5% 8% 1% 4% 0% 0% 4%
YoY 27% 24% 37% 40% 44% 27% 21% 24%
Aluminum ($/t) 1,968 1,903 2,030 2,096 2,131 2,097 2,080 2,210
MoM - 1% 7% 3% 2% -2% -1% 6%
YoY 23% 17% 24% 33% 28% 21% 20% 23%
Nickel ($/t) 10,410 9,491 10,890 11,216 11,336 11,972 11,495 12,865
MoM - 6% 15% 3% 1% 6% -4% 12%
YoY 8% -8% 5% 11% 10% 8% 5% 29%
Zinc ($/t) 2,891 2,787 2,981 3,117 3,265 3,229 3,196 3,442
MoM - 8% 7% 5% 5% -1% -1% 8%
YoY 38% 28% 31% 36% 41% 26% 20% 27%
Gold ($/oz) 1,259 1,238 1,284 1,315 1,283 1,282 1,267 1,332
MoM - -2% 4% 2% -2% 0% -1% 5%
YoY 1% -8% -4% -1% 1% 4% 10% 12%
2017
Chern Woon Lam
Strategic Research Division (Singapore)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
2. Iron Ore
Mining Monitor | 14 February 2018 5
In January, iron ore prices maintained
their strength, trading between $71-
$75/t. The average price in January
was $73/t, up 6% from December’s
$69/t.
Chinese iron ore port inventories rose
to a record 154mn tons before easing
slightly to 153mn tons in the last week
of January.
The consensus view is for near-term
strength in iron ore prices given the
expected snapback in demand when
the steel production curbs in China
end after winter.
The overall outlook for the later half of
2018 has softened. Bearish sentiments
have surfaced more strongly, citing
record port inventories, growing supply
from low-cost producers and weaker
steel output in China due to curbs by
the government.
Top miners are expected to show
restraint in adding to supply, mitigating
the supply pressures.
6
Iron Ore Prices and Inventories
Prices maintained strength in January, as market expects demand snapback after steel production curbs end.
Outlook is turning bearish due to record port inventories, growing supply and weaker Chinese steel output.
2. Iron Ore
1) Price Trends
Mining Monitor | 14 February 2018
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China Iron Ore Port Inventory (RHS) Iron Ore Fines 62%, CFR China Import Spot Price (LHS)
($/t) (Mt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Fortescue expects reversal in iron ore’s quality squeeze – 30 January, 2018
Fortescue Metals Group expects steelmakers in China to reverse a recent trend favoring higher-quality iron ore from rival iron ore shippers. The shift will
narrow the discount on Fortescue’s products and boost its income. The discount on the 58% content ore shipped by Fortescue, compared with the 62%
content benchmark, has widened to -46% at the start of 2018 compared to less than -15% at the start of 2016. After the end of the winter steel
production restrictions, the ensuing decline in mill profitability and falling coking coal prices will prompt steel makers to boost their use of lower-quality
iron ore to cut costs, the company said.
Rio Tinto’s 2017 iron ore exports up 1%, maintains 2018 guidance – 15 January, 2018
Rio Tinto, the world's second largest iron ore miner, reported that iron ore shipments rose 1% in 2017 to 330.1mn tons, meeting its guidance. It
maintained a target of 330-340mn tons for 2018, but cautioned the guidance was subject to weather constraints and partly reflected rail maintenance
required in 2018. In the middle of 2017, the miner cut its 2017 iron ore guidance by -10mn to a range of 320-330mn tones, citing bad weather and
overhaul of its rail lines.
China imported a record amount of iron ore in 2017 – 14 January, 2018
Demand for high-quality iron ore from Australia and Brazil pushed Chinese imports of the steelmaking ingredient to a record high in 2017. Although
shipments were down -11% in December, full-year imports rose 5% to 1.075bn tons, exceeding 1bn ton for the second year. Demand for foreign iron
ore is boosted by China's aggressive campaign to clamp down on polluting domestic steel mills; higher-grade ore limits emissions and is more efficient.
7
2. Iron Ore
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Mining Monitor | 14 February 2018
William Cheung
Strategic Research Division (Hong Kong)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
3. Coal
Mining Monitor | 14 February 2018
8
Average global coking coal price was
almost flat at $240/ton in January.
But it should be noted that price fell
sharply from $262/ton at the
beginning of January to $215/ton on
31 January, due to a reduced level of
concern about Australia’s supply
disruption, as well as slowing
inventory re-stocking from Asian
steelmakers and traders. As the
supply tightness has relieved, coking
coal price fell lately.
Average global thermal coal price
extended its growth momentum into
2018, by rising 6.1% month-on-
month to $105/ton in January.
The price increase was because
blizzards blocked railway and
highway in China, cutting off critical
supply of thermal coal. Meanwhile,
higher-than-usual heating demand
due to cold weather also put forward
thermal coal price to a certain extent.
Mining Monitor | 14 February 2018 9
Coal Prices
Average coking coal price was flat, but easing supply disruption in Australia caused price to fall later this month.
Average thermal coal price rose as blizzards blocked railway and highway in China, cutting off critical coal supply.
3. Coal
1) Price Trends
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300
350
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Spot Price (Coking Coal) Spot Price (Thermal Coal)($/t)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
China’s Shanxi province asks coal miners to cut or shorten holidays – 30 January 2018
Shanxi province, China’s second-largest coal producing region, has asked the major state-owned coal miners to cancel or shorten staff holidays during
the upcoming Spring Festival in mid-February. It aims to ensure stable coal supply throughout the nation’s most important break, so as to accommodate
higher-than-usual heating demand and suppress recent thermal coal price rally. The government’s action came with the warning of heating and
electricity shortages from four of China’s top utilities (including China Huaneng, China Datang, China Huadian and State Power Investment Corp) last
week after blizzards blocking railway and highway, cutting off critical supply of thermal coal. The government intervention has immediate impact on
thermal coal price, which fell slightly by 1.4% to $105/ton on 30 January from a day earlier. However, analysts believe that thermal coal price may keep
at high level as utilities will need to replenish their coal inventory before the Spring Festival.
China’s Hebei halts coal to gas heating conversion project – 30 January 2018
China’s Hebei province has stopped an ambitious program to convert large numbers of coal-fired boilers to natural gas, after natural gas supply
shortages left home without heat last month. On one hand, a lack of infrastructure has forced the local government to temporarily suspend the
conversion. On the other hand, the insufficient communication between local government and gas producers has underestimated the potential demand.
The conversion program will be delayed until 2020 when new pipelines delivering gas from Russia are scheduled to come online. This marks a U-turn
by the provincial government, which had previously determined the switch from coal to gas as one of its major priorities to curb pollution. But it is now
saying that it would allow to burn coal again for heating purpose.
China to support more coal miner-consumer M&A to boost productivity – 23 January 2018
China’s NDRC (National Development and Reform Commission) plans to support more merger and acquisition activities in its coal sector. The top
planner is going to support the merger activities of efficient coal miners with downstream industries such as utilities and coal-based chemical
processing, so as to optimize coal production and consumption. Besides, NDRC will increase the efficient coal mine and remove the inefficient one in
the sector. By reducing small to mid-sized domestic coal mines in 2020, NDRC expects to have a few coal conglomerates that produce over 100 million
tons/year of coal.
Sharp fall in coking coal price amid an alleviation of supply concern – 19 January 2018
The sharp fall in coking coal price in 14 February 2018 was because of a reduced level of concern about Australia coal supplies, which saw the worst of
the vessel queue in Queensland late last year. On the demand side, some steelmakers and traders ceased coking coal inventory replenishment and are
waiting for a further decrease in prices. As the supply tightness has relieved, coking coal price decreased by 7.6% since the beginning of this month to
reach $240/ton on 17 January.
Mining Monitor | 14 February 2018 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 | 14 February 2018 11
Following a strong performance in
December, copper prices pulled
back slightly in January (-0.7% m-
o-m) in a month with mixed.
On one hand, the US dollar fell
further to three-year lows, lending
support to prices, but on the other,
the market felt the bearish
pressure coming from weak
Chinese trade data (copper
imports at -7% y-o-y in
December) and an uptick in
inventories at LME, SHFE and
COMEX warehouses.
Copper is still near four-year
highs, trading above the $7,000/t
threshold (~$3.15/lb) though as
the market moves into balance
this year (from deficit in 2017), we
may start to see price slide lower
from current levels.
Mining Monitor | 14 February 2018 12
Copper Prices and Inventories
Copper prices consolidate near recent highs amid mixed drivers.
4. Copper
1) Price Trends
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COMEX Inventories (RHS) SHFE Inventories (RHS) LME Inventories (RHS) LME Spot Price (LHS)
($/t) (Kt)
Source: Bloomberg, MUFG Union Bank Strategic Research
Katanga ramp up to boost copper output – 1 February, 2018
Glencore said that copper output in 2018 will rise to around 1.5Mt as its Katanga mine in the Democratic Republic of Congo ramps up to add around
150Kt of copper (in addition to 11.6Kt tons of cobalt – a byproduct of copper). In 2019, copper output from Katanga will rise to 300Kt (and to 34Kt tons in
the case of cobalt). During the 2015 commodities downturn, Glencore shut down its Katanga operation for an upgrade. In 2017, Glencore’s copper
output fell to around 1.3 million tons. Glencore’s estimates for the Katanga copper ramp up are modestly ahead of our estimates of 100Kt and 200Kt
tons.
Copper deals start 2018 strong amid high prices – 28 January, 2018
Copper mining deals had the best start in over a decade as appetite for deals rises with surging copper prices. Over US$500 million worth of
transactions are pending or were completed year-to-date – the most recorded by Bloomberg data going back 12 years. Interest in mergers is rising after
years of low investment limited miner’s ability to meet rising demand for copper, especially in an environment of falling ore grades at various mines.
Project pipelines are empty and can only be replenished through M&A given how long it takes to develop, permit, and build a new copper mine.
China copper imports end 2017 at multi-year lows – 8 January, 2018
In December, China imported 450Kt of refined copper (-4% m-o-m, -8% y-o-y). This negative yearly growth reading is the first after three months of
positive growth. For the whole 2017, imports totaled 4.69Mt (-5% y-o-y) – the lowest annual number since 2013, reflecting higher domestic production of
refined copper and increased scrap availability.
Mining Monitor | 14 February 2018 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 | 14 February 2018 14
Mining Monitor | 14 February 2018
Aluminum prices were volatile during
January, swinging over 10% down.
However, the closing price ended only
1.6% lower than December’s closing
price as ultimately support emerged
from trade flow changes on the back of
likely US protectionist policies.
The US Department of Commerce
(DoC) initiated a probe into Chinese
imports of aluminum during late 2017
and in January it was announced that
the DoC’s report had moved to
President Trump. At this point the
President has 90 days to act and given
recent rhetoric around the US’ trading
position, it is likely protectionist policies
will be enacted.
This sent US premiums higher (the
price paid in addition to the LME global
benchmark to guarantee readily
available aluminum in different regions),
as traders adjusted supply sources
away from Chinese imports. This had
the knock on affect of positively
supporting global prices as high
premiums indicate tightness in US
located warehouses.
. 15
Aluminum Prices and Inventories
Protectionist trade policies in the US against Chinese imports came closer to fruition in January, causing some
regional tightness in the US, supporting global pricing.
5. Aluminum
1) Price Trends
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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
Fundamentals Underpin Aluminum’s Rise - 1 February, 2018
Growth in China’s manufacturing sector remained elevated in January, a private survey showed on Thursday, though it contrasted with an official survey
on Wednesday pointing to a slight loss of momentum. Asia’s factories got off to a strong start in 2018, with manufacturing activity in many countries
hitting multi-year highs as global demand for hi-tech products remained strong. However, rising stockpiles in top producer China reinforce worries that
the Chinese market remains in surplus despite capacity cuts.
China’s Aluminum Production in December Up by 15.3 Percent From Previous Month - 20 January, 2018
The People’s Republic of China’s aluminum production came roaring back in December to levels not seen since early summer according to numbers
released by the government on Thursday. China’s National Bureau of Statistics (NBS) revealed that the Middle Kingdom produced 2.71 million metric
tons in the final month of 2017, good for a 15.3-percent rise month-on-month. Though December’s output was down by 1.8 percent from last year,
China’s numbers for the full year were up by 1.6 percent, totaling 32.27 million metric tons. December’s numbers represented a reversal from
November, which saw the country’s aluminum output drop by 7.8 percent. Factors including the state’s shuttering of illegal capacity and Beijing’s 2+26
initiative to combat winter smog by compelling mandatory seasonal cuts of 30 percent by both aluminum smelters and alumina refineries likely
accounted for the lion’s share of that month’s decline. In contrast, analysts indicate that the bump in production last month can be credited in large part
to new capacity coming online at smelters in Inner Mongolia and Guangxi at plants owned by Aluminum Corporation of China (Chinalco). Smelters in
these areas fall outside the 2+26 zone and, as a result, are not subject to mandatory cuts.
