Mining Monitor (February 2017) - bk.mufg.jp · impact on Chinese coal miners’ output. However,...
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Mining Monitor (February 2017)
Strategic Research Division,
Corporate Research Office
7 February 2017
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 | 7 February 2017 2
6. Nickel 17
7. Zinc 20
8. Gold 23
Appendix 26
1. Overview
Mining Monitor | 7 February 2017 3
Takuya Eto
Strategic Research Division,
Corporate Research Office
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Mining Monitor | 7 February 2017 4
Mined Commodity Price Trends
The prices of mined commodities were by and large solid in January 2017 related with growing demand or short
supply mainly in China. Prices of some commodities were affected by government decisions or speculative factors.
1. Overview
Mined Commodity Price Trends
In January 2017, the prices of mined
commodities were stable and solid
except coking coal, thermal coal, and
nickel.
The prices of coking coal and thermal
coal followed the downtrend as the
global supply tightness has relieved.
In respect to nickel, price was coming
down due to the decision from
Indonesian government to relax a
nickel ore export ban.
Conversely, iron ore and copper prices
were positive supported by China’s
growing demand. As aluminum and
zinc were expected to be deficit, those
prices increased as well.
In addition, speculative factors made
influences on some commodities
including gold.
Meanwhile, inventories of some
commodities increased because
trading activities slowed ahead of
Chinese New Year Holiday. It will be
necessary to monitor the movement of
inventories and prices closely.
2016 2017
Yr Avg Jul Aug Sep Oct Nov Dec Jan
Iron Ore ($/t) 58 57 61 57 59 73 80 81
MoM - 11% 6% -6% 3% 23% 10% 1%
YoY 5% 10% 9% 0% 11% 56% 98% 92%
Coking Coal ($/t) 142 96 114 189 232 300 267 185
MoM - 7% 19% 66% 22% 29% -11% -31%
YoY 58% 11% 35% 131% 191% 299% 245% 141%
Thermal Coal ($/t) 65 63 67 72 92 97 85 84
MoM - 16% 7% 8% 27% 6% -12% -2%
YoY 12% 6% 15% 26% 74% 83% 63% 66%
Copper ($/t) 4,866 4,869 4,767 4,731 4,748 5,414 5,667 5,753
MoM - 5% -2% -1% 0% 14% 5% 2%
YoY -11% -11% -6% -9% -9% 13% 22% 29%
Aluminum ($/t) 1,605 1,629 1,639 1,575 1,666 1,737 1,728 1,791
MoM - 2% 1% -4% 6% 4% -1% 4%
YoY -4% -3% 4% -2% 8% 17% 16% 21%
Nickel ($/t) 9,605 10,263 10,336 10,093 10,260 11,126 10,972 9,971
MoM - 15% 1% -2% 2% 8% -1% -9%
YoY -19% -10% -1% 1% -1% 20% 26% 17%
Zinc ($/t) 2,091 2,183 2,279 2,292 2,312 2,566 2,665 2,715
MoM - 8% 4% 1% 1% 11% 4% 2%
YoY 8% 9% 26% 33% 34% 62% 74% 79%
Gold ($/oz) 1,250 1,339 1,338 1,326 1,266 1,237 1,151 1,194
MoM - 5% 0% -1% -5% -2% -7% 4%
YoY 8% 18% 20% 18% 9% 14% 8% 9%
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
2016
Chloe Lim
Strategic Research Division (Singapore)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
2. Iron Ore
Mining Monitor | 7 February 2017 5
January marked the fourth
consecutive rise (up 1% MoM) in
average monthly iron ore price which
reached US$81/t.
Prices were supported by sustained
imports by Chinese buyers as iron
ore inventory at China ports
indicated no signs of easing and rose
to record high in the month.
As trading activity slowed ahead of
Chinese New Year holiday, prices
were stable towards end-January at
US$83/t.
In the meantime, iron ore pricing is
expected to be sticky on the back of
speculative trade positions.
6
Iron Ore Prices and Inventories
Prices were supported above US$80/t mark as China’s imports remained robust.
2. Iron Ore
1) Price Trends
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China Iron Ore Port Inventory (RHS) Iron Ore Fines 62%, CFR China Import Spot Price (LHS)
($/t) (Mt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Fortescue Metals Group (“FMG”) 2Q’FY17 result: steady shipment, lower cost and debt – 30 January, 2017
The fourth largest iron ore exporter’s shipment in 2Q’FY17 was firm at 42 million tons and grew 2% to 86 million tons in 1H’FY17. Despite rising oil
prices, its C1 cash cost continued to trend lower to US$12.54/wet metric ton (“wmt”), down -4% QoQ. Higher realised iron ore prices and reduction in
C1 cash cost were sufficient to allow FMG to report a lower net debt level from US$5 billion to US$4 billion in 1H’FY17.
The company looks set to achieve its full-year FY2017 guidance of 165-170 million tons shipment at C1 cash cost of US$12-13/wmt.
Brockman Mining secured port access for the first stage of its Marillana mine in West Australia – 27 January, 2017
Australia’s junior miner, Brockman Mining secured port access at Port Hedland for the first phase of its Marillana iron ore m ine in Pilbara. Known as
Project Maverick, this first phase development is expected to be a 2.5-3 million ton operation and will pave the way for its Marillana mine with an annual
operational capacity of 20 million tons. Marillana mine has an estimated reserve of 1 billion tons.
Construction is targeted in second quarter this year, and commissioning is slated for the first quarter of 2018.
New Zealand’s private conglomerate Todd Corporation plans new A$5 billion project in Pilbara – 22 January, 2017
Todd Corporation signed a state agreement with Western Australian government and laid out the framework for its proposed Balla Balla infrastructure
project in Pilbara region. The A$5.6 billion (US$4.3 billion) development is expected to include a 160km railway network and a trans-shipping port, with
the entire operation capable of exporting about 50 million tons of iron ore annually. Rail construction is likely to start in 2018.
While BBI Group, a subsidiary of Todd Corporation, owns a magnetite iron ore deposit near the proposed port site located between Karratha and Port
Hedland, it is not feasible to develop at current prices. However, the company is confident it can strike an agreement with ASX-listed Flinders Mines and
other existing miners in the vicinity. Todd Corporation is Flinders’ largest shareholder with a 53% stake.
China posted record iron ore imports in 2016 – 12 January, 2017
According to General Administration of Customs, China imported 89 million tons of iron ore in December, down -3% from November. For the full year,
the country’s imports hit an all-time high, posting 8% growth to 1 billion tons in 2016.
The driving factor for Chinese iron ore import growth in 2016 was due to a -6% YoY decline in domestic production, which reached a six-year low of 1.3
billion tons in 2016, based on National Bureau of Statistics.
Mining Monitor | 7 February 2017 7
2. Iron Ore
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
William Cheung
Strategic Research Division (Hong Kong)
THE BANK OF TOKYO-MITSUBISHI UFJ, H.K.
3. Coal
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Global coking coal price continued to
fall in January. The average price for
January was $185/ton, down 30.7%
from the previous month.
The price decrease was because
supply tightness has relieved, after
China’s decision to ease production
restrictions and overturn supply
disruptions last year. Besides, supply
disruptions in Australian mines have
been resolved, putting downward
pressure on the coking coal price.
Global thermal coal price followed
the downtrend of coking coal. The
average price fell to $84/ton in
January, mainly because China
eased restrictions on coal mine
operation. However, the pace of
decline was moderating as the
majority of coal mines in China
stopped production during the Spring
Festival holidays from late January to
early February.
Mining Monitor | 7 February 2017 9
Coal Prices
The coking and thermal coal prices continued to fall after the global supply tightness has relieved.
3. Coal
1) Price Trends
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Spot Price (Coking Coal) Spot Price (Thermal Coal)($/t)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Thermal coal price falls with the shift in Chinese policy – 31 January, 2017
The global spot price for thermal coal continued to fall to around $82t/ton in mid-January 2017, down more than 20% from the recent high in November
last year. The major reason was that China eased restrictions on coal mine operation in September last year. Then, coal output in China began to
recover from November and subsequently put downward pressure on the thermal coal spot price to below $90/ton. On the other hand, price showed
little volatility during the Spring Festival holidays in late January 2017, as the majority of coal mines in China will stop production until the first week of
February. However, the thermal coal price may continue to fall after the Spring Festival holidays when coal mines resumes operation.
China coal industry 2016 profits more than triple on year-on-year – 26 January, 2017
According to the latest data released by the National Bureau of Statistics of China, the sales revenue of coal mining industry in China decreased slightly
by 1.6% year-on-year to $338 billion in 2016, because China’s production cut policy and supply disruption caused by abnormal rainfall have negative
impact on Chinese coal miners’ output. However, profits of the industry rose by 223.6% year-on-year to $15.9 billion for the same period, driven by the
improvement in product margin as a result of coal price rally in the second half of last year. Overall, coal miners and processors (i.e. steel mills and oil
refiners) in China saw remarkable improvement in performance, compared with firms in other industries.
Coal capacity cut will continue in China in 2017 – 24 January, 2017
According to the China National Coal Association, the Chinese government will continue its efforts to remove excess capacity in coal industry this year.
The capacity reduction target in 2017 could be lower than last year’s target of 250 million tons. The major reason is that the government is going to
remove excess capacity at operating coal mines, rather than halted or half-halted mines in 2016. The government could face greater difficulties such as
employee resettlement in carrying out the de-capacity task this year. The national target for cutting coal capacity in 2017 is pending the State Council for
final approval and is set to be announced soon.
Coking coal price still falling – 20 January, 2017
The global spot price for coking coal has decreased by around 23% in the first three weeks of 2017 to $173/ton after the supply tightness has relieved.
This could be largely attributable to China’s decision to ease production restrictions and overturn many supply disruptions that caused the price to rally
in 2016. Besides, most of the supply interruptions that hit Australian mines in mid-2016 have been resolved. Looking ahead, many coking coal
producers in US, Australia and Canada such as Warrior Met Coal, Rosebud Mining, Ramaco, South32, Anglo American and Conuma are planning to
increase production in 2017. Against this backdrop, the global coking coal price is likely to fall to $143/ton, according to the market consensus forecast.
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3. Coal
2) News Flow
Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Satoshi Kondo
Strategic Research (NY)
MUFG UNION BANK, N.A.
4. Copper
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Copper price in January 2017
increased 7.4% m-o-m to $5,930/t,
reversing a downward trend seen
in the last month.
On the demand side, anticipation of
demand growth in US and China
bolstered prices. Particularly in
China, imports of copper
concentrate increased 12.8% y-o-y
in December 2016, indicating
expectation of recovery in copper
demand.
On the supply side, tough labor
negotiations in a Chilean mine and
forecast of shipment delays from
Indonesia created upward
pressures on prices.
Inventories at LME declined while
SHFE warehouses increased
ahead of the Chinese New Year.
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Copper Prices and Inventories
Copper prices continued to be higher in January given forecast of growing demand in major consumption countries
and supply concerns of major production countries.
4. Copper
1) Price Trends
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LME Inventory (RHS) SHFE Inventory (RHS) LME Spot Price (LHS)
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Source: Bloomberg, MUFG Union Bank, Strategic Research
Labor union votes for strike at Chile’s Escondida copper mine – 1 February, 2017
The labor union representing workers at Escondida, the world’s largest copper mine in Chile (2015 production was nearly 6% of global total) voted in
favor of a strike, after a-month-long talks and rejecting a new wage contract which offered no increase in pay and benefit cuts. The owners could
request government mediation, and the strike could begin around the middle of February. The mine is owned by BHP Billiton (57.5%), Rio Tinto (30%),
and Mitsubishi-JECO (12.5%). BHP Billiton commented that the offer “maintained almost all of the benefits of the current contract, adjusting it to the
current reality of the company, industry and country.” The union stated that “the strength of the vote closes the door to any attempt by the company to
introduce its disastrous plans to lower costs through making the workforce cheaper,” and “it will pave the way for other companies to do the same.”
Labor negotiations at Escondida are regarded as a benchmark for the copper industry. During the last contract negotiations held four years ago, copper
prices were much higher, and the mine workers won the highest ever offered bonus of $49,000 per worker.
Freeport may be temporarily exempt from Indonesian export ban – 31 January, 2017
The Indonesian government said that it may issue a temporary permit which could allow Freeport-McMoRan to resume exports of copper concentrate.
The shipment of the metal has been halted since a new rule took effect on January 12, 2017. As part of its efforts to boost domestic industries,
Indonesia is demanding foreign miners to divest 51% of their stakes to local owners by their 10th year of operation, and requiring Freeport’s local
operation, PT-FI, to change operating terms to allow exports by converting Contract to Work to a special mining license. Under the current contract,
Freeport “is not required to pay export duties on concentrate or to conduct further divestments”. Freeport has rejected Indonesia’s demand since it
would eliminate the “legal and fiscal” certainty” provided by the existing contract, unless it is accompanied by a “stability agreement providing the same
rights and the same level of legal and fiscal certainty provided under its contract of work.”
