Another week where differing commodities told a different story to different listeners – oil rose because of the continuing impact of Hurricane Ida in the US Gulf Coast, iron ore steadied because the stricken property giant Evergrande continues to list but not sink, gold fell as the Fed signalled a tightening in monetary policy, as did the Bank of England, while Norway’s central bank lifted its key rate. But copper detached itself from gold and China and edged higher as the demand from renewables signalled continuing demand for metal and mines.
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Glencore is getting closer to selling its CSA copper mine at Cobar in central western NSW after six years of trying.
It’s not that the copper price picture has mitigated against a deal. In that time world copper prices have jumped from around $US2.60 a pound to $US4.28 last week and an all-time high of $US4.88 a pound in May.
Copper prices steadied towards the end of last week and ended up 1.2% after closing at $US4.28 a pound which was a gain of 1% for the week.
Given that rise, it remains odd the Glencore has not been able to snaffle a buyer, despite several bites.
London reports say Glencore is expected to tap Bank of America and UBS to assist with the sale of the mine which started in 2015 when Glencore was in the midst of a major debt crisis.
The miner and commodities giant got close to selling CSA to small Australian Aeris Resources (which has the Tritton mines to the south of Cobar) in 2019 but the deal collapsed.
Aurelia Metals was also engaged in negotiations around a potential acquisition of the mine but that went nowhere.
Glencore said on Friday that the latest talks were at an early stage and a there was no guarantee that a deal will happen. There was no clue as to who the possible buyer might be.
We know Sandfire Resources isn’t a buyer given its surprise $A2.5 billion move last week to buy a big Spanish copper mining and processing complex.
But there are two other big copper miners in the area – Newcrest at Cadia and Evolution at Lake Cowal.
The Cobar mine produces over 1.1 million tonnes of copper ore and 185,000 tonnes of copper concentrate. Last year that was around 46,200 tonnes of copper.
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Gold prices ended the week with little change on the day, and little change when compared to the previous Friday’s close.
But the metal faces a big test to remain above $US1,700 an ounce in the wake of the Fed’s move to give a big hint about tightening monetary policy late this year or early next.
The problems at China’s Evergrande didn’t help gold and the news of the crack down on cryptocurrencies in China came too late to impact trading late Friday.
Comex metal settled at $US1,751.70 an ounce, up 0.2% for the week while Comex silver rose 1.3% to $US22.39.
US Treasury yields rose sharply to 1.46%-1.47% – bac to where they were in July and before Covid Delta’s full impact started being felt around the world.
The US dollar is on a stronger track in the wake of the Fed statement and forecasts and this is going to make it tough for gold and could very well see if test the $US1,700 level this week.
But offsetting this will be the switch of focus will shift to the debt ceiling debate, with US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell continually stressing the urgency of the matter.
Also on the radar will be the progress around the Biden Administration’s infrastructure package.
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Meanwhile oil prices rose again last week.
Brent crude futures rose more than 1% to above $US78 a barrel on Friday, the highest since October 2018 and widening a weekly gain to 3.6% amid global supply concerns following storms in the US that damaged facilities on the Gulf coast.
Brent settled eventually at $US77.23 a barrel.
Disruptions in US Gulf Coast production following Hurricane Ida and other storms have led to sharp draws in US and global inventories. EIA data showed US crude stocks fell by 3.5 million barrels to 414 million last week, the lowest since October 2018.
US production is still around 400,000 to 500,000 barrels a day below what it was before Ida hit at the end of August/early September.
Capping some gains was China’s first public sale of state oil reserves. State-owned PetroChina and private refiner and chemical producer Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
That has no impact on world prices.
West Texas Intermediate jumped 3% to $US73.98 for the 5th weekly gain in a row. Prices are up 7.7% in the month.
US rig numbers again rose – the total (including gas) rose 9 to 521 and the number of oil-directed rigs rose by 10 to 421.
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And iron ore prices appeared to have bottomed out by Friday after the big slide of the past two months.
The price of 62% Fe fines ended at $US113.33, up $US2.66 a tonne on Friday for a gain of more than 11% for the week.
The price of 58% Fe fines rose $US3.54 a tonne on Friday $US83.08.
The price over the week added 13% as buyers sought out cheaper mid-strength blends of ore.
The higher quality 65% Fe fines from Brazil rose $US1.30 on Friday to end at $US135.90. That was up just 6.5%.
Prices bounced after China came out of the long Mid-Autumn Festival that kept trading low on Monday and Tuesday.
At the same time, investors worried about slumping construction output after data showed home sales in China falling 20% year on year in August coupled with fears over a crisis in property developer Evergrande.
Evergrande and the shortage of electricity remain big threats to iron ore prices.
