Stronger deflation in China adds to calls for more stimulus
MiFID II exempt information – see disclaimer below
Anglo American (AAL LN) – Q4/23 and FY23 production update
Power Metal Resources* (POW LN) – Drilling starts at Molopo Farms Complex
| Dow Jones Industrials | +0.40% | at | 38,677 | |
| Nikkei 225 | +2.06% | at | 36,863 | |
| HK Hang Seng | -1.27% | at | 15,878 | |
| Shanghai Composite | +1.28% | at | 2,866 |
Economics
US – More Fed officials expressed their views that the timing on the first rate cut is currently uncertain.
- Governor Adriana Kugler, Boston Fed President Susan Collins (non voting) and Richmond Fed President Thomas Barkin (non-voting) were all noncommittal on the start of policy easing in their latest comments, Blomberg writes.
- Markets are currently seeing an 80% chance of a rate cut in May compared to a fully priced in move same time last week.
China – Deflation accelerates in January coming in higher than forecasts in a sign of deteriorating demand dynamics.
- CPI dropped 0.8%yoy last month marking the sharpest decline since Sep/09.
- The data may add to calls for authorities to add more stimulus to the economy helping confidence to recover.
- Core CPI that excludes volatile food and energy costs climbed 0.4%yoy, slower than in December in a weakest increase since June 2023.
- Separately, China replaced its head of the main securities regulator amid ongoing rout in the equities market.
- PPI (%yoy): -2.5 v -2.7 December and -2.6 est.
- CPI (%yoy): -0.8 v -0.3 December and -0.5 est.
Japan – The yen is weakening against the US$ on dovish comments from the BOJ Deputy Governor.
- “Even if the bank were to terminate the negative interest rate policy, it is hard to imagine a path in which it would then keep raising the interest rate rapidly,” Shinichi Uchida said.
Israel – Hamas offer for the release of hostages in exchange for a ceasefire and a withdrawal of Israeli military from Gaza faced different reactions from Israel and US sides.
- Hamas demands a four and a half month ceasefire in Gaza, an Israeli military withdrawal from the territory and the release of at least 1,500 Palestinian prisoners as part of a three phase deal to release of the remaining hostages, FT writes.
- The proposal followed a meeting with top officials from Qatar, Egypt, the US and Israel held previously in Paris.
- PM Natanyahu rejected the proposal straight away while US Secretary of State Antony Blinken said it opened space for a deal, Bloomberg reports.
- “Surrendering to the delusional demands of Hamas not only will not lead to the release of the hostages, it will only invite another massacre,” Netanyahu said in a news conference hours before Blinken spoke.
- “While there are some clear nonstarters in Hamas’s response, we do think it creates space for agreement to be reached and we will work at that relentlessly until we get there,” Blinken told reporters.
Azerbaijan – President Ilham Aliyev secured a fifth consecutive term winning 92% of the vote.
- Elections were called 14 months early after government forces established full control of Nagorno-Karabakh region last September.
- Turnout was 67.7% translating into more than 60% of those registered to vote backing Aliyev.
- For the first tine in the nation’s post Soviet history, polling stations opened in the Karabakh region, where President went to cast his ballot in the region’s main city of Khakendi, DW reports.
- President Aliyev is set to serve another seven year term and is able to participate in next elections following a referendum in 2009 that removed the limit on the number of terms.
Currencies
US$1.0777/eur vs 1.0764/eur previous. Yen 148.81/$ vs 147.99/$. SAr 18.950/$ vs 18.858/$. $1.263/gbp vs $1.263/gbp. 0.651/aud vs 0.652/aud. CNY 7.196/$ vs 7.193/$.
Dollar Index 104.07 vs 104.08 previous.
Commodity News
Precious metals:
Gold US$2,031/oz vs US$2,033/oz previous
Gold ETFs 83.6moz vs 83.8moz previous
Platinum US$882/oz vs US$900/oz previous
Palladium US$887/oz vs US$941/oz previous
Silver US$22.29/oz vs US$22/oz previous
Rhodium US$4,400/oz vs US$4,425/oz previous
Base metals:
Copper US$ 8,339/t vs US$8,403/t previous
Aluminium US$ 2,240/t vs US$2,224/t previous
Nickel US$ 16,105/t vs US$15,900/t previous
Zinc US$ 2,408/t vs US$2,421/t previous
Lead US$ 2,106/t vs US$2,109/t previous
Tin US$ 25,910/t vs US$25,330/t previous
Energy:
Oil US$79.5/bbl vs US$78.8/bbl previous
- Crude oil prices edged higher despite the EIA reporting a 5.5mb w/w US crude build, offset by ~3mb draws to both gasoline and distillate stocks, as refinery utilisation fell to 82.4% and production rebounded to 13.3mb/d.
- European energy prices were stable as EU natural gas storage levels fell 2.3% w/w to 68.3% full (vs 54.3% 5-Yr average), with Germany reporting levels at 73.7% full and aggregate storage at 778TWh.
- US natural gas prices fell below $2/mmBtu for the first time in almost 12M on expectations that mild winter temperatures would continue to impact heating demand to leave domestic stockpiles above average.
Natural Gas €28.2/MWh vs €28.1/MWh previous
Uranium Futures $102.9/lb vs $103.0/lb previous
Bulk:
Iron Ore 62% Fe Spot (cfr Tianjin) US$124.7/t vs US$124.7/t
Chinese steel rebar 25mm US$569.7/t vs US$569.9/t
Thermal coal (1st year forward cif ARA) US$94.5/t vs US$94.8/t
Thermal coal swap Australia FOB US$123.3/t vs US$122.3/t
Coking coal swap Australia FOB US$310.0/t vs US$310.0/t
Other:
Cobalt LME 3m US$29,135/t vs US$29,135/t
NdPr Rare Earth Oxide (China) US$55,448/t vs US$55,468/t
Lithium carbonate 99% (China) US$12,299/t vs US$12,303/t
China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t
Ferro-Manganese European Mn78% min US$1,062/t vs US$1,060/t
China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu
China Graphite Flake -194 FOB US$565/t vs US$565/t
Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb
Europe Ferro-Vanadium 80% 27.55/kg vs US$27.55/kg
China Ilmenite Concentrate TiO2 US$320/t vs US$320/t
Spot CO2 Emissions EUA Price US$65.9/t vs US$66.3/t
Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t
Battery News
Toyota to invest $1.3bn for EV production at Kentucky plant
- The Japanese automaker will invest $1.3bn for EV and hybrid production at its plant in Georgetown, Kentucky
- The latest investment takes Toyota’s total investment to $10bn since it built in Kentucky in 1988.
- Kentucky is the largest facility for Toyota globally and in May, the company announced plans to build an all-new battery electric Toyota SUV starting in 2025.
- The $1.3bn investment will also facilitate in-house battery pack assembly.
China NEV sales drop mom for first time since August
- Sales were up 102% yoy, but down 29% from December, the first drop in sales since August 2023.
- The China Passenger Car Association estimated that sales would equal around 800,000 units for January.
- Preliminary data shows that sales only reached 670,000 units.
Tesla sell only one vehicle in South Korea in January
- According to Seoul-based research Carisyou and the Korean trade ministry, only one Tesla was sold in South Korea in January.
- Safety concerns, price and lack of infrastructure have weighed on demand.
- The number of new EV registrations in Korea fell 80% from December to January.
Company News
Anglo American (AAL LN) 1,780p, Mkt Cap £21.6bn – Q4/23 and FY23 production update
- Q4/23 production was in line with management expectations and in line with Q3/23.
- Base metals production:
- Copper 230kt (-6%yoy) in Q4/23 and 826kt (+24%) in FY23;
- Nickel 11.1kt (+9%) and 40.0kt (+1%).
- Quellaveco copper mine in Peru (93.7kt Q4/23 / 319.0kt FY23) recorded highest quarterly production after reaching commercial production in Jun/23.
- PGMs production 932koz (-6%) and 3,806koz (-5%).
- Diamonds production 7.9mcts (-3%) and 31.9mcts (-8%).
- Bulk commodities production:
- Iron ore 13.8mt (-12%) and 59.9mt (+1%);
- Steelmaking Coal 4.8mt (+2%) and 16.0mt (+7%);
- Manganese 848kt (-14%) and 3,671kt (-2%).
- Realised prices for the FY23 pulled back strongly for nickel (-25%yoy), PGMs (-35%), diamonds (-25%) and steelmaking coal (-13% for HCC and -21% for PCI).
- Weakness in nickel prices see the Company reviewing the carrying value of Barro Alto operations with a potential write-down alluded to for FY23.
- Additional exceptional charges to FY23 results are expected to come from increased rehabilitation provisions for Chilean copper assets (~$0.1bn charge) and an De Beers inventory value write down (~$0.1bn).
- Realised prices for copper and iron ore were little changed.
- FY24 guidance implies a slight reduction in output of copper (730-790kt), nickel (36-38kt), PGMs (3.3-3.7moz) and diamonds (29-32mt) with relatively little change in iron ore (58-62mt) and steelmaking coal (15-17mt).
- FY24 guidance is unchanged from previous estimates released in December with management reiterating the strategy to prioritise “value over volume”.
Power Metal Resources* (POW LN) 0.99p, Mkt Cap £23m – Drilling starts at Molopo Farms Complex
- The Company launches diamond drilling at the Molopo Farms Complex Project in Botswana.
- The drill is onsite and is targeting a steeply-dipping high-priority conductor at target area T1-14.
- The target was refined on the back of results from ground geophysics surveys carried over areas T1-14 and T1-9.
- Drilling is exploring for nickel and PGE mineralisation with a targeted drilling depth of 700-800m.
*SP Angel acts as Nomad and Broker for Power Metal Resources
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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
Analysts
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472
Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
| Sources of commodity prices | |
| Gold, Platinum, Palladium, Silver | BGNL (Bloomberg Generic Composite rate, London) |
| Gold ETFs, Steel | Bloomberg |
| Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt | LME |
| Oil Brent | ICE |
| Natural Gas, Uranium, Iron Ore | NYMEX |
| Thermal Coal | Bloomberg OTC Composite |
| Coking Coal | SSY |
| RRE | Steelhome |
| Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite | Asian Metal |
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