Good afternoon
Australia celebrated the arrival of the first, British fleet today in 1788….hmmmm…I wonder a little about it….anyway, therefor markets in Australia were closed today.
The virus has a firm gripp on markets today…major markets are down by 2% so far, as were all base metals initially….Nickel staged a recovery in the afternoon to be nearly unchanged in the moment - don´t know, why. Markets trying to figure out the potential impact of the virus outbreak , which is very hard in the moment to do. The major worry seems to be the up to 14 day incubation time, during which infected humans seem to be able to transfer the virus without feeling any impact themselves. That makes it very hard to contain.
Bonds are strong today, as is gold…flight to safety everywhere.
The A$ gold price is making new highs today at 2340 A$/oz…great price, but difficult to cheer about it! It´s up by 8% this year so far. Australian gold producers share prices are not really behaving like they should. Very strong performance until August last year during a time, when general funds weighted back into gold, have forced them into a consolidation. Some not so good Quarterly Reports from larger producers did not help either…But at some stage, this will be put behind them, and I think we might be getting very close. The A$ is weak again, as China is Australia´s by far largest trading partner…so I expect some defensive buying by Australian institutions to take place again - firstly averaging down, but also betting on a continued, weak currency. Holdings of Gold ETF´s are rising again.
The Mining Journal today published an interesting article today, talking about battery metals..please contact me, if you want to read more about it. In essence, analysts are seeing stronger demand for nickel, as battery compositions change quickly. The incentive price for new, conventional nickel mines is seen as close to 20.000 US$/t, while the expectation for new HPAL producers is to take longer, need more capex, and produce lesser than name plate at reasonably high costs. They are less bullish on lithium - it would not take that much to re-open moothballed mines first, and after that, a lot of deposits have already been defined to facilitate production growth, once the market is asking for more product. Not easy, though, to manage the potential mismatch between production, growth of demand, and prices for the product. Copper was not seen as strong in demand as previously - a guy from McKinsey got cited as saying, that EV´s don´t need 3x as much copper as combustion cars, as technological progress is driving this to 2x and even lower over time. But still a lot of copper is needed for the charging-infrastructure. Cobalt - they do not see so much of a general shortage, but rather a shortage of ESG-compliant material, as 70% of the world´s mine production is coming from the DRC. Overall, quite a positive article, as some observers believe a hock-stick demand curve, as consumers start to embrace the new technology very slow in the first place, but potentially quickly respnding to about 200 new models hitting the street until mid 2022 ( starting with what might be the biggest seller, the new VW by the middle of this year. And tehy are askingthe question, how consumers will react, once the find, that there local petrol station is closing down. But I think this is a few years down the track!
have a nice evening
WS