Weekly Mining Commentary

Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

AstraZeneca (LSE: AZN) announced today that tests on its vaccine for COVID-19 returned an average efficacy rate of 70%. AZN is now the third drug company to report positive results. Although Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) have achieved 94%-95% efficacy rates, a major benefit of AZN’s vaccine is that it does not have to be stored at ultra cold temperatures. AZN’s vaccine is also expected to be cheaper. Pfizer has submitted its vaccine to the U.S. FDA for approval. These developments are extremely positive for an economic recovery, and drove base metal prices higher in the past week. Not surprisingly, gold and silver reported losses, as demand for safe haven assets typically rises when there is global economic uncertainty and vice versa.

Four of the seven indices we track are trading higher than pre-COVID19 levels (blue bars).

Source: FRC / Various

Copper inventory levels continued to decline on a WoW basis, both on the LME (London), and on the SHFE (Shanghai).

Another positive development for base metals was that China announced several positive macroeconomic data last week, including strong industrial production, retail sales, and lower unemployment.

China’s industrial production was up 6.9% YoY in October, beating market expectations

Retail Sales in China

China Unemployment

Inline with commodity prices, valuations of base metals increased, while that of gold declined in the past week.

As the rollout of vaccines is expected to take time, we remain concerned about the surge in COVID-19 cases, potential for increased restrictions, and their near-term impact. Although certain countries (such as France and Spain) have stared showing signs of decline, India and Brazil have entered their second-wave, and have started to experience an increase in new cases.

Our commodity price forecasts (unchanged) are shown below: