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Iron ore strong as base metals fall amid rising LME copper stockpiles

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Iron ore strong as base metals fall amid rising LME copper stockpiles

Iron ore continued its strong run, rising 5% for the week ending April 5, as rising stockpiles in London Metal Exchange warehouses saw most base metals fall, though optimism over U.S.-China trade talks and China's plans to boost its economy through more stimulus measures may have tempered the negativity.

Haywood Securities said in an April 5 note that China's government plans to reduce certain taxes and raise wages to alleviate economic slowdown and boost domestic consumption, adding that the potential tax cuts could be worth US$298 billion.

Meanwhile, both the U.S. and China have indicated progress is being made in trade talks, with Chinese President Xi Jinping reportedly pushing for a rapid conclusion and U.S. President Donald Trump talking up prospects for a "monumental" agreement that may still be some weeks away.

Price ring

The China spot iron ore import price continued its rise, finishing the week up 5% at US$86.20 per tonne amid persistent supply concerns following Vale SA's Feijao dam disaster in January.

Copper suffered the mildest fall among base metals, dropping 0.8% to close the week at US$6,437/t, while aluminum's 1.5% fall to US$1,872/t represented the biggest slump for base metals, followed by lead (1.7% to US$1,988/t) and zinc (1.1% to US$2,968/t). Nickel rose 1.4% to US$13,082/t.

Gold finished the week unchanged at US$1,292/ounce, while palladium continued its fall, this time by just 0.4%, to US$1,379/ounce. Silver was up 0.1% to US$15.10.

Talking points

SP Angel said in an April 5 note that copper stocks in LME-registered warehouses had jumped by 30,375 tonnes to 198,325 tonnes, the highest in six months and nearly double the level it was three weeks prior.

Reuters cited Capital Economics analyst Ross Strachan as saying that while current copper supply is tight, deteriorating economic growth in Europe, China and the U.S. will sap demand, and he believes prices will fall slightly this year.

SP Angel's comments came a day after the firm said output from the world's largest copper miner, Codelco, is at risk of tumbling unless the company's ongoing funding arrangement can be agreed upon. Chile President Sebastian Pinera’s government will start discussing a funding package for state-owned Codelco once Congress passes a tax reform bill.

The firm noted in the separate April 4 note that Codelco has said it needs the Chilean government to resume funding an ongoing US$21 billion program to expand and upgrade its operations, some of which are over 100 years old, to avoid a decline in production.

After output fell 3.2% and costs rose to the highest in four years in 2018, SP Angel said "the struggle to maintain output at Codelco is happening amid [a broader trend of] slipping global stockpiles and expectations the market will end the year in deficit."

Financings

Antofagasta PLC has secured funding for its US$1.3 billion Los Pelambres expansion project in Chile which will add an average of 60,000 tonnes of copper per year to the mine's production over the first 15 years of operations.

Cia. Siderúrgica Nacional secured a three-year extension of a US$148 million debt with Caterpillar Financial Services Corp. that was due March 30, 2020.

Norsk Hydro ASA closed an offering of €800 million of senior unsecured bonds issued in two tranches for general corporate purposes, including debt refinancing.

Hastings Technology Metals Ltd. is raising up to A$28.5 million via a placement and a rights issue to fund development of its Yangibana neodymium-praseodymium rare earths mine in Western Australia.

Gascoyne Resources Ltd. plans to raise about A$24.4 million from a share placement and entitlement offer to fund development work at its Dalgaranga gold mine in Western Australia.

Lucapa Diamond Co. Ltd. expects to slash to US$7.5 million a US$15 million debt funding it secured from Equigold Pte. Ltd. in October 2017 to develop the Mothae diamond project in Lesotho.