Commodities Compendium
25 June 2018 2
Key commodity recommendations
Our commodity preferences listed below are set relative to spot prices reported shortly before
the publication of this report.
2018’s most-preferred
Nickel – China’s stainless industry reform + robust stainless demand
Alumina – industry’s still struggling with Rusal sanction shock + Alunorte still on the bench.
Thermal coal – NDRC’s accidently ham-strung China’s once-flexible local coal industry.
2018’s least-preferred
Manganese ore – silico-manganese price’s decline flagged an ore market in surplus.
Met-coal – at a local high, exposed to a return of China’s domestic production capability.
Lithium/cobalt – wall of supply overwhelms a still-solid EV demand growth story
Iron ore – stable trade + S11D/SSF/Samarco = downside risk, late 2018.
Outperformers over 2-years
Nickel – EV crowding out stainless steel, as a meaningful demand-driver.
Precious metal – US deficit issues persist; inflation/recession risk builds.
Uranium – global supply sustainability shrinks.
5-year winners
Lithium – critical EV metal.
Cobalt – a big market deficit in 2022!
Nickel – Battery World takes on Stainless Steel, for access to nickel.
Copper – The Miners forgot to invest in new mines.
5-year strugglers
Coals – steel demand moderates + power industries diversify.
Palladium/rhodium – The Rise of EVs delivers a grim long-term outlook
Fig 1 Positions of key mined/extracted commodities in the fundamental cycle (arrow = 2-year progression)
Source: Macquarie Research, June 2018
Strong Demand PushDemand destructionMarket back in balanceStrong supply growthHigh stocksStocks DrawingSupply constraint
or deficit marketCapex acceleratingCapex peakingStocks buildingStrong supply reactionLimited new supplyCapex lagging
Price AccelerationPrice peakingPrices fallingSevere price declinePrices stablise at low levelPrices stablePricing to encourage supply
NickelManganese
Lead
UraniumThermal Coal
Met Coal
Iron Ore
Aluminium
ZincCopper
Chrome
Palladium
Gold
Platinum
Tin
Silver
Bauxite
Steel
Lithium
Cobalt
Alumina
Commodities Compendium
25 June 2018 3
Table of contents
Summaries
Price forecast revisions 5
Macro Outlook: The best of times, the worst of times, normal times 7
The Contemporary Commodity Theme: IMO 2020 vs. Bulks 14
Executive Summary: Trade shock 17
By Commodity
Copper
Improving fundamentals undercut by trade war fears 20
Aluminium
A Rusal ride, but two years ahead before another shortage 22
Bauxite & Alumina
Double push in alumina; China to boost bauxite imports 24
Zinc
The tipping point 26
Lead
RV hero 28
Tin
Nothing to see here 30
Nickel
China’s nickel pig iron cuts accelerate stock decline 31
Stainless Steel
Indonesia and protectionism dominate market outlook 33
Ferrochrome
Back on the price rollercoaster 35
Molybdenum
Price explosion on strong demand recovery, weak supply growth 37
Cobalt
Cracks in the ice 39
Steel
The US threat 41
Iron ore
Balanced unless China destocks43
Manganese
Long overdue correction 45
Metallurgical Coal
Strangled supply, as China’s trade lifts 47
Gold
Identity crisis, without macro support 49
Silver
Upside case not just delayed but damaged 51
Commodities Compendium
25 June 2018 4
Platinum and Palladium
Platinum clinging to palladium’s deficit 52
Thermal Coal
NDRC policy-watching 55
Uranium
Spot’s adrift, again 57
Lithium
Battery makers calming down 59。。。