BHP Billiton downgrades FY2017 copper guidance; Rio Tinto 2016 production below estimates – 31 January, 2017
BHP Billion downwardly revised FY2017 copper guidance by 40,000t, due to disruptions in operations from power outages in Southern Australia at the
Olympic Dam as well as unplanned maintenance of the operation’s refinery n 3Q-4Q’16. The FY guidance for Escondida is unchanged at 1.07mt, which
indicates that the company plans to produce 618,000t of copper during 1H 2017.
Rio Tinto’s copper production increased 4% y-o-y to 523,000t in 2016, but 10% below guidance of 575,000 - 625,000t, due mainly to operational
difficulties at the Grasberg mine and lower-than-expected output from the Kennecott mine. The 2017 copper production guidance is 525,000 - 665,000t.
Growth forecasted for copper production in Chile and Peru in 2017 – 24 January, 2017
According to Cochilco, the state copper commission, copper production in Chile is expected to increase 4.3% y-o-y in 2017 to 5.79mt, after declining
3.9% y-o-y to 5.55mt in 2016, as higher output is expected from the Escondida mine owned by BHP Billiton. Production at some plants at Escondida
was suspended during 2016 for upgrading the facilities. The forecast for 2018 is an increase by 3.4% y-o-y to 6.0mt.
According to the Peruvian government, copper production in Peru is expected to increase 20% y-o-y in 2017 to 2.60 – 2.70mt, surpassing estimated
2016 production of 2.20mt. Copper production in Peru surged 42% reaching a record 2.15mt during the period from January to November in 2016 y-o-
y, attributable primarily to higher output from the Las Bambas copper mine owned by China’s MMG and expansion of Cerro Verde mine by Freeport-
McMoRan.
Mining Monitor | 7 February 2017 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 | 7 February 2017 14
Prices performed strongly gaining 7%
by month end to finish at over $1,800.
This was in defiance of fundamentals as
although production data for January is
unknown, LME inventories gained 3%.
This was likely down to continued
strong Chinese output as SHFE stocks
grew even faster, peaking during the
month 25% higher than year end 2016.
Therefore it would appear price gains
are speculation driven, based on the
rumour that the Chinese government is
poised to enforce capacity cut backs.
It is estimated by Metal Bulletin that in
China 7Mtpa of inactive capacity built
up during 2016 and the market has
reacted very positively to possible
lasting removal.
However the price gains partially
reversed during the last week of
January as LME inventories remained
high, showing that fundamentals still
hold influence on price.
Mining Monitor | 7 February 2017 15
Aluminum Prices and Inventories
Prices managed to rally during January despite growing inventories. This appeared to be driven by expectations that
the Chinese government may act to address smelter overcapacity in the country.
5. Aluminum
1) Price Trends
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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
China's war on smog not seen as a game-changer for aluminum market – 2 February, 2017
Top aluminum producer China's battle against pollution has raised the prospect of output cuts, causing prices to rise to 20-month highs, but the rally
might have gone too far as oversupply remains a problem. The market excitement was sparked by a Chinese government document proposing that
about a third of aluminum capacity in the provinces of Shandong, Henan, Hebei and Shanxi should be shut over the winter months. However it is
thought that the only time production cuts really happened in China was when the economics of the smelters didn’t work. An example of this came in
November 2015 when prices crashed to 6-1/2 year lows below $1,440 a ton and Chinese smelters cut about 3.6 million tonnes of capacity, according to
analysts.
Rio Tinto's 2016 bauxite, alumina, aluminum output exceed expectations – 17 January, 2017
Rio Tinto produced more bauxite, alumina and aluminum than anticipated in 2016, the group said in a production report. Its bauxite yield came in at 47.7
million mt, above guidance of 47 million mt given last October, and up 9% from 2015. Aluminum production was 10% higher than 2015 at 3.65 million
mt, helped by record annual production at 10 smelters, notably at the revamped Kitimat smelter in Canada, which has produced at nameplate capacity
since April 2016. Rio Tinto Tuesday put its 2017 guidance for bauxite at 48 million-50 million mt, with alumina output anticipated at 8 million-8.2 million
mt and aluminum at 3.5 million-3.7 million mt.
Alcoa revenue tops estimates, sees higher aluminum demand – 15 January, 2017
Alcoa reported higher-than-expected revenue in its first quarterly results after the metals company split into two in November, helped partly by a rise in
alumina prices. The producer of aluminum, alumina and bauxite said it expects a 4 percent growth in global aluminum demand in 2017. Alcoa said it
expects bauxite and alumina markets to be relatively balanced in 2017 and "a modest" global aluminum surplus of 400,000-800,000 metric tons.
Mining Monitor | 7 February 2017 16
5. Aluminum
2) News Flow
Source: 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 | 7 February 2017 17
Prices endured significant downward
pressure during January as the
markets digested the surprise move
from the Indonesian government to
partially relax a nickel ore export ban
which had stood since 2014.
Prices fell as low as $9,350 per
tonne, a fall of -6% compared to year
end 2016.
In a market that is weighed down by
near record inventories, a possible
increase in supply from Indonesia
has sufficiently dented sentiment to
cause prices to retreat from the
beginnings of the recovery.
However the fundamental picture
during January did not materially
change with the market still relatively
tight given environmental shutdowns
in the Philippines.
The negative January price trend
was therefore driven more by money
managers releasing long positions
and retreating to shorts, dragging
prices with the movement.
Mining Monitor | 7 February 2017 18
Nickel Prices and Inventories
Bearish sentiment took hold in the market as the decision from the Indonesian government to partially relax a nickel
ore export ban was fully digested.
6. Nickel
1) Price Trends
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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Philippines to shut half of mines, mostly nickel, in environmental clampdown – 3 February, 2017
The Philippines ordered the closure on Thursday of 23 mines, mainly nickel producers that account for about half of output in the world's top nickel ore
supplier, in a government campaign to fight environmental degradation by the industry. News of the mine closures sent global nickel prices higher and
followed the earlier suspension of some operations amid an audit of the country's 41 mines that began shortly after outspoken President Rodrigo
Duterte took office last June. Lopez said the nickel mines ordered to shut account for about 50 percent of the country's annual output, which analysts
estimate at about 10 percent of world supply.
Global Stainless Steel production set for new high in 2017 – 2 February, 2017
Annual global crude stainless steel production for 2016 is estimated to have totalled an all-time high of around 45.5 million tons, which represents a
year-on-year increase of 9.5 percent. MEPS (a market analytics agency) forecasts a further rise in worldwide out-turn of around 4 percent, in 2017, to a
new peak of 47.3 million tons. Recently-issued, official Chinese output figures were significantly higher than earlier expectations, despite reports of plant
closures. In Japan and South Korea, last year’s production is estimated to have fallen slightly below the 2015 totals. Moderate increases are forecast,
for both countries, in 2017. Output in the European Union, in 2016, was approximately 2 percent more than the year earlier figure. A further, marginal
expansion is expected, this year.
Nickel price picked as 2017 winner – 31 January, 2017
Nickel rallied to more than $11,700 by mid-November only to fall back nearly 20% to trade at a six-month low in January. However in a new report
Capital Economics, a London-based independent research house, believes of all industrial metals, the nickel price has the best prospects to improve
adding that "the market is tightening [following years of underinvestment in new mines] and it is still too soon to say what the partial lifting of Indonesia’s
ban on ore exports will mean for supply. Capital Economics sees the price of nickel climbing to $11,500 per tonne by the end of the year (that's a 20%
jump from today's price), with further upside predicted in 2018. That makes nickel the metal Capital Economics is by far the most bullish about.
Mining Monitor | 7 February 2017 19
6. Nickel
2) News Flow
Source: The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
7. Zinc
Mining Monitor | 7 February 2017 20
Tom Haddon
Strategic Research Division (London)
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
Zinc prices enjoyed a fantastic month
finishing 14% higher than year end
2016, hitting $2,852 – close to push
through the multiyear high of $2,886
seen in November.
The price rise is driven by the
continued perception of tightening
underlying fundamentals – which is
backed up by LME inventories
dipping below 400kt for only the
second time since 2009.
Bullish price sentiment was also
buoyed by trade statistics showing
that China’s zinc concentrate imports
were down 13% year on year in
December due to lack of availability
rather than decreasing demand as
galvanized steel production was
stable.
However in China, SHFE stocks
marginally increased during January,
providing early indications that
domestic supply may be responding
to the price environment, although it
will take a few more months of stable
or increasing inventories to be sure.
Mining Monitor | 7 February 2017 21
Zinc Prices and Inventories
With the market still in deficit due to mine closures in 2016, the underlying fundamentals have led to bullish
sentiment driving prices close to multiyear highs.
7. Zinc
1) Price Trends
0
500
1,000
1,500
2,000
0
1,000
2,000
3,000
4,000
Jan-0
9A
pr-
09
Jul-0
9
Oct-
09
Jan-1
0A
pr-
10
Jul-1
0
Oct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3A
pr-
13
Jul-1
3
Oct-
13
Jan-1
4A
pr-
14
Jul-1
4
Oct-
14
Jan-1
5A
pr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)
Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Glencore sticks with 2017 production targets – 2 February, 2017
Glencore stuck with its target for broadly higher output in 2017 after reporting falls in copper and zinc which led overall production lower last year. Zinc
prices rallied 60 percent last year, making them the best performing metal on the London Metals Exchange in 2016, helped partly by Glencore's
production cuts. The company has said capacity for zinc will stay shut until market conditions allow for extra supply without pushing down prices.
MMK ships record volume of galvanized steel – 1 February, 2017
OJSC Magnitogorsk Iron and Steel Works ("MMK“) shipped 1,135,500 tonnes of galvanized steel to its consumers in 2016, the most in the Company’s
history. The previous record of 1,115,700 tonnes was achieved in 2014. During the past 15 years, MMK has sustainably grown its galvanized steel
output. Currently, another continuous hot-dip galvanizing line with annual capacity of 360,000 tonnes is under construction at sheet-rolling shop 11, with
launch scheduled for July 2017.
Global refined zinc market ends in deficit during Jan-Nov ‘16 – 17 January, 2017
The latest statistics published by the International Lead and Zinc Study Group (ILZSG) indicates that global refined zinc market was in deficit of 263,000
tons during the initial eleven-month period of 2016. The total reported zinc inventories declined by 72,000 tons during this period. The zinc mine output
declined considerably in major producing countries including Australia, India, Ireland and Peru. Overall, the zinc mine output declined by 1.2% during
the initial eleven-month period in 2016 when compared with the corresponding period last year. This is despite sharp increase in mine output by China.
The global demand for refined zinc metal increased modestly to 12.795 million tons during January to November last year, as compared with 12.358
million tons during the same period last year.
Mining Monitor | 7 February 2017 22
7. Zinc
2) News Flow
Source: The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division
Satoshi Kondo
Strategic Research (NY)
MUFG UNION BANK, N.A.
8. Gold
Mining Monitor | 7 February 2017 23
Mining Monitor | 7 February 2017 24
Gold Prices, ETF Holdings, and 10Yr US TIPS Yield
After the sell-off related to Mr. Trump election in November, gold price turned positive on uncertainties over the
policies of the new US administration.
8. Gold
1) Price Trends
After the sell-off due to concern of
higher US inflation and stronger USD,
all which related to the unexpected
Mr. Trump election in November, gold
prices turned higher in January, up
5.5% in the month.
Factors behind the price gain are
reversal of factors which have been
pressuring gold prices downward. In
other words, lower stock prices and
weaker dollar on the back of
uncertainties over the policies of the
new US administration, which in turn
made risk-averse investors to
purchase gold, a safe-haven asset.
Money manager net length at the
COMEX which have been
plummeting over the trailing three-
month period, turned positive in
January 2017. Gold ETF holdings
were relatively lower (-0.5% m-o-m).
600
900
1,200
1,500
1,800
2,100
2,400
2,700
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-0
9A
pr-
09
Jul-0
9O
ct-
09
Jan-1
0A
pr-
10
Jul-1
0O
ct-
10
Jan-1
1A
pr-
11
Jul-1
1
Oct-
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
5
Oct-
15
Jan-1
6A
pr-
16
Jul-1
6O
ct-
16
Jan-1
7
(t) ETF Holdings (RHS) Gold Price (LHS)($/oz)
Source: World Gold Council, GFMS, Bloomberg, MUFG Union Bank, Strategic Research
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
10Yr US TIPS Yield (%)
Mining Monitor | 7 February 2017 25
8. Gold
2) News Flow
Egypt opened international tender offer for gold exploration rights – 24 January, 2017
Egypt started accepting bids for its first gold exploration rights since 2009 on January 15, 2017. The offer covers five concession areas and remains
open until April 20, 2017. Currently the country has one commercial gold mine, Sukari, operated by Centamin, with production of 551,036 ounces in
2016. The terms of the tender offer include a 6% royalty payment, partial cost-recovery before the beginning of production-sharing, and three bonus
payments to EMRA, Egypt’s mining agency, including one of at least $1 million. Companies will also be required to share at least 50% of any gold
revenues with the government. Miners commented that the international norm for a royalty and tax regime is for the government to take a small royalty
fee from production revenues, a model which has created booming industries in countries such as Chile and Ethiopia. Egypt’s three main foreign miners
(Centamin, Aton Resources, and Thani Stratex Resources) are not planning to bid on current terms, but EMRA expects a “beyond excellent” turnout.
Strike ends at Yamana’s Chilean mine – 18 January, 2017
Workers at Chile’s El Peñon mine and its owner, Canada’s Yamana Gold, have reached a wage agreement, ending a strike which began on January 7,
2017. The mine is the company’s second largest gold mine by output, producing 164,445 ounces during January – September 2016 (approximately 17%
of company’s total production). The company stated that the interruption has not created a “significant impact” on mine and consolidated production and
expects to recover production from its other operations in the near term and from El Peñon throughout 2017.
Goldcorp announced its growth plan to increase production – 17 January, 2017
Goldcorp, a Canadian gold miner, shared a growth plan to increase production by 20% to approximately 3 million ounces over the coming five years.
The growth is planned to be achieved by boosting capacity at its Cerro Negro mine (Argentina) and the Eleonore mine (Canada). The company
forecasts its gold reserves to increase 20% to 50 million ounces during the same period from existing resources at Century project (Ontario),
Peñasquito mine (Mexico), and Pueblo Viejo mine (Dominican Republic). The Goldcorp Chief Executive David Garofalo commented that world’s major
gold miners should partner to share the risks (e.g., financials) of developing large gold deposits, and “what we are looking to do on the M&A side is find
more of those large resources that are undeveloped right now and do so in partnership with some of our senior peer companies.”
Source: Various sources, MUFG Union Bank, Strategic Research
Mining Monitor | 7 February 2017 26
Appendix : Mined Commodities Price Forecasts by Strategic Research Division as of 27 January 2017
Yr Avg 1Q (f) 2Q (f) 3Q (f) 4Q (f) 1H (f) 2H (f) 1H (f) 2H (f)
Iron Ore ($/t) 58 77 72 66 63 60 55 56 52
YoY 5% 60% 29% 12% -11% -20% -14% -6% -5%
QoQ - 9% -6% -9% -4% - - - -
Coking Coal ($/t) 142 179 158 140 128 117 112 107 103
YoY 58% 65% 75% 66% 65% -30% -17% -9% -8%
QoQ - 131% -12% -11% -9% - - - -
Thermal Coal ($/t) 65 81 73 68 66 65 65 64 64
YoY 12% 29% 25% 17% 25% -15% -3% -1% -1%
QoQ - 53% -10% -6% -3% - - - -
Copper ($/t) 4,866 5,119 4,763 4,668 4,617 4,617 4,726 4,904 5,132
YoY -11% 9% 1% -2% -13% -7% 2% 6% 9%
QoQ - -3% -7% -2% -1% - - - -
Aluminum ($/t) 1,605 1,654 1,603 1,584 1,576 1,595 1,644 1,724 1,798
YoY -4% 9% 1% -2% -8% -2% 4% 8% 9%
QoQ - -3% -3% -1% -1% - - - -
Nickel ($/t) 9,605 10,103 9,901 9,852 10,050 10,565 11,101 11,637 11,990
YoY -19% 18% 12% -4% -7% 6% 12% 10% 8%
QoQ - -6% -2% -1% 2% - - - -
Zinc ($/t) 2,091 2,665 2,718 2,746 2,691 2,651 2,611 2,540 2,465
YoY 8% 59% 41% 22% 7% -2% -4% -4% -6%
QoQ - 6% 2% 1% -2% - - - -
Gold ($/oz) 1,250 1,153 1,159 1,168 1,181 1,205 1,223 1,238 1,249
YoY 8% -3% -8% -12% -3% 4% 4% 3% 2%
QoQ - -5% 1% 1% 1% - - - -Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division, MUFG Union Bank, Strategic Research
2016 2017 2018 2019
Disclaimer
Mining Monitor | 7 February 2017 27
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