Section 232 Aluminum Probe Report Moves on to President Trump - 12 January, 2018
The Department of Commerce announced Secretary of Commerce Wilbur Ross had completed his Setion 232 steel & aluminum reports and sent it on
to President Donald Trump. Under the statutory guidelines of Section 232 (derived from the Trade Expansion Act of 1962), Trump has 90 days to
respond to the recommendations and act (or not act). As a result of the investigation, the president could call for tariffs, quotas, or a hybrid tariff-quota
solution in an effort to help domestic metal producers dealing with rising imports.
Mining Monitor | 14 February 2018 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 | 14 February 2018 17
Nickel prices were flat through most of
January (holding around $12,400 per
ton) until later in the month where
prices surged 10% in just 11 trading
days to close at $13,600.
Bullishness has recently been present
in the market on the back of some
market participants seeing the start of
a new “super cycle” for nickel
demand, as it is a key metal used in
lithium-ion batteries (electric vehicles
being a large potential end market).
In January the release of fresh data
from the International Nickel Study
Group spurred the price surge as it
showed that the market was in a
deeper supply deficit than previously
thought as demand grows from the
stainless steel sector in China.
However, prices remain subdued
against historical levels as the data
also showed that mined nickel supply
had increased by 7% to November,
while refined metal production
increasing by 5%, indicating that the
deficit is constantly under threat from
new supply sources. Mining Monitor | 14 February 2018 18
Nickel Prices and Inventories
Nickel prices surged late in January as data showed demand growth outpacing supply through most of 2017.
However supply growth is still present which means prices remain low against historical levels.
6. Nickel
1) Price Trends
0
100
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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
China demand and tight supplies set to sustain nickel price rally - 30 January, 2018
A combination of surging China imports, tighter supplies and fund interest are expected to sustain prices of stainless steel ingredient nickel, which have
reached their highest level in more than two years. Wood Mackenzie forecasts a deficit of between 80,000-90,000 tonnes this year following a deficit of
similar levels in 2017. The shortfall is likely to be particularly acute in China, which accounts for about half of global consumption estimated at around
2.1 million tonnes this year but where an environmental crackdown has shut capacity. It is expected to ramp up imports. Latest data shows China’s
nickel imports more than doubled in December from a year earlier to 41,315 tonnes.
Top China Nickel Producer Joins BHP in Prepping for EV Boom - 17 January, 2018
China’s top nickel supplier aims to boost output of a material used in car batteries by 40 percent this year, joining the ranks of global producers ramping
up operations to meet demand from electric vehicles. Jinchuan Group Co. expects to raise production of nickel sulphate to 70,000 metric tons from
50,000 tons in 2017, Simon Bao, vice general manager of its marketing unit, said in an interview in Shanghai. The country is already the world’s largest
automotive market and sales of new-energy vehicles may hit 1 million in 2018 after topping 700,000 last year, according to manufacturers. “While
physical demand hasn’t picked up too significantly yet, it may surge in about two years,” Bao said. The world’s biggest miners are stepping up efforts to
meet demand for battery materials. BHP Billiton Ltd. has begun work to build on a nickel sulphate plant in Western Australia and is considering further
expansions. Rio Tinto Group is developing a lithium project in Serbia, while Glencore Plc plans to double production of cobalt in the next two years.
Strong Growth in World Stainless Steel Output to Continue - 15 January, 2018
Annual global crude stainless steel production for 2017 is estimated to have totalled an all-time high of around 48 million tonnes, which represents a
year-on-year increase of 4.9 percent. MEPS forecasts a further rise in worldwide outturn of nearly 5 percent, in 2018, to a new peak of 50.3 million
tonnes. Recently-issued official Chinese output figures were significantly higher than earlier expectations. The annual total at close to 26 million tonnes
represents 54 percent of global crude stainless steel production. A further escalation of around one million tonnes is predicted, in China, in 2018.
Mining Monitor | 14 February 2018 19
6. Nickel
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
7. Zinc
Mining Monitor | 14 February 2018 20
Tom Haddon
Strategic Research Division (London)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Zinc prices continued the march
upwards in January, moving into a new
range above $3,500 per ton, closing
8% higher than in December.
The continuing strength of price goes
against many analyst’s expectations
that loosening supply conditions,
especially since Glencore announced
some of its mines would re-enter the
market, would cool the market.
However the market remains tight as
trade statistics show that Chinese
concentrates (mined supply for
smelters) imports were up 19% in
December vs. November. Alongside
this, outflows of refined metal from
LME warehouses picked up in late
January, leaving inventory 5% lower at
end of January vs. December.
Although the supply correction is
coming, with several mines ramping up
or being extended bringing 850kt per
annum of supply though 2018, the
market is clearly not yet seeing the
effects.
Mining Monitor | 14 February 2018 21
Zinc Prices and Inventories
The zinc market remains tight with Chinese mined concentrate imports surging and refined stocks becoming
depleted.
7. Zinc
1) Price Trends
0
500
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Jan-1
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6
Apr-
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6
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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, BTMU Strategic Research Division
Glencore maintains zinc production guidance for 2018 after mine disposals offset restart - 2 February, 2018
Glencore has kept its zinc production guidance unchanged in financial year 2018 at around 1.09 million tonnes, matching actual production in 2017,
despite the scheduled restart of its 100,000 tonne per year Lady Loretta mine in the first half of this year. In December 2017, Glencore announced it will
restart its mothballed Lady Loretta mine in the first half of 2018, bringing 100,000 tonnes of material to the market after a two-year pause. The restart
came under market expectations and is unlikely to rock prices as analysts had expected. "That should easily be absorbed; 400,000 tonnes may have
dented the market but I doubt 100,000 will, it may even give the price a boost as it could have been a lot more,”, noted analysts.
Zinc metal demand (for) battery storage would be 19.8Mt of metal - 30 January, 2018
Extensive Stormcrow research on current and emerging global energy storage needs connected to nuclear and renewable capacity leads the firm to
estimate demand from cheap grid storage using batteries could run to 4,404GGWh, including 3,904GWh for renewables. Potential demand in the ‘fast
back-up systems' space could actually double this storage requirement, Hykawy and Chudnovsky suggest. "The zinc metal demand from 4,404GWh of
zinc-air battery storage would be roughly 19,818,000 tonnes of metal," Stormcrow's report says. "This amount of metal represents roughly 1.5-times the
annual production of zinc metal in the world. Even so, we could see as much as 3-6% annual impacts in demand in the future."
Steel Has Been ‘Galvanized’ by China’s Industrial Policies - 11 January, 2018
Zinc is mainly used for plating steel products for automobiles and construction materials to prevent them from rusting. China accounts for roughly 40%
of global demand, and government-led infrastructure projects helped consumption of galvanized steel plates to surge. China's ambitious Belt and Road
initiative has the potential to substantially lift steel demand. Demand for construction materials and automobiles also grew in Southeast Asia, and
steelmakers using zinc are increasing their production. Nippon Steel & Sumitomo Metal teamed up with an Indonesian state-owned steelmaker earlier in
2017 and started operation of a new factory to manufacture high-end galvanized steel plates. On the supply side, Chinese mines are cutting zinc
production. The Chinese government restricted operations of smaller mines as part of environmental regulations to address serious air pollution. The
policy has caused supplies of zinc ore and ingots to fall despite the rapid recovery in demand. In 2017, demand surpassed supply by about 400,000
tonne, and the shortage is expected to continue in 2018. Zinc features plunged to around USD 1,700 per tonne in the second half of 2015, but the prices
shot up 60% during 2016 and kept rising to top USD 3,300 in the latter half of last year.
Mining Monitor | 14 February 2018 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 | 14 February 2018 23
Mining Monitor | 14 February 2018 24
Gold Prices, ETF Holdings, DXY Index and 10Yr US TIPS Yield
Gold prices rise further with US dollar support.
8. Gold
1) Price Trends
Gold prices continued trending
higher in January (+3.3% m-o-m),
hitting 18-month highs above the
$1,350/lb.
US dollar weakness continued to
support gold. The dollar index fell
to three-year lows in January
amid fears of a US government
shutdown, comments by senior
US officials backing a weak dollar
and less-dovish commentary from
the ECB’s Mario Draghi.
With the recent leg up in prices,
funds increased bullish bets on
gold, with money manager net
length at the COMEX rebounding
from five-month lows. Gold ETF
holdings also rose, reaching 4 ½
year highs.
