Weekly Mining Commentary

Global equity markets were up 2.1% last week despite rising U.S. treasury yields. Rising yields indicate that the market is expecting the Fed to hike rates in the near-term. Considering the weakness in key economic indicators, we believe rate hikes will be slower than market expectations. U.S. jobs and manufacturing data were weaker than expected in September, and consumer confidence has edged lower this month. In addition, China’s economy grew 4.9% in Q3 vs 7.9% in Q2. We believe inflation and slow rate hikes will provide near-term support to commodity prices.

Current Vs Pre COVID-19 (as of OCT 18, 2021)

Source: FRC / Various

Supply chain disruptions (primarily due to the ongoing energy crisis) continue to drive commodity prices. Both precious and base metals gained strength last week. Zinc prices were up 19%, despite higher inventory levels on the SHFE (Shanghai).

Week-over-Week (Oct 18, 2021) and Year-over-Year (Oct 18, 2021)

Source: FRC / Various

SHFE Inventory (Oct 15, 2021)

Source: FRC/SHFE

LME Inventory (Oct 18, 2021)

Source: FRC/Various

Valuations of gold producers were up 5% WoW; base metals producers were also up 5%.

Gold Producers

Source: S&P Capital IQ & FRC

Base Metal Producers

Source: S&P Capital IQ & FRC

Gold producers and Base metal Producers

Source: S&P Capital IQ & FRC

Vaccination rates remain slow in developed economies: Last week, three (unchanged) out of the 15 hardest hit nations experienced higher daily new COVID-19 cases. Only one country (unchanged) experienced a WoW increase in deaths. Globally, 47.61% have received at least one dose, up 0.02 ppt WoW vs 1.88 ppt the same time last week. 72.79% of Canadians are fully vaccinated (0.7 ppt vs 0.8 ppt) vs 65.73% in the U.K. (0.5 ppt vs 0.3 ppt), and 56.24% in the U.S. (0.6 ppt vs 0.5 ppt).

Share of People vaccinated against COVID-19, Oct 17, 2021

Source: Our World in Data

Source: Our World in Data / FRC

We are raising our near-term price forecasts for base metals. As gold prices have been below expectations, we are lowering our forecast for H2-2021.

FRC Forecasts

Source: FRC

 

Source: https://www.researchfrc.com/weekly-mining-commentary-88