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Trade deal bolsters industrial metals while gold, silver remain flat

Prices for most industrial metals were lifted by a "phase one" trade deal signed by China and the U.S. during the week ended Jan. 17, while prices for gold and silver were almost flat as demand for the precious metals as safe havens eased.

Under the interim deal signed Jan. 15 by the world's two largest economies, China agreed to buy more than US$200 billion of additional American products and services over the next two years. Also, as part of the deal, China would increase its purchases of two types of rare earth metals including scandium and yttrium from the U.S., Reuters reported Jan. 16.

The Chinese economy grew in 2019 at the slowest in 29 years, with the country's GDP growth dropping to 6.1%. The growth rate is within the government's target for the year of between 6% and 6.5% but marked the slowest expansion since 1990.

Despite the slowdown in the Chinese economy, crude steel production reached another historic high in 2019 as demand was fueled by a push on infrastructure spending and its resilient market. The country's crude steel output climbed to 996.34 million tonnes, up 8.3% from 2018's previous record, Reuters reported Jan. 17, citing data from the National Bureau of Statistics.

Price ring

Gold ended the week at US$1,559.9 per ounce on Jan. 17, compared to US$1,558.7/oz a week ago. Silver was 0.1% down week over week at US$18.06/oz.

In the industrial metals space, copper rose by 2% to US$6,275.5 per tonne, the highest since May. 2, 2019. China's unwrought copper imports rose 9.1% in December 2019 from the previous month to their highest since March 2016, thanks to greater industrial activity and slowing scrap metal supply, Reuters reported Jan. 14, citing customs data.

Lead booked a weekly gain of 2.8%, climbing to US$1,976/t. Zinc was up 2.2% over the period at US$2,433/t. Nickel dropped by 1.5% to US$13,835/t.

Aluminum rose 1.4% over the previous week to US$1,795.5/t.

S&P Global Platts assessed the 62% Fe Iron Ore Index at US$93.25 per dry metric tonne Jan. 17, a gain of 2.7% over the previous week.

Talking points

The World Gold Council in a Jan. 15 report predicted that the gold demand in 2020 will be driven by potentially lower interest rates, market uncertainty, weakening global economic growth and potential volatility in gold prices.

Although weaker global economic growth may hurt consumer demand in the near term, the council anticipated that structural economic reforms in India and China will support gold demand in the long term.

From a macroeconomic perspective, French investment bank Natixis warned of uncertainty over future trade negