Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Global equity markets fell today on concerns of a new variant of the coronavirus that emerged in the U.K. The U.K. has tightened restrictions, and several countries have closed their borders to travellers from the U.K. Although the new strain is 70% more transmissible than other variants, health officials stated that there is no evidence that the new strain is more deadly. Sources indicate that there is no evidence to suggest that current vaccines will be less effective against the new strain.

 We believe that this new development will further delay the global economic recovery. We believe that restrictions are unlikely to be relaxed until there is a decline in new cases. As shown below, except India, most of the hardest-hit nations continued to experience a surge in new cases last week.

Daily New Cases in the US,Brazil,UK,India, Russia and Germany

Source: https://www.worldometers.info/coronavirus/

Four of the seven indices we track declined WoW.

Current Vs Pre COVID-19(as of Dec 21, 2020)

Source: FRC / Various 

However, a weaker US$ supported prices of mainstream metals.

Week-over-Week(December 21,2020) and Year-over-Year(December 21,2020)

Source: FRC / Various

 As gold had a relatively strong week, valuations of gold producers increased, while that of base metal producers remained flat. 

Gold Producers ( December 21,2020)

Source: S&P Capital IQ & FRC

Base Metal Producers December 21,2020

Source: S&P Capital IQ & FRC

Gold Producers and Base Metal Producers

Source: S&P Capital IQ & FRC

Inventory levels of base metals on both the LME and the SHFE (Shanghai) were down WoW, which we believe was primarily a result of the strong rebound of the Chinese economy.

LME Inventory (Dec 21,2020)

Source: FRC/Various

SHFE Inventory (Dec 18,2020)

Source: FRC/SHFE

With restrictions tightening in Europe, we expect base metal prices to be under pressure in the coming weeks. As mentioned last week, we do not expect the global economy to recover to pre-COVID levels until mid-2021, as the rollout of vaccines is expected to take three to six months. Our commodity price forecasts (unchanged) are shown below:


FRC Forecast December 21, 2020

Source: FRC

Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research