Gold Trends: 2014 & Beyond

Source: Visual Capitalist

11.7% Of The World's At War: Global Geopolitical Risk Mapped

You can be forgiven for thinking that the world is a pretty terrible place right now, exclaims JPMorgan's Michael Cembalest. With 11.7% of the world's population currently at war (and a considerably larger percentage seemingly on the verge), it seemed an appropriate time to summarize the main geopolitical risk points in the world.

Deutsche Bank warns Geopolitical Risks Remain High

As Cembalest notes, the list is long... and growing

The downing of a Malaysian jetliner in eastern Ukraine and escalating sanctions against Russia, the Israeli invasion of Gaza, renewed fighting in Libya, civil wars in Syria, Afghanistan, Iraq and Somalia, Islamist insurgencies in Nigeria and Mali, ongoing post-election chaos in Kenya, violent conflicts in Pakistan, Sudan and Yemen, assorted mayhem in central Africa, and the situation in North Korea, described in a 2014 United Nations Human Rights report as having no parallel in the contemporary world. Only in Colombia does it look like a multi-decade conflict is finally staggering to its end.

For investors, strange as it might seem, such conflicts are not affecting the world’s largest equity markets very much (for now). Perhaps this reflects the small footprint of war zone countries within the global capital markets and global economy, other than through oil production.

While markets maybe ignorant of the risk flares, economies are not as today's durable goods orders in the US show, even the cleanest dirty shirt is starting to get soiled.

Central America's Largest Nickel Mine Resumes Operation after 30 Years of Shutdown

Fenix mine, the largest nickel mine in Central America has resumed its operation after long years of shut down.

 The authorities took the decision amid violent clashes between the natives and security forces, disputes relating the land ownership and current lawsuits for murder and gang rape reported there.

The largest nickel mine in Guatemala has been shut down for 30 years. It was inaugurated by the president Otto Pérez during his recent visit to the site. He called the mine as the biggest investment in the history of the nation.

Years of alleged killings, intimidation, violence, harassment and evictions of Q’eqchi’ people in the Fenix region made hindrance to the mining operations there. Some of the people filed lawsuits for getting legal title of their land.

At present, three lawsuits are ongoing for the 2007 gang rapes allegedly committed by company security, the army and police, for 2009 murder of Q’eqchi’ man Adolfo Ich Chaman and for shooting German Chub allegedly committed by company security.  

The Fenix mine is one of the largest nickel mines in Guatemala, located in El Estor in Izabal Department.The mine has mineral deposits of about 36.1 million tonnes of ore grading 1.86% nickel

Goldman predicts copper market surplus, prices to fall to $6,200/mt over 12 months

Goldman Sachs in its latest research note on commodities, released yesterday, states that the global copper market is likely to witness a surplus of around 350,000 to 500,000 mt over 2014-’15. Also, copper prices are likely to fall to lows of $6,200/mt over a period of twelve months.

According to Goldman Sachs, the copper market is likely to remain in surplus in 2014 and 2015. This is despite considering the strong demand growth expectations from non-Chinese markets and the anticipated capacity cuts at copper smelters around the world. The copper prices are expected to fall to $6,600/mt over the next three months. The prices may further fall to $6,400/mt on a six-month horizon. Over the next 12 months, the prices may reach levels as low as $6,200/mt.

The investment banks notes that there are several negative factors that weigh on the copper industry. One of these factors is the overdependence of the commodity on Chinese property market. The bank anticipates the Chinese real estate market to remain bearish in 2014 and 2015. The underperformance of the property market may keep the copper prices under pressure.

Secondly, the Chinese copper financing deals have shifted large volumes of physical copper from markets on to bonded warehouses. It may require at least 6 to 12 months for the situation to ease.

Consequently, the copper average price forecast for 2015 is being lowered from $6,600/mt to $6,400/mt and that for 2016 is being lowered from $7,000/mt to $6,600/mt.

Aluminium Production Shows Slight Decline, Still Close To All Time Highs: IAI

International Aluminium Institute (IAI) stated that world aluminium market has showed again a slight decline in production. But, rising demand for aluminium made some relief in the month of June and that was close to all time highs.

IAI data showed that the production of primary aluminium in the month of June 2014 was about 4.303 million tonnes and that of May was about 4.331 million tonnes. Even though, it reported a slight decline, when calculating on year-on-year basis production figures have some improvements. It says that the aluminium production increased 1.8 pct on YoY basis in the month of June.

In the month of March, the aluminium production figure was at record highs of about 4.406 million tonnes. June month production has gained by 1.8 pct of last year figure 4.224 million tonnes. China is the main contributor in world aluminium production by producing a total of 1.95 million tonnes in June. In China May month production was around 1.898 million tonnes.

This implies that the China shares 45.31 pct in the world aluminium production. On YoY, production in China has increased by 6 pct, when compared to 1.84 million tonnes produced in June 2013. The unreported Chinese aluminium production is estimated about 250000 tonnes.

In the month of June 2014, production in Asian countries including China was about 193000 tonnes, when compared to 203000 tonnes produced in May 2014. IAI also noted that the production in the GCC region has also reported an appreciation. The net aluminium production in GCC in June was about 412000 tonnes, increased by 26 pct from 327000 tonnes in June 2013. 

Russia scraps nickel, copper export duties ahead of schedule

The Russian government said it would cancel export duties for nickel and copper ahead of schedule, as expected, signalling support for a project by Norilsk Nickel , the world's largest nickel producer.

Prices of nickel, used in making stainless steel, have gained 38 percent this year after top exporter Indonesia in January banned shipments of unprocessed ore, leading to fears that shortages would develop.

Russia's decision on Thursday to cut duties to zero from the current 3.75 percent for unalloyed nickel and 10 percent for copper cathodes will come into affect in 30 days after its official publication, which is expected in a few days.

The cut to zero was originally slated for 2016.

Norilsk, which is partially owned by Russian tycoon Vladimir Potanin and aluminium giant Rusal said in May it expected the duties to be cancelled early, which would provide the company an additional roughly 11 billion roubles ($315 million).

Norilsk will use the additional funds to shut down its 72-year-old nickel plant in the town of Norilsk. The shutdown will not affect its production plans. 

The decision to cut duties will add between $120 million and $140 million to Norilsk's 2014 core earnings (EBITDA), currently estimated at $5 billion, analysts at Otkritie Capital said in a note on Thursday.

($1 = 34.9550 Russian Roubles)

China Surprisingly Strong PMI to Push Up Shanghai Metal Prices

 Shanghai metals price is expected to lurch higher today following the surprisingly high HSBC PMI reading for July, Shanghai Metals Market foresees. 

The HSBC flash China manufacturing PMI rose to 52 in July, an 18-month high, well above market expectations. The result helped copper , being refrained from rising, lead the gain among base metals. The bullish sentiment in zinc and aluminum market should remain unchanged.  

The followings are SMM price estimations for base metals on July 25. (unit: yuan per tonne)

 

Copper: 50,500 -51,000 

Aluminum: 14,030 -14,130   

Zinc: 17050-17150

Lead: 14,300-14,400  

Nickel: 130,000-132,000 (spot)

Tin: 139,500-140,500 (spot)