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This MorningCopper and tin both gained around 1% on Thursday morning. Nickel and zinc lifted a bit. But aluminium and lead both are at the same level as LME closing yesterday. What’s Moving Markets?Global equities rose ahead of the Fed's upcoming policy decision, while digesting a slew of economic data and corporate earnings reports. Weak economic data in China weighed on sentiment across the industrial metals sectors. Energy markets remained on edge amid elevated geopolitical risks. Yields on 10-year US Treasuries fell 8bp to 4.80%, while the USD index was steady at 106.9.
Fed hawkish stance. The Fed kept the target range for the federal funds rate at its 22-year high of 5.25%-5.5% for a second consecutive time in Nov, reflecting policymakers' dual focus on returning inflation to the 2% target while avoiding excessive monetary tightening. Policymakers emphasized that the extent of any additional policy tightening would consider the cumulative impact of previous interest rate hikes, the time lags associated with how monetary policy influences economic activity and inflation, and developments in both the economy and financial markets. The Fed also noted that economic activity expanded at a strong pace in Q3, and the labor market remains robust, albeit with signs of cooling, while inflation continues to stay elevated. During the press conference, Chair Powell stated that the FOMC had not discussed any rate cuts yet, while the primary focus remains on whether the central bank will need to implement additional rate hikes.
World Bank Commodity Markets Outlook: Under the Shadow of Geopolitical risks. Metal prices have edged down 1% since the onset of the conflict. However, gold prices - which usually move in tandem with geopolitical concerns - have increased 8%. An escalation of the conflict would push metal prices up, mainly through indirect channels. Prolonged disruptions to energy markets can raise production costs of energy-intensive metals such as aluminium and zinc. Heightened geopolitical risk could lead to much higher gold prices, as investors shift to safe-haven assets. Prices for minerals used in electric vehicles and battery production, such as cobalt, lithium, and molybdenum, have followed the downward trend in base metals prices. However, prices remain volatile due to the stratified and concentrated nature of mineral markets. Base metal prices are projected to fall 5% in 2024 due to slowing demand and rebound in 2025 on recovering global industrial activity. Even though activity in China’s property and construction sectors is anticipated to stabilize by 2024, these sectors will increasingly have less influence on global metals demand than they did in the previous two decades.
Precious metals were steady following the Fed's decision to maintain interest rates at their 22-year highs, while leaving the possibility of another rate hike open due to the continued resilience of the US economy. Increased safe-haven demand driven by geopolitical risks in the Middle East was supportive. Gold mine production continued its strong run in Q3: up 2% YoY to hit another quarterly record, said the WGC. YTD gold mine production of 2,744t is also a record: 1% higher than the previous Q1-Q3 record of 2,706t achieved in 2018.
Base metals were broadly steady; aluminium was buoyed by capacity cuts in China. Chinese aluminium smelters in southwestern Yunnan province started cutting a total of 1.15Mt of capacity this week, to comply with curbs expected to last until Apr. The curb, issued by China Southern Power Grid on 30 Oct, asked local producers to cut their production by between 9% and 40% of capacity. Sep copper output in Chile rose 4.1% YoY, following similar gains in Jul and Aug. Codelco shrugged off project delays to increase production in Q3.
Iron ore prices reacted positively to renewed China stimulus measures even though China’s steel industry PMI came in at 45.6 for Oct, slightly worse than in Sep. More worrying for iron ore was the sharp fall in the output component of the index, which dropped to 43.4.
---Published in collaboration with independent metals consultant RBMChttps://www.rbmc.world
*DISCLAIMER*This report has been prepared and issued by Robin Bhar Metals Consulting (RBMC). All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however, we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those RBMC at the time of publication.Please see https://www.rbmc.world for more information.
