…but Slowing Chinese Growth a Cause of Concern
The global commodity markets have seen strong gains in recent times, thanks to a robust outlook for the world economy and an intentional effort by the producers to keep supplies in check. There has been a slowdown in Chinese economic growth owing a cooling property market and tighter credit conditions, but the same seems to have been offset by rising growth in the United States and Europe supporting the rise in price of industrial metals. China released its data, and it revealed that industrial output, fixed asset investment, and retail sales all performed below expectations.
Nickel Prices – EV Movement, along with Global Economic Optimism Support Strong Future for Nickel Prices & Demand
Nickel Prices Touched US$13,000, and Retreated back to $11300-11,400 levels, owing to strong resistance from long term downward trend line and as speculators booked profit amid waning optimism of quick increase in demand from EV vehicles. Prices jumped sharply earlier from $10,300 to 13,000, as $10,300 was a strong support in technical terms and there were expectations rise in nickel demand from electronic vehicles for the next many years to come. It is believed that the EV demand along with global economic growth, would certainly support nickel prices over the long term. Most electric cars are powered by lithium NMC batteries which use a cathode composed of nickel, manganese and cobalt and a graphite anode. The prices of cobalt have more than doubled so far this year, and I believe Nickel is next. We expect nickel demand to increase over the coming years, as a move towards the increased usage of electric vehicles going to gain momentum over the coming years.
Cancelled warrants (material slated for delivery from LME warehouses) for Nickel LME stocks has hovered around 35% levels since the past 4 months, indicating no major surprises on the demand on supply side. Nickel inventories at LME warehouses have remained stable this year, with no major movements. We will be closely monitoring this indicator – A gradual rise in cancelled warrants could be a sign of pick up in actual demand, while a falling ratio could indicate rising inventories and lower demand. The cancelled warrants ratio, as on 21st November 2017 stood at 35.6%, up from 35.0% as on 10th November 2017. Without an uptick in cancelled warrants ratio, any rally in nickel prices could be short lived.
Copper Prices – Prices Remain Firm, but Slowing Growth in China Remains a Cause of Concern
On the fundamental front, copper prices remain largely supported amid positive global economic growth and robust outlook for the world economy. However, the pace of increase has been checked in by slowing growth in the Chinese economy, at a time when growth in the United States and Europe has picked up. Currently, the monetary policy in the Europe remains accommodative, while in the US interest rates are likely to be raised amid improving economic growth, evident across sectors. At the same time in China, the Chinese government has tightened credit to reduce high debt risks and check speculation in the property sector.
On the technical front copper prices remain slated for higher movement in the short term, up to around March-April. Also, technically copper prices have moved out of the bear market, and await further signs of positivity on the global economic landscape.
Cancelled warrants (material slated for delivery from LME warehouses) for Copper LME stocks stood at 40.7% as on 21st November 2017, up from 35% as on 10th November 2017 and 29% as on 23rd October 2017.
Crude Oil – Supply Concerns & Geopolitical Tensions Continue to Support Oil Prices
An important barometer of strength in global economy, crude oil prices have increased on the back of expectations that oil producing countries will agree to extend an output cut at their meeting on 30th November 2017. The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year to end a global supply glut and support prices. The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the future of output policy to be followed.
CFTC Crude Oil Speculative Net Positions have risen from 446.8K as on 28th October 2017 to 596.5K as on 18th November 2017. The current net long positions are up 9.4% compared to the previous week when the total net long speculative positions stood at 545.2K.
Steel Making Raw Materials & Baltic Dry Index
The BDI has been on a rising trend, reflecting increased demand for raw materials. The Baltic Dry index — an indicator of global bulk commodity freight costs — has increased from around 700 levels in February to around 1400 levels in November, marking a 100% increase.
Iron Ore Prices – Iron ore prices have remained weak, as Chinese regulators enforce steel production cuts in northern provinces, and also because the stockpiles of iron ore on Chinese ports remain high, putting pressure on prices. However, in November iron ore prices have increased around 8-10% in different regions.
Price have increased since the start of October, reflecting supply concerns from Australia, and improving global economic outlook and resulting demand for this steelmaking raw material. Coking Coal Future Prices in China, on the Dallas Commodity Exchange are up around 28% from October to 21st November 2017.
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