📌 Chile’s copper output was down 7% YoY in February
• The decline might have been caused by possible supply disruptions amid protests in some of Chile’s northern mining cities in mid-February
❗️Given Chile accounts for 28% of global copper supply, this might slightly support copper prices

#copper #Chile

📌New property sales in China’s key cities fell 47% YoY in March
📝In 2mo22, China's property sales were down 10% YoY
❗️This might weaken China’s domestic demand for industrial metals

#steel #copper #aluminium

📌Aluminium prices supported by rising cash costs
• Aluminium prices increased 3% through March, driven mostly by rising costs amid the 10-40% increase of thermal coal prices. Supply concerns amid geopolitical tensions also supported price growth
• On the supply side, China's aluminium output fell 1% YoY in 2mo22. However, it might recover in the short term as China’s producers restart idled aluminium capacity amid the easing electricity crisis. At the same time, the growth of energy prices might lead to production disruptions in the EU, if smelters cannot realise sufficient margins
• China’s aluminium exports were up 23% YoY in 2mo22, which might have been caused by growing ex-China aluminium consumption (up 6-8% MoM in 2mo22). This reasoning was supported by the rise in aluminium premiums, with the US Midwest P1020 premium and the European duty paid ingot premium up 8% MoM and 26% MoM, respectively. Meanwhile, the Japan Ingot premium declined 9% MoM in March as automotive demand remained weak

#aluminium

📌 Copper underperformed other base metals in March due to weak Chinese demand and recession fears
• Copper construction demand in China remains subdued, with a weak construction pipeline, according to CRU; relief in 2022 looks unlikely
• The copper price underperformed other base metals in March, growing 'only' 2% MoM despite supply risks from Russia, due to global risk-off and recession anticipation (the copper price is usually linked with the state of the global economy, as copper is used in construction and industrial goods manufacturing). CRU also notes that despite the low level of exchange inventories, there is no shortage of cathode in the physical spot markets
• On the supply side, CRU expects new and expansion projects to add 4.3% YoY to global production in 2022. We believe that the copper price might be pressured by supply recovery and modest demand from China. However, supply short-term supply risks remain due to the continuing blockade of the Las Bambas mine (1.7% of global supply)

#copper

☢️ Medium- and long-term outlooks on uranium demand brighten as countries intend to diversify energy sources
• The uranium spot price rose 21% over the course of March to one of the historical highest levels of USD 58.6/lb, driven by energy supply concerns amid geopolitical uncertainty
• The Energy Transitions Commission Chair said that countries should keep their nuclear plants online as long as possible to help reduce dependence on fossil fuels, which have recently experienced price rises. Greater emphasis on nuclear power generation in order to reduce the usage of fossil fuels supports the demand for uranium
• At the same time, in March, the Sprott Physical Uranium Trust further increased its uranium holdings 10%, which was also supportive for the uranium price
• On the supply side, Kazatomprom announced that it does not plan to revise 2022-23 production plans, while the decision on the 2024 production level is to be announced in 3Q22

#uranium

☢️ Why Kazatomprom looks interesting
❗️Uranium is currently a fashionable commodity, as major western countries are developing strategies to accelerate their shift from fossil fuels. Kazatomprom accounts for more than 40% of the global mine supply. However, since the beginning of 2022, Kazatomprom has significantly underperformed its main competitor, Cameco: -19% YTD vs. +33% YTD.
• In the short term, there are few sources of additional uranium supply.
• Kazatom looks attractive at spot, trading at 4.0x 1-y fwd EV/EBITDA and generating 15-16% FCF and dividend yield.
• Risks: there are solid civil stockpiles of uranium in China, the EU and the US. Moreover, Sprott inventories are at 53.6mnlb, which is >30% of global annual demand. As the current price is c.20% above the weighted average purchasing price, we believe that there is a potential risk of holdings redemptions.

$KAP #uranium

⛏Nexa Resources has restored operations to full capacity at its Vazante zinc mine in Brazil
• In mid-January, production at the mine was reduced to 60% of its capacity due to flooding amid heavy rains
📝 The Vazante mine accounts for 1% of global zinc production
❗️Despite the production curtailments, the company reiterated Vazante’s zinc production guidance of 118-127kt in 2022
💰On spot prices, Nexa Resources trades at 2x 1-y fwd EV/EBITDA and generates a 30% FCF yield
• The company has exposure mostly to zinc (90% of revenue), copper (5%), and also silver, lead and gold

$NEXA #zinc

📌Global EV sales (passenger cars and light-duty vehicles) increased 93% YoY in February, with the growth rate slightly accelerating from January's 90% YoY.
• US & Canada EV sales rose 69% YoY in February, decelerating from the 91% YoY growth in January
• Meanwhile, the growth rate of China’s EV sales accelerated to 184% YoY in February from 136% YoY in January 
• At the same time, the share of BEVs in total EV sales remained at 71%
❗️Strong EV sales are to support the demand for battery metals: nickel, lithium and cobalt

#EV #nickel #lithium #cobalt

📌Volkswagen plans to build a new 'Trinity' EV plant in Germany
• The company expects the production to commence in 2026
• The plant is to have an annual production capacity of 250k BEVs per year (or 21% of EU BEV sales in 2021)
❗️This is to support the demand for battery metals -- nickel, lithium and cobalt -- in the medium term, we believe

#EV #nickel #lithium #cobalt

📌Nickel prices spiked in mid-March, mostly due to a short squeeze
• In March,nickel prices rose 31%, driven by a price spike as investors and industrial users who had sold the metal scrambled to buy back contracts after prices initially rallied on concerns about supplies. This was also supported by low inventories (-5% MoM). As such,the spread between the price and 90th %-ile cash cost widened to 74%
• Fundamentals were modest in February: stainless steel production fell 6% YoY, due to the 19% YoY decrease in China’s output. However, in March, Chinese mills are planning to significantly ramp up production to 3.0−3.1mnt (up 17% YoY). EVs consumption of nickel remains strong, with China's new EV sales were up 184% YoY in February
• Recovering demand from stainless steel coupled with low inventories and geopolitical concerns is to support the nickel price. However, we note that due to the rising energy costs, the roll-out of EVs might decelerate in the short term, which implies downside risks to demand

#nickel

📈Why IGO looks attractive
•IGO is an Australian nickel, copper, cobalt and lithium producer - a unique exposure to the whole battery metals basket
• Nickel accounts for 80% of revenues at spot (which is likely to increase to 85% after the acquisition of WSA),the largest share among the producers we know
• IGO has a share in Greenbushes -- the biggest operating lithium mine in the world. It is to add up to 100% of FY21 (ending June) attr.EBITDA by FY23. Lithium production is to generate up to 30% of attr.EBITDA in 2023
❗️As we expect a 2.5x increase in EVs by 2025 vs. 2021 to drive the demand for battery metals, we view IGO as an excellent way to gain exposure to this story. Despite the ST EV market downside risk amid high energy costs, countries are still striving to achieve their CO2 targets, which is set to make nickel and lithium high demand metals in the coming years
💰On spot prices IGO trades 5x 1-y fwd EV/EBITDA (below its historical and peer mults), and generates 13% FCF yield

$IGO #nickel #lithium

📌Palladium and platinum prices fell 9% and 6% in March, respectively, due to weak demand and easing risks to Russia's supply. We do not see an upside for the prices amid depressed automotive sector demand.
• PGM demand from autocatalysts remains weak: EU + UK car sales were down 5% YoY (-25% from the 2020 level), while the US sales declined 11% YoY. China’s ICE car registrations were up 4% YoY in January; however, we expect the growth rate to reverse amid the COVID-19 lockdown in the country. 
• Investment demand was modest in March: ETF palladium holdings remained roughly flat, while platinum ETFs sold 81koz during the period. Moreover, in mid-March, platinum Comex net speculative positioning deepened, with a 20% MoM increase in shorts and flat longs.  
• PGM supply was weak in January-February. South Africa’s PGM output was down 3% YoY in January (-19% from 2020 level). Moreover, Russia’s PGM production declined 13% YoY and 7% YoY in January and February, respectively.

#PGMs #palladium #platinum

🥇Gold prices increased 2% in March due to geopolitical uncertainty and supply risks. In the coming months, a federal funds rate hike might negatively affect gold prices, while supply concerns and geopolitics might support them.
• South Africa’s gold supply might be constrained given Sibanye-Stillwater halted production at some of its gold mines in South Africa (0.7% of global supply) due to strike action.
• Russia’s gold output (5% of global supply) might be at risk as well. The Union of Gold Producers of Russia expects Russia’s gold production to fall 10% YoY in 2022 due to disruptions in machinery deliveries, export restrictions and risks to domestic gold demand.
• At the same time, the target federal funds rate was raised to 0.25-0.50%, and further increases are possible. The Fed’s contractionary monetary policy might pose downside risks for gold prices in the short term. Nevertheless, inflation continues to accelerate, which might support gold prices.

#gold

🔗 Russian steel volumes have good prospects for redirection.

• The EU has recently imposed sanctions on Russian finished steel exports. We estimate total Russian expors to the EU were 9.2mnt in 2021, including 4.4mnt of semi-finished steel

• Russian producers need to redirect shipments from 'unfriendly countries' (mainly Eurozone) to the rest of the world. We estimate the volume in need of redirection at c.7.5mnt

• The total coverage of the 'missing' volumes is more than 6 times, on our numbers. We see the region with the best prospects for Russian steelmakers as the Asia-Pacific -- and specifically 6 countries there, the Philippines, Indonesia, Thailand, Bangladesh, Vietnam and Myanmar, which between them imported more than 30mnt in total in 2020

• Given an HRC integrated cash cost of $250-350/t vs. the current HRC FOB china $850/t, Russian steel makers have a good chance of redirecting volumes. Additional transportation costs might add c.$50/t to total costs, on our numbers

#steel #rusteel

📌Global central banks were net sellers of 6t of gold in February
• Up from 5t in January
• The biggest seller was Uzbekistan, which sold 22t of gold in February (vs. 1t in January)
• Meanwhile, Turkey was the biggest purchaser, with 25t of gold purchases in February (vs. 10t in January)
❗️The central banks’ gold net sales might negatively affect gold prices

#gold

📌Brazil's iron ore exports rose 2% YoY in March, reversing from a 20% YoY decline in February
• The recovery in the country's iron ore exports might have been caused by improved weather conditions 
❗️Given Brazil accounts for some 22% of the global seaborne iron ore market, this might adversely affect iron ore prices

#iron_ore

⛏Iron ore and coking coal prices both increased 13% in March. Iron ore prices were driven up by China’s logistical disruptions amid a COVID-19 lockdown and heavy rains in Brazil. Meanwhile, coking coal prices were mostly supported by wet weather in Australia

• In April, the demand for steelmaking raw materials is likely to be driven by the gradual removal of COVID-19 restrictions in Tangshan, China’s main steelmaking city

• On the supply side, coking coal output might continue to be pressured due to heavy rains in Australia, which, coupled with the recovery in demand, could support prices at the current high levels. However, iron ore prices are likely to see some downside given supply has started to recover: Brazil's iron ore exports rose 2% YoY as rainfall passed the peak

• We also note downside risk for long term iron ore prices amid CSN’s production expansion (5% of seaborne supply) and the launch of the Simandou project (4% of supply)

#iron_ore #coking_coal #steel #raw_materials

 ⛏Russia’s steelmakers kept domestic steel prices flat in roubles amid a soft agreement with authorities
 
• As such, domestic steel prices were roughly flat in roubles in March. Meanwhile, the discount to export prices narrowed 70% to USD 91/t amid appreciation of the rouble
 
• Prices for coking coal in Russia are fixed until June in order to stabilise steelmaking raw material prices. Furthermore, the Russian authorities are pushing for an increase in scrap export duties to EUR 290/t for the same purposes
 
• On the demand side, the Russian Steel association expects Russia’s domestic steel demand to fall 30% YoY in 2022. However, it might be supported by the launch of new infrastructure projects. So far we see April volumes declining at a modest 10-15%
 
• Among Russian steel producers, NLMK is best positioned given its exports are mostly semi-finished and are exempt from sanctions. Meanwhile 90% of Severstal exports face disruptions due to sanctions
 
#steel #rusteel #coking_coal

⛏Steelmaking margins declined globally due to the increase in raw materials prices
 
• Chinese steel producers’ margins fell 10% through March, mostly driven by 22% growth of the raw materials basket price. At the same time, HRC China FOB rose 8% in March, which might be partially caused by the negative effect of China’s COVID-19 restrictions on production
 
• Domestic demand for steel in the country was negatively affected by COVID-19-related disruptions: new property sales in China’s key cities fell 47% YoY in March after China's property sales declined 10% YoY in 2mo22
 
• EU steel prices, meanwhile, rose more than 70% over the course of the month to USD 1,582/t, supported by supply issues amid geopolitics and rising energy costs. This led to more than 160% growth of EU HRC premium to HRC Black Sea FOB (USD 667/t) and to more than a 120% increase in the premium to HRC China FOB (USD 682/t). US steel prices were up 30% during the period
 
#steel

📌China’s domestic excavator sales declined 48% YoY in January and 31% YoY in February
•Meanwhile, the country's total excavator sales (domestic + export) fell 20% YoY in January and 14% YoY in February
❗️The decline in excavator sales might indicate weakening construction activity, which could negatively affect China’s demand for industrial metals

#steel #copper #aluminium

📌Peru’s copper output was roughly flat YoY in February
•Meanwhile, in January, the country’s copper production increased 13% YoY
❗️However, we note risks to Peru’s copper output in the coming months due to protests at the Las Bambas copper mine (1.7% of global copper supply)
📝Chile’s copper output was down 7% YoY in February

#copper