mining monitor (february 2018) · 2020. 4. 5. · coal prices average coking coal price was flat,...

Mining Monitor (February 2018)

Strategic Research Division

14 February 2018

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

MUFG Union Bank, N.A.

Table of Contents

1. Overview 3

2. Iron Ore 5

3. Coal 8

4. Copper 11

5. Aluminum 14

Mining Monitor | 14 February 2018 2

6. Nickel 17

7. Zinc 20

8. Gold 23

Appendix 26

1. Overview


Ryosuke Ohno

Strategic Research Division

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.


Mined Commodity Price Trends

The prices of mined commodities went up in January 2018.

1. Overview

Mined Commodity Price Trends

In January 2018, the prices of mined

commodities went up from December

2017.

Iron ore price maintained strength as

market expects demand snapback after

steel production curbs end.

Average coking coal price was flat,

however the spot price fell sharply due to

concern for easing of supply disruption.

Thermal coal price rose as blizzards in

China cut off critical supply.

The advance of Copper price was

supported by week dollar.

Aluminum price was volatile, but went up

as protectionist trade policies in the US

came closer to fruition.

Nickel price surged late in January on the

back of demand growth, however the

price remains low against historical levels.

Zinc price continued to rise with Chinese

minded concentrate imports surging and

refined stocks becoming depleted.

Gold price rose further with US dollar

support.

2017 2018

Yr Avr Jul Aug Sep Oct Nov Dec Jan

Iron Ore ($/t) 71 65 77 73 62 63 69 73

MoM - 17% 19% -6% -15% 2% 10% 6%

YoY 22% 14% 27% 27% 5% -14% -14% -9%

Coking Coal ($/t) 189 166 197 205 182 190 239 240

MoM - 13% 19% 4% -11% 5% 26% 0%

YoY 33% 74% 73% 8% -22% -37% -10% 30%

Thermal Coal ($/t) 88 84 95 96 97 95 99 105

MoM - 6% 13% 2% 1% -2% 4% 6%

YoY 34% 33% 41% 33% 6% -2% 17% 26%

Copper ($/t) 6,192 6,015 6,517 6,610 6,842 6,854 6,850 7,118

MoM - 5% 8% 1% 4% 0% 0% 4%

YoY 27% 24% 37% 40% 44% 27% 21% 24%

Aluminum ($/t) 1,968 1,903 2,030 2,096 2,131 2,097 2,080 2,210

MoM - 1% 7% 3% 2% -2% -1% 6%

YoY 23% 17% 24% 33% 28% 21% 20% 23%

Nickel ($/t) 10,410 9,491 10,890 11,216 11,336 11,972 11,495 12,865

MoM - 6% 15% 3% 1% 6% -4% 12%

YoY 8% -8% 5% 11% 10% 8% 5% 29%

Zinc ($/t) 2,891 2,787 2,981 3,117 3,265 3,229 3,196 3,442

MoM - 8% 7% 5% 5% -1% -1% 8%

YoY 38% 28% 31% 36% 41% 26% 20% 27%

Gold ($/oz) 1,259 1,238 1,284 1,315 1,283 1,282 1,267 1,332

MoM - -2% 4% 2% -2% 0% -1% 5%

YoY 1% -8% -4% -1% 1% 4% 10% 12%

2017

Chern Woon Lam

Strategic Research Division (Singapore)


2. Iron Ore


In January, iron ore prices maintained

their strength, trading between $71-

$75/t. The average price in January

was $73/t, up 6% from December’s

$69/t.

Chinese iron ore port inventories rose

to a record 154mn tons before easing

slightly to 153mn tons in the last week

of January.

The consensus view is for near-term

strength in iron ore prices given the

expected snapback in demand when

the steel production curbs in China

end after winter.

The overall outlook for the later half of

2018 has softened. Bearish sentiments

have surfaced more strongly, citing

record port inventories, growing supply

from low-cost producers and weaker

steel output in China due to curbs by

the government.

Top miners are expected to show

restraint in adding to supply, mitigating

the supply pressures.

6

Iron Ore Prices and Inventories

Prices maintained strength in January, as market expects demand snapback after steel production curbs end.

Outlook is turning bearish due to record port inventories, growing supply and weaker Chinese steel output.