1,000
1,300
1,600
1,900
2,200
2,500
2,800
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-1
0A
pr-
10
Jul-1
0O
ct-
10
Jan-1
1A
pr-
11
Jul-1
1O
ct-
11
Jan-1
2A
pr-
12
Jul-1
2O
ct-
12
Jan-1
3A
pr-
13
Jul-1
3O
ct-
13
Jan-1
4A
pr-
14
Jul-1
4O
ct-
14
Jan-1
5A
pr-
15
Jul-1
5O
ct-
15
Jan-1
6A
pr-
16
Jul-1
6O
ct-
16
Jan-1
7A
pr-
17
Jul-1
7O
ct-
17
Jan-1
8
(t) ETF Holdings (RHS) Gold Price (LHS)($/oz)
Source: World Gold Council, GFMS, Bloomberg, MUFG Union Bank Strategic Research
Note: ETF Holdings are expressed in aggregate tons.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
9
10
11
12
13
14
15
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
Jan-1
8
Index DXY Inverse (LHS) 10Yr UST Yield (RHS) (%)
Source: Bloomberg, MUFG Union Bank Strategic Research
Mining Monitor | 14 February 2018 25
8. Gold
2) News Flow
Analysts see wild ride for gold in 2018 – 2 February, 2018
According to a survey by the London Bullion Market Association, following a relatively uneventful 2017, gold prices are set for a wild ride in 2018. The
LBMA says that 34 surveyed analysts are divided on the path that gold will take. Analysts are essentially divided on which driver will win out this year –
US real interest rates, geopolitics or global macro growth. Analyst forecasts ranged from a high of $1,510/oz to a low of $1,120/oz. The average forecast
was $1,318/oz, which is not far from current levels.
Small deals to dominate gold sector in 2018, too – 23 January, 2018
According to industry analysts, small, opportunistic deals will shape the gold mining sector again this year. This is exemplified by Leagold Mining Corp’s
US$264 million bid for fellow Canadian gold miner Brio Gold Inc. Following billions of dollars in writedowns after the mega-deals of years ago, miners
are still hesitant about large purchases even as gold prices accumulated healthy gains in 2017. Part of this is reflected in M&A values, which fell 14
percent on an annual basis in 2017 to US$10.6 billion. The number of deals though catapulted 70 percent to 648 as miners focused on smaller
purchases.
Goldcorp is done with M&A – 16 January, 2018
At Goldcorp’s annual investor day, CEO David Garofalo said that the company is done with M&A and will now turn its focus on building new mines at
projects it already owns and improving existing operations. Over the past two years, Goldcorp has made various acquisitions, including the purchase of
a 50 percent stake in Chile’s Cerro Casale gold mine, as well as other smaller deals.
Source: Various sources, MUFG Union Bank, Strategic Research
Mining Monitor | 14 February 2018 26
Appendix : Mined Commodities Price Forecasts by Strategic Research Division as of 23 January 2018
2017
Yr Avg 1Q (f) 2Q (f) 3Q (f) 4Q (f) 1H (f) 2H (f) 1H (f) 2H (f)
Iron Ore ($/t) 71 61 61 60 61 60 58 58 58
YoY 21% -29% -1% -16% -6% -1% -4% -3% 0%
QoQ - -6% 0% -1% 1% - - - -
Coking Coal ($/t) 187 214 154 146 142 135 132 130 127
YoY 30% 28% -20% -23% -30% -27% -8% -4% -4%
QoQ - 5% -28% -5% -3% - - - -
Thermal Coal ($/t) 87 98 80 77 77 73 71 70 68
YoY 34% 19% 1% -16% -21% -17% -8% -5% -4%
QoQ - 0% -19% -3% -1% - - - -
Copper ($/t) 6,207 6,836 6,816 6,796 6,775 6,792 6,833 6,885 6,994
YoY 28% 17% 20% 6% -1% 0% 1% 1% 3%
QoQ - 0% 0% 0% 0% - - - -
Aluminum ($/t) 1,968 2,164 2,078 2,016 2,139 2,262 2,213 2,301 2,154
YoY 23% 17% 9% 0% 2% 7% 6% 2% -3%
QoQ - 3% -4% -3% 6% - - - -
Nickel ($/t) 10,412 11,041 11,481 12,546 13,310 13,747 13,953 13,572 13,949
YoY 8% 7% 24% 19% 15% 22% 8% -1% 0%
QoQ - -5% 4% 9% 6% - - - -
Zinc ($/t) 2,893 3,196 3,260 3,326 3,211 2,933 2,787 2,685 2,614
YoY 38% 15% 26% 12% -1% -9% -15% -8% -6%
QoQ - -1% 2% 2% -3% - - - -
Gold ($/oz) 1,259 1,270 1,275 1,280 1,285 1,285 1,285 1,285 1,285
YoY 1% 4% 1% 0% 1% 1% 0% 0% 0%
QoQ - -1% 0% 0% 0% - - - -Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division, MUFG Union Bank, Strategic Research
20202018 2019
Disclaimer
Mining Monitor | 14 February 2018 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
other products. Contents of the report are information as at publish date and are subject to change without notice. This report has not been
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Publisher:The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
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