Equities in Driving Seat

Wall Street reaches a new high, with interest rates pegged and US-China trade talks resuming in Beijing. Oil prices continue to rise but metals remain weak as investors focus on equities.

Like Comment

Although the price of gold stabilised and iron ore improved, last week was another difficult one for metal markets as investors continued to focus on equities. Wall Street reached another all-time high, and the S&P 500 index has now risen almost 25% since the savage sell-off in equities at the end of last year.

From a 20-month low on the eve of Christmas, the S&P 500 has surged despite ongoing fears over a US-China trade war and concern for the global economy. Sentiment towards equities received a boost last month when the Federal Reserve indicated that it would refrain from raising interest rates for the remainder of this year. The Bank of Japan last week confirmed that it also will not raise interest rates before Spring 2020, and made a series of adjustments to its monetary-stimulus programme.

More market signals are expected this week from the Fed's Open Market Committee, which starts a two-day meeting tomorrow (Tuesday 30). On the same day, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will be in Beijing for the start of the latest round of trade talks. This meeting will be followed by Chinese Vice Premier Liu He visiting Washington for more discussions starting on May 8. Both sides have cited progress.

Crude oil prices were buoyed last week by Washington's decision to demand that all countries cease importing oil from Iran (ending waivers previously granted to five nations, including China), and the benchmark Brent Crude rose to a five-month high.

In the week to end-Friday, the price of gold improved 0.4% to close in London at US$1,281/oz, with iron ore (62% Fe) up 1.1% to US$92.8/t. All the other major metals closed lower; copper was down 1.0% to US$6,400/t, zinc slipped 1.1% to US$2,764/t, aluminium fell 1.5% to US$1,841/t and nickel slumped 1.8% to US$12,435/t.

Mining Markets

Meanwhile, the electric vehicle (EV) market in China continues to soar. Government support and the country's burgeoning middle class lifted EV sales to 1.2 million last year, compared with only 0.7 million in 2017. Pure-electric vehicles now represents over 3.5% of total vehicle sales in China.

The China Iron and Steel Association (CISA) has predicted, however, that the country's annual steel consumption has peaked at the 870 Mt consumed in 2018, and a likely similar amount this year. The association expects China's steel consumption to fall to 750-800 Mt/y between 2020 and 2025, followed by a fall to around 700 Mt/y by 2035. China's economic growth, according to CISA, will rely increasingly on efficient production, meaning less intensive steel consumption.

S&P Global Market Intelligence (SPGMI) forecasts that revenue for zinc miners will decline 29% to US$10.6 billion in 2021, from over US$15.0 billion in 2018. The lower revenues are primarily due to a forecast fall in zinc prices, from US$2,892/t in 2018 to an average of US$2,800/t this year and then to only US$2,667/t in 2021. However, despite declining grades, production cash costs are expected to fall over the period due to decreasing onsite costs.

The uranium sector is awaiting a decision from President Trump as to whether the US will impose import quotas on the metal. This follows a request last year from two US miners that imports of the nuclear fuel be limited (with a mooted 25% quota for domestic production). The US Department of Commerce made a recommendation to the administration in mid-April but details have not been released. The president has 90 days to respond to the report from the day it was submitted.

The price of U3O8 halved between early 2015 and end-2016, before recovering almost half of the lost ground in 2018. The metal has slipped this year, and is currently trading at around US$25/lb. In 2017, US nuclear reactors, the primary buyers of the country's uranium, took delivery of 43 Mlb U3O8 equivalent, according to the US Energy Information Administration.

Of the US uranium consumption, only 7% came from domestic sources, with over half coming from Australia and Canada. A report by SPGMI notes that in 2018 the US produced only 2% (2.55 Mlb) of forecast world U3O8 production. Kazakhstan was expected to have a 43% share of forecast 2018 world output, Canada 13% and Australia an 11% share. 

The London Metal Exchange has announced that it will allow only responsibly-sourced metals to be traded from 2022. Under the new rules, producers operating in high-risk areas or conflict zones will need to meet guidelines on responsible sourcing in their metals are to trade on the LME. Cobalt is expected to be particularly impacted.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.


Hello we Can supply Aviation Kerosene, Jet fuel (JP 54-A1,5), Diesel (Gas Oil) and Fuel Oil D2, D6,ETC in FOB/Rotterdam only, serious buyer should contact or if you have serious buyers

my seller is ready to close this deal fast contact us below: Phone via WhatsApp/
Call +79167856894 

Russia D2 50,000-150,000 Metric Tons FOB Rotterdam Port.

JP54 5000,000 Barrels per Month FOB Rotterdam.

JA1 Jet Fuel 10,000,000 Barrels FOB Rotterdam.

D6 Virgin Fuel Oil 800,000,000 Gallon FOB Rotterdam.

Phone via WhatsApp/
Call +79167856894 

Best Regards