Gold $1,844.60
Silver $25.28
Copper $3.54
  • TSX.V MXR $0.285 -0.035
  • TSX VOL 368
  • Copper is surging, but it doesn’t mean economy is booming (Bloomberg, July 10, 2020)

    The metal – known colloquially as Dr. Copper because its performance is often used to gauge the health of the overall economy – has surged by a staggering 45% since mid-March. That’s despite the International Monetary Fund downgrading its global forecast and a resurgence of covid-19 infections forcing governments around the world to re-impose business-crippling lockdowns.

    Copper’s gain has been driven chiefly by concerns over strains on supply from key producers South America.

    Thousands of copper workers have fallen ill in Chile, which is by far the world’s largest producer of the metal, accounting for more than a quarter of global supply. Mines have postponed non-essential activities and reduced their labor force in an attempt to keep workers safe without forgoing too much output. Infections are also slowing the mining recovery in Peru, the second-biggest producer.

    Meanwhile, demand in China is recovering with factories ramping back up in the second quarter.

    “We’re seeing some fairly good demand, we’ve seen some production cuts,” said Bill O’Neill, partner at Logic Advisors in Upper Saddle River, New Jersey. “You’re going to see global demand for copper pickup in the next 6 to 12 months.”

    Chile supply

    In Chile, unions and local politicians are calling for tighter restrictions, which may further crimp supply.

    BHP Group announced plans to scale back activity at one of its mines, while Codelco suspended smelting and cut back refining at one mine, and stopped development work at its largest site. Workers at two mines are voting on whether to go on strike, raising the prospect of further disruptions.

    The risk to production has some analysts warning the market could slip into a supply deficit this year. While Chile’s government expects a rebound in global supplies in 2021, demand is likely to recover as well with economies bouncing back from the pandemic.

    Workers are falling ill in Peru, slowing the pace of recovery. Mines were expected to be almost back to pre-pandemic levels by the end of the month following a phased restart, but the country’s Energy and Mines Minister said Thursday that forecast was now looking overly optimistic.

    In addition to the pickup in Chinese demand, there are some other signals of a nascent recovery that could also support higher prices for the metal. Bloomberg Economics’ global GDP growth tracker rebounded in June to the highest since early 2019, indicating a rebound after lockdowns put in place to stem the Covid-19 outbreak were lifted.

    Copper in London reached $6,360 a tonne at one point on Thursday, the highest since May 2019, before slipping back to $6 300. Mining companies able to keep up output are reaping the benefits.

    Freeport-McMoRan, the world’s largest publicly traded copper company, said Monday that it sold about 8% more copper in the second quarter than it forecast earlier in the pandemic.

    Silver Weekly Price Forecast – Silver Markets Finally Break Out (Christopher Lewis, July 10, 2020)

    Silver markets had an extraordinarily bullish week, finally break above the $19 level. I fully anticipate that we continue to go much higher.

    Silver markets broke higher during the week, clearing the $19.00 level finally. This is an area that has been extraordinarily difficult to overcome, so it is not a huge surprise that we would see a little bit of a breather being taken into the weekend. Having said that, if you look at the two previous weekly candlesticks, we had formed a hammer followed by a shooting star. If you remember, I said this normally dictates that we are seen a bit of a range be informed. When she break out of that range of those two candlesticks, then in theory should continue going higher. So far that has been exactly what happened. I fully anticipate that silver will go looking towards the $20 level, but it does not necessarily mean that is going to be easy.

    Everything being said, a test of the $20 level seems somewhat inevitable, but one has to be cautious about trying to get too cute with this, because silver does tend to be very volatile and if you are trading the futures contract, it can be quite expensive. However, if you have the ability to trade smaller contracts, perhaps in the CFD market, then it is a little easier to hang on through all of the volatility. Regardless of what market you are trading though, selling simply is not an option as you will probably get run over. Keeping that in mind, I believe that the market is probably going to continue seeing a lot of chop, but most certainly in the upward direction.

    BAML sees platinum, palladium deficit this year as South Africa production losses bite (Reuters, May 8, 2020)

    There is likely to be a deficit of platinum and palladium this year after a COVID-19 lockdown in South Africa, the world’s biggest platinum producer, forced mines to shut, analysts at Bank of America Merrill Lynch predicted on Friday.

    While demand for platinum group metals, which are mainly used in cars and jewellery, has also plummeted due to the global pandemic, the analysts said they expect demand to rebound, while mine production will take months to build back up.

    In South Africa, which produces 78% of the world’s platinum and 36% of palladium according to BAML, a strict lockdown to stop the spread of COVID-19 forced most mines to shut from March 27.

    Though the government allowed mines to restart at up to 50% capacity from April 16, BAML analysts predict it will take six months for production to ramp back up to pre-pandemic levels.

    “Our base line assumption is that output runs at 50% in May and June, before rising to capacity by December,” they wrote in a note dated May 7 but distributed to media on May 8.

    “Putting it all together, we anticipate that both platinum and palladium will be in deficit this year. As such, we remain bullish the white metals into year-end.”

    South Africa’s biggest platinum miners have cut production guidance for 2020 and announced production losses due to the lockdown.

    Anglo American Platinum said quarterly production decreased by 7%, while Impala Platinum reported a 6% drop.

    Analysts are split on how the demand-supply dynamics will play out: Citi on Wednesday predicted platinum group metals prices could fall 15-20% due to a “rising surplus”.

    Platinum prices are down 20% since the start of the year, while palladium prices have fallen 3.6%. (Reporting by Helen Reid; Editing by Mark Potter)