Market Update


Good afternoon

Chinese numbers good today - IP +6,3% ( just ahead of exp ) and Fixed Asset Investment + 8.9% both accelerated, while Retail Sales were up by only 9,5% - below expectations. Overall, good for resources demand! And are ALL analysts as well as ALL large producers in their comments wrong?? Iron ore stronmg today, just 4% below the recent high now, while Steel is making a fresh high today. Such a long and sustained, very high price level cannot just be explained by Chinese speculators. Looking at the fundamentals, though ( or at least what we perceive as "the fundamentals" ), I would agree, that prices just have to come back....

US PPI rises stronger than expected, driven by energy.

Funny enough, the prices of large producers BHP/RIO/VALE have been under strong pressure, and something clearly has to give - at today´s spot prices, RIO´s earnings after tax would be 50% higehr than consensus numbers! And using consensus, RIO is only trading at a PE of 10 and 5,5% div-yield!

The oil price took a beating today, as Saudi Arabia confirms, that tehy have increased production in February. they are clearly not prepared to hold the babay ( of production cuts ) alone!

Escondida still on strike and no end in sight, the second largest producer of concentrate, Grasberg, still haggling with the Indonesian government, and a short strike ( well, for now at least ) at the 5th largest producer in Peru....The shortage of concentrate will only now begin to show up in copper cathode production, while Chinese demand is only now starting to come into gear following the New Year Holiday.

Mr. Duterte, the Phillippino maniac, is toying with the idea of a total mining ban...While I´d like that for my Australian nickel producers, his behaviour is obviously pretty irrational!

Metals turned around nicely today, following some weakness in the morning.

Glencore - are selling some of their smaller zinc assets into Trevali, and will emerge as a 25% shareholder in the Canadian zinc miner. Looks like tehy might use Trevali as a holder for their smaller zinc assets.

Have a nice evening