Gold prices hit a new high in July after the US Federal Reserve's dovish comments and, more recently, weaker US jobs data kindled optimism of a forthcoming interest rate cut. Investors' flight to safety amid continuing geopolitical tensions drove additional demand support, resulting in upgrades to gold price forecasts. Although supply surplus and lagging demand recovery weighed on base metals prices, US rate cut expectations fueled anticipation of improved industrial demand that helped drive an upside bias for price outlooks.
Waning uptake of cobalt-containing batteries and increasing output from DRC drove the Platts-assessed European cobalt metal price to its lowest level in over five years at $13.50 per pound on July 22. China's traction battery production growth significantly decreased to 5.4% year over year in June versus a 45.6% increase in June 2023. Of the batteries installed in China-made PEVs, the share of nickel-manganese-cobalt chemistry narrowed from 33% in full year 2023 to 26% in June. Weakening consumer confidence and cost concerns have tapered the momentum of global PEV sales, which bolster expectations of prolonged cobalt surpluses. Although oversupply and falling prices have led to mine closures and withdrawn projects, China-led investments in Indonesia, Zimbabwe and DRC — where CMOC Group Ltd.'s Tenke Fungurume and Kisanfu mines reached production milestones — have maintained elevated production levels. Cobalt consensus price forecasts were lowered an average 2.2% for 2024–28.
The London Metal Exchange three-month (LME 3M) copper price rose to $9,970 per metric ton July 5, as reports of slowing US payroll growth and increasing unemployment weighed down the dollar. Bearish fundamentals prevailed thereafter, paring down the price to below $8,949/t July 30. Against a backdrop of tepid demand, global exchange warehouse stocks rose to their highest level since May 2020. Purchasing managers' indexes for June in China (National Bureau of Statistics), the US and Eurozone remained in contractionary territory, while China commercial housing sales, floorspace starts and completions fell about 20% year over year in the first half of 2024. Increased refined copper production in Indonesia and the Democratic Republic of Congo exacerbated supply pressure, but a persistent concentrate squeeze has helped cap the decline in copper prices. US rate cut expectations, energy-transition demand and an improvement in China demand — as it works to meet its economic growth target — support an upgrade of 1.1% on average to copper consensus price outlooks over the five-year forecast horizon.
Underpinning copper demand upside is “traditional” growth in developing countries, such as the growing use of air conditioners in India, washing machines in Bangladesh, rural electricity access in sub-Saharan Africa to displace biomass. Despite its already massive annual copper consumption, China’s stock of copper-in- use is also only half that of the United States on a per capita basis. And India’s market is forecast to grow to be around five times larger in 2050 than pre-pandemic levels. [BHP’s Economic and Commodity Outlook, published 27 August 2024]
These are only my thoughts and it does not constitute investment advice. Before acting on any information you read and before making any financial or investment decisions, you should always consult your advisor(s) or other relevant professional experts.
HAV Price at posting:
18.0¢ Sentiment: Hold Disclosure: Held
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