2. Iron Ore

1) Price Trends

Mining Monitor | 14 February 2018

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China Iron Ore Port Inventory (RHS) Iron Ore Fines 62%, CFR China Import Spot Price (LHS)

($/t) (Mt)

Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division

Fortescue expects reversal in iron ore’s quality squeeze – 30 January, 2018

Fortescue Metals Group expects steelmakers in China to reverse a recent trend favoring higher-quality iron ore from rival iron ore shippers. The shift will

narrow the discount on Fortescue’s products and boost its income. The discount on the 58% content ore shipped by Fortescue, compared with the 62%

content benchmark, has widened to -46% at the start of 2018 compared to less than -15% at the start of 2016. After the end of the winter steel

production restrictions, the ensuing decline in mill profitability and falling coking coal prices will prompt steel makers to boost their use of lower-quality

iron ore to cut costs, the company said.

Rio Tinto’s 2017 iron ore exports up 1%, maintains 2018 guidance – 15 January, 2018

Rio Tinto, the world's second largest iron ore miner, reported that iron ore shipments rose 1% in 2017 to 330.1mn tons, meeting its guidance. It

maintained a target of 330-340mn tons for 2018, but cautioned the guidance was subject to weather constraints and partly reflected rail maintenance

required in 2018. In the middle of 2017, the miner cut its 2017 iron ore guidance by -10mn to a range of 320-330mn tones, citing bad weather and

overhaul of its rail lines.

China imported a record amount of iron ore in 2017 – 14 January, 2018

Demand for high-quality iron ore from Australia and Brazil pushed Chinese imports of the steelmaking ingredient to a record high in 2017. Although

shipments were down -11% in December, full-year imports rose 5% to 1.075bn tons, exceeding 1bn ton for the second year. Demand for foreign iron

ore is boosted by China's aggressive campaign to clamp down on polluting domestic steel mills; higher-grade ore limits emissions and is more efficient.

7

2. Iron Ore

2) News Flow

Source: Various sources, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division


William Cheung

Strategic Research Division (Hong Kong)


3. Coal


8

Average global coking coal price was

almost flat at $240/ton in January.

But it should be noted that price fell

sharply from $262/ton at the

beginning of January to $215/ton on

31 January, due to a reduced level of

concern about Australia’s supply

disruption, as well as slowing

inventory re-stocking from Asian

steelmakers and traders. As the

supply tightness has relieved, coking

coal price fell lately.

Average global thermal coal price

extended its growth momentum into

2018, by rising 6.1% month-on-

month to $105/ton in January.

The price increase was because

blizzards blocked railway and

highway in China, cutting off critical

supply of thermal coal. Meanwhile,

higher-than-usual heating demand

due to cold weather also put forward

thermal coal price to a certain extent.


Coal Prices

Average coking coal price was flat, but easing supply disruption in Australia caused price to fall later this month.

Average thermal coal price rose as blizzards blocked railway and highway in China, cutting off critical coal supply.

3. Coal

1) Price Trends

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Spot Price (Coking Coal) Spot Price (Thermal Coal)($/t)

Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division

China’s Shanxi province asks coal miners to cut or shorten holidays – 30 January 2018

Shanxi province, China’s second-largest coal producing region, has asked the major state-owned coal miners to cancel or shorten staff holidays during

the upcoming Spring Festival in mid-February. It aims to ensure stable coal supply throughout the nation’s most important break, so as to accommodate

higher-than-usual heating demand and suppress recent thermal coal price rally. The government’s action came with the warning of heating and

electricity shortages from four of China’s top utilities (including China Huaneng, China Datang, China Huadian and State Power Investment Corp) last

week after blizzards blocking railway and highway, cutting off critical supply of thermal coal. The government intervention has immediate impact on

thermal coal price, which fell slightly by 1.4% to $105/ton on 30 January from a day earlier. However, analysts believe that thermal coal price may keep

at high level as utilities will need to replenish their coal inventory before the Spring Festival.

China’s Hebei halts coal to gas heating conversion project – 30 January 2018

China’s Hebei province has stopped an ambitious program to convert large numbers of coal-fired boilers to natural gas, after natural gas supply

shortages left home without heat last month. On one hand, a lack of infrastructure has forced the local government to temporarily suspend the

conversion. On the other hand, the insufficient communication between local government and gas producers has underestimated the potential demand.

The conversion program will be delayed until 2020 when new pipelines delivering gas from Russia are scheduled to come online. This marks a U-turn

by the provincial government, which had previously determined the switch from coal to gas as one of its major priorities to curb pollution. But it is now

saying that it would allow to burn coal again for heating purpose.

China to support more coal miner-consumer M&A to boost productivity – 23 January 2018

China’s NDRC (National Development and Reform Commission) plans to support more merger and acquisition activities in its coal sector. The top

planner is going to support the merger activities of efficient coal miners with downstream industries such as utilities and coal-based chemical

processing, so as to optimize coal production and consumption. Besides, NDRC will increase the efficient coal mine and remove the inefficient one in

the sector. By reducing small to mid-sized domestic coal mines in 2020, NDRC expects to have a few coal conglomerates that produce over 100 million

tons/year of coal.

Sharp fall in coking coal price amid an alleviation of supply concern – 19 January 2018

The sharp fall in coking coal price in 14 February 2018 was because of a reduced level of concern about Australia coal supplies, which saw the worst of

the vessel queue in Queensland late last year. On the demand side, some steelmakers and traders ceased coking coal inventory replenishment and are

waiting for a further decrease in prices. As the supply tightness has relieved, coking coal price decreased by 7.6% since the beginning of this month to

reach $240/ton on 17 January.


3. Coal

2) News Flow


Katia Tavarez

Strategic Research (NY)

MUFG UNION BANK, N.A.

4. Copper


Following a strong performance in

December, copper prices pulled

back slightly in January (-0.7% m-

o-m) in a month with mixed.

On one hand, the US dollar fell

further to three-year lows, lending

support to prices, but on the other,

the market felt the bearish

pressure coming from weak

Chinese trade data (copper

imports at -7% y-o-y in

December) and an uptick in

inventories at LME, SHFE and

COMEX warehouses.

Copper is still near four-year

highs, trading above the $7,000/t

threshold (~$3.15/lb) though as

the market moves into balance

this year (from deficit in 2017), we

may start to see price slide lower

from current levels.


Copper Prices and Inventories

Copper prices consolidate near recent highs amid mixed drivers.

4. Copper

1) Price Trends

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COMEX Inventories (RHS) SHFE Inventories (RHS) LME Inventories (RHS) LME Spot Price (LHS)

($/t) (Kt)

Source: Bloomberg, MUFG Union Bank Strategic Research

Katanga ramp up to boost copper output – 1 February, 2018

Glencore said that copper output in 2018 will rise to around 1.5Mt as its Katanga mine in the Democratic Republic of Congo ramps up to add around

150Kt of copper (in addition to 11.6Kt tons of cobalt – a byproduct of copper). In 2019, copper output from Katanga will rise to 300Kt (and to 34Kt tons in

the case of cobalt). During the 2015 commodities downturn, Glencore shut down its Katanga operation for an upgrade. In 2017, Glencore’s copper

output fell to around 1.3 million tons. Glencore’s estimates for the Katanga copper ramp up are modestly ahead of our estimates of 100Kt and 200Kt

tons.

Copper deals start 2018 strong amid high prices – 28 January, 2018

Copper mining deals had the best start in over a decade as appetite for deals rises with surging copper prices. Over US$500 million worth of

transactions are pending or were completed year-to-date – the most recorded by Bloomberg data going back 12 years. Interest in mergers is rising after

years of low investment limited miner’s ability to meet rising demand for copper, especially in an environment of falling ore grades at various mines.

Project pipelines are empty and can only be replenished through M&A given how long it takes to develop, permit, and build a new copper mine.

China copper imports end 2017 at multi-year lows – 8 January, 2018

In December, China imported 450Kt of refined copper (-4% m-o-m, -8% y-o-y). This negative yearly growth reading is the first after three months of

positive growth. For the whole 2017, imports totaled 4.69Mt (-5% y-o-y) – the lowest annual number since 2013, reflecting higher domestic production of

refined copper and increased scrap availability.


4. Copper

2) News Flow

Source: Various sources, MUFG Union Bank Strategic Research

Tom Haddon

Strategic Research Division (London)


5. Aluminum



Aluminum prices were volatile during

January, swinging over 10% down.

However, the closing price ended only

1.6% lower than December’s closing

price as ultimately support emerged

from trade flow changes on the back of

likely US protectionist policies.

The US Department of Commerce

(DoC) initiated a probe into Chinese

imports of aluminum during late 2017

and in January it was announced that

the DoC’s report had moved to

President Trump. At this point the

President has 90 days to act and given

recent rhetoric around the US’ trading

position, it is likely protectionist policies

will be enacted.

This sent US premiums higher (the

price paid in addition to the LME global

benchmark to guarantee readily

available aluminum in different regions),

as traders adjusted supply sources

away from Chinese imports. This had

the knock on affect of positively

supporting global prices as high

premiums indicate tightness in US

located warehouses.

. 15

Aluminum Prices and Inventories

Protectionist trade policies in the US against Chinese imports came closer to fruition in January, causing some

regional tightness in the US, supporting global pricing.

5. Aluminum

1) Price Trends

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LME Inventory (RHS) LME Spot Price (LHS)($/t) (Kt)

Source: Bloomberg, BTMU Strategic Research Division

Fundamentals Underpin Aluminum’s Rise - 1 February, 2018

Growth in China’s manufacturing sector remained elevated in January, a private survey showed on Thursday, though it contrasted with an official survey

on Wednesday pointing to a slight loss of momentum. Asia’s factories got off to a strong start in 2018, with manufacturing activity in many countries

hitting multi-year highs as global demand for hi-tech products remained strong. However, rising stockpiles in top producer China reinforce worries that

the Chinese market remains in surplus despite capacity cuts.

China’s Aluminum Production in December Up by 15.3 Percent From Previous Month - 20 January, 2018

The People’s Republic of China’s aluminum production came roaring back in December to levels not seen since early summer according to numbers

released by the government on Thursday. China’s National Bureau of Statistics (NBS) revealed that the Middle Kingdom produced 2.71 million metric

tons in the final month of 2017, good for a 15.3-percent rise month-on-month. Though December’s output was down by 1.8 percent from last year,

China’s numbers for the full year were up by 1.6 percent, totaling 32.27 million metric tons. December’s numbers represented a reversal from

November, which saw the country’s aluminum output drop by 7.8 percent. Factors including the state’s shuttering of illegal capacity and Beijing’s 2+26

initiative to combat winter smog by compelling mandatory seasonal cuts of 30 percent by both aluminum smelters and alumina refineries likely

accounted for the lion’s share of that month’s decline. In contrast, analysts indicate that the bump in production last month can be credited in large part

to new capacity coming online at smelters in Inner Mongolia and Guangxi at plants owned by Aluminum Corporation of China (Chinalco). Smelters in

these areas fall outside the 2+26 zone and, as a result, are not subject to mandatory cuts.

Section 232 Aluminum Probe Report Moves on to President Trump - 12 January, 2018

The Department of Commerce announced Secretary of Commerce Wilbur Ross had completed his Setion 232 steel & aluminum reports and sent it on

to President Donald Trump. Under the statutory guidelines of Section 232 (derived from the Trade Expansion Act of 1962), Trump has 90 days to

respond to the recommendations and act (or not act). As a result of the investigation, the president could call for tariffs, quotas, or a hybrid tariff-quota

solution in an effort to help domestic metal producers dealing with rising imports.


5. Aluminum

2) News Flow


Tom Haddon



6. Nickel


Nickel prices were flat through most of

January (holding around $12,400 per

ton) until later in the month where

prices surged 10% in just 11 trading

days to close at $13,600.

Bullishness has recently been present

in the market on the back of some

market participants seeing the start of

a new “super cycle” for nickel

demand, as it is a key metal used in

lithium-ion batteries (electric vehicles

being a large potential end market).

In January the release of fresh data

from the International Nickel Study

Group spurred the price surge as it

showed that the market was in a

deeper supply deficit than previously

thought as demand grows from the

stainless steel sector in China.

However, prices remain subdued

against historical levels as the data

also showed that mined nickel supply

had increased by 7% to November,

while refined metal production

increasing by 5%, indicating that the

deficit is constantly under threat from

new supply sources. Mining Monitor | 14 February 2018 18

Nickel Prices and Inventories

Nickel prices surged late in January as data showed demand growth outpacing supply through most of 2017.

However supply growth is still present which means prices remain low against historical levels.

6. Nickel

1) Price Trends

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China demand and tight supplies set to sustain nickel price rally - 30 January, 2018

A combination of surging China imports, tighter supplies and fund interest are expected to sustain prices of stainless steel ingredient nickel, which have

reached their highest level in more than two years. Wood Mackenzie forecasts a deficit of between 80,000-90,000 tonnes this year following a deficit of

similar levels in 2017. The shortfall is likely to be particularly acute in China, which accounts for about half of global consumption estimated at around

2.1 million tonnes this year but where an environmental crackdown has shut capacity. It is expected to ramp up imports. Latest data shows China’s

nickel imports more than doubled in December from a year earlier to 41,315 tonnes.

Top China Nickel Producer Joins BHP in Prepping for EV Boom - 17 January, 2018

China’s top nickel supplier aims to boost output of a material used in car batteries by 40 percent this year, joining the ranks of global producers ramping

up operations to meet demand from electric vehicles. Jinchuan Group Co. expects to raise production of nickel sulphate to 70,000 metric tons from

50,000 tons in 2017, Simon Bao, vice general manager of its marketing unit, said in an interview in Shanghai. The country is already the world’s largest

automotive market and sales of new-energy vehicles may hit 1 million in 2018 after topping 700,000 last year, according to manufacturers. “While

physical demand hasn’t picked up too significantly yet, it may surge in about two years,” Bao said. The world’s biggest miners are stepping up efforts to

meet demand for battery materials. BHP Billiton Ltd. has begun work to build on a nickel sulphate plant in Western Australia and is considering further

expansions. Rio Tinto Group is developing a lithium project in Serbia, while Glencore Plc plans to double production of cobalt in the next two years.

Strong Growth in World Stainless Steel Output to Continue - 15 January, 2018

Annual global crude stainless steel production for 2017 is estimated to have totalled an all-time high of around 48 million tonnes, which represents a

year-on-year increase of 4.9 percent. MEPS forecasts a further rise in worldwide outturn of nearly 5 percent, in 2018, to a new peak of 50.3 million

tonnes. Recently-issued official Chinese output figures were significantly higher than earlier expectations. The annual total at close to 26 million tonnes

represents 54 percent of global crude stainless steel production. A further escalation of around one million tonnes is predicted, in China, in 2018.


6. Nickel

2) News Flow


7. Zinc


Tom Haddon



Zinc prices continued the march

upwards in January, moving into a new

range above $3,500 per ton, closing

8% higher than in December.

The continuing strength of price goes

against many analyst’s expectations

that loosening supply conditions,

especially since Glencore announced

some of its mines would re-enter the

market, would cool the market.

However the market remains tight as

trade statistics show that Chinese

concentrates (mined supply for

smelters) imports were up 19% in

December vs. November. Alongside

this, outflows of refined metal from

LME warehouses picked up in late

January, leaving inventory 5% lower at

end of January vs. December.

Although the supply correction is

coming, with several mines ramping up

or being extended bringing 850kt per

annum of supply though 2018, the

market is clearly not yet seeing the

effects.


Zinc Prices and Inventories

The zinc market remains tight with Chinese mined concentrate imports surging and refined stocks becoming

depleted.

7. Zinc

1) Price Trends

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Glencore maintains zinc production guidance for 2018 after mine disposals offset restart - 2 February, 2018

Glencore has kept its zinc production guidance unchanged in financial year 2018 at around 1.09 million tonnes, matching actual production in 2017,

despite the scheduled restart of its 100,000 tonne per year Lady Loretta mine in the first half of this year. In December 2017, Glencore announced it will

restart its mothballed Lady Loretta mine in the first half of 2018, bringing 100,000 tonnes of material to the market after a two-year pause. The restart

came under market expectations and is unlikely to rock prices as analysts had expected. "That should easily be absorbed; 400,000 tonnes may have

dented the market but I doubt 100,000 will, it may even give the price a boost as it could have been a lot more,”, noted analysts.

Zinc metal demand (for) battery storage would be 19.8Mt of metal - 30 January, 2018

Extensive Stormcrow research on current and emerging global energy storage needs connected to nuclear and renewable capacity leads the firm to

estimate demand from cheap grid storage using batteries could run to 4,404GGWh, including 3,904GWh for renewables. Potential demand in the ‘fast

back-up systems' space could actually double this storage requirement, Hykawy and Chudnovsky suggest. "The zinc metal demand from 4,404GWh of

zinc-air battery storage would be roughly 19,818,000 tonnes of metal," Stormcrow's report says. "This amount of metal represents roughly 1.5-times the

annual production of zinc metal in the world. Even so, we could see as much as 3-6% annual impacts in demand in the future."

Steel Has Been ‘Galvanized’ by China’s Industrial Policies - 11 January, 2018

Zinc is mainly used for plating steel products for automobiles and construction materials to prevent them from rusting. China accounts for roughly 40%

of global demand, and government-led infrastructure projects helped consumption of galvanized steel plates to surge. China's ambitious Belt and Road

initiative has the potential to substantially lift steel demand. Demand for construction materials and automobiles also grew in Southeast Asia, and

steelmakers using zinc are increasing their production. Nippon Steel & Sumitomo Metal teamed up with an Indonesian state-owned steelmaker earlier in

2017 and started operation of a new factory to manufacture high-end galvanized steel plates. On the supply side, Chinese mines are cutting zinc

production. The Chinese government restricted operations of smaller mines as part of environmental regulations to address serious air pollution. The

policy has caused supplies of zinc ore and ingots to fall despite the rapid recovery in demand. In 2017, demand surpassed supply by about 400,000

tonne, and the shortage is expected to continue in 2018. Zinc features plunged to around USD 1,700 per tonne in the second half of 2015, but the prices

shot up 60% during 2016 and kept rising to top USD 3,300 in the latter half of last year.


7. Zinc

2) News Flow

Source: Various sources , The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division

Katia Tavarez

Strategic Research (NY)

MUFG UNION BANK, N.A.

8. Gold



Gold Prices, ETF Holdings, DXY Index and 10Yr US TIPS Yield

Gold prices rise further with US dollar support.

8. Gold

1) Price Trends

Gold prices continued trending

higher in January (+3.3% m-o-m),

hitting 18-month highs above the

$1,350/lb.

US dollar weakness continued to

support gold. The dollar index fell

to three-year lows in January

amid fears of a US government

shutdown, comments by senior

US officials backing a weak dollar

and less-dovish commentary from

the ECB’s Mario Draghi.

With the recent leg up in prices,

funds increased bullish bets on

gold, with money manager net

length at the COMEX rebounding

from five-month lows. Gold ETF

holdings also rose, reaching 4 ½

year highs.

1,000

1,300

1,600

1,900

2,200

2,500

2,800

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan-1

0A

pr-

10

Jul-1

0O

ct-

10

Jan-1

1A

pr-

11

Jul-1

1O

ct-

11

Jan-1

2A

pr-

12

Jul-1

2O

ct-

12

Jan-1

3A

pr-

13

Jul-1

3O

ct-

13

Jan-1

4A

pr-

14

Jul-1

4O

ct-

14

Jan-1

5A

pr-

15

Jul-1

5O

ct-

15

Jan-1

6A

pr-

16

Jul-1

6O

ct-

16

Jan-1

7A

pr-

17

Jul-1

7O

ct-

17

Jan-1

8

(t) ETF Holdings (RHS) Gold Price (LHS)($/oz)

Source: World Gold Council, GFMS, Bloomberg, MUFG Union Bank Strategic Research

Note: ETF Holdings are expressed in aggregate tons.

1.0

1.5

2.0

2.5

3.0

3.5

4.0

9

10

11

12

13

14

15

Jan-1

0A

pr-

10

Jul-1

0

Oct-

10

Jan-1

1A

pr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3A

pr-

13

Jul-1

3

Oct-

13

Jan-1

4A

pr-

14

Jul-1

4

Oct-

14

Jan-1

5A

pr-

15

Jul-1

5

Oct-

15

Jan-1

6

Apr-

16

Jul-1

6

Oct-

16

Jan-1

7A

pr-

17

Jul-1

7

Oct-

17

Jan-1

8

Index DXY Inverse (LHS) 10Yr UST Yield (RHS) (%)

Source: Bloomberg, MUFG Union Bank Strategic Research


8. Gold

2) News Flow

Analysts see wild ride for gold in 2018 – 2 February, 2018

According to a survey by the London Bullion Market Association, following a relatively uneventful 2017, gold prices are set for a wild ride in 2018. The

LBMA says that 34 surveyed analysts are divided on the path that gold will take. Analysts are essentially divided on which driver will win out this year –

US real interest rates, geopolitics or global macro growth. Analyst forecasts ranged from a high of $1,510/oz to a low of $1,120/oz. The average forecast

was $1,318/oz, which is not far from current levels.

Small deals to dominate gold sector in 2018, too – 23 January, 2018

According to industry analysts, small, opportunistic deals will shape the gold mining sector again this year. This is exemplified by Leagold Mining Corp’s

US$264 million bid for fellow Canadian gold miner Brio Gold Inc. Following billions of dollars in writedowns after the mega-deals of years ago, miners

are still hesitant about large purchases even as gold prices accumulated healthy gains in 2017. Part of this is reflected in M&A values, which fell 14

percent on an annual basis in 2017 to US$10.6 billion. The number of deals though catapulted 70 percent to 648 as miners focused on smaller

purchases.

Goldcorp is done with M&A – 16 January, 2018

At Goldcorp’s annual investor day, CEO David Garofalo said that the company is done with M&A and will now turn its focus on building new mines at

projects it already owns and improving existing operations. Over the past two years, Goldcorp has made various acquisitions, including the purchase of

a 50 percent stake in Chile’s Cerro Casale gold mine, as well as other smaller deals.

Source: Various sources, MUFG Union Bank, Strategic Research


Appendix : Mined Commodities Price Forecasts by Strategic Research Division as of 23 January 2018

2017

Yr Avg 1Q (f) 2Q (f) 3Q (f) 4Q (f) 1H (f) 2H (f) 1H (f) 2H (f)

Iron Ore ($/t) 71 61 61 60 61 60 58 58 58

YoY 21% -29% -1% -16% -6% -1% -4% -3% 0%

QoQ - -6% 0% -1% 1% - - - -

Coking Coal ($/t) 187 214 154 146 142 135 132 130 127

YoY 30% 28% -20% -23% -30% -27% -8% -4% -4%

QoQ - 5% -28% -5% -3% - - - -

Thermal Coal ($/t) 87 98 80 77 77 73 71 70 68

YoY 34% 19% 1% -16% -21% -17% -8% -5% -4%

QoQ - 0% -19% -3% -1% - - - -

Copper ($/t) 6,207 6,836 6,816 6,796 6,775 6,792 6,833 6,885 6,994

YoY 28% 17% 20% 6% -1% 0% 1% 1% 3%

QoQ - 0% 0% 0% 0% - - - -

Aluminum ($/t) 1,968 2,164 2,078 2,016 2,139 2,262 2,213 2,301 2,154

YoY 23% 17% 9% 0% 2% 7% 6% 2% -3%

QoQ - 3% -4% -3% 6% - - - -

Nickel ($/t) 10,412 11,041 11,481 12,546 13,310 13,747 13,953 13,572 13,949

YoY 8% 7% 24% 19% 15% 22% 8% -1% 0%

QoQ - -5% 4% 9% 6% - - - -

Zinc ($/t) 2,893 3,196 3,260 3,326 3,211 2,933 2,787 2,685 2,614

YoY 38% 15% 26% 12% -1% -9% -15% -8% -6%

QoQ - -1% 2% 2% -3% - - - -

Gold ($/oz) 1,259 1,270 1,275 1,280 1,285 1,285 1,285 1,285 1,285

YoY 1% 4% 1% 0% 1% 1% 0% 0% 0%

QoQ - -1% 0% 0% 0% - - - -Source: Bloomberg, The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division, MUFG Union Bank, Strategic Research

20202018 2019

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prepared to provide legal, taxational, financial, market-judgmental, or any other advises on propriety of any transactions. In taking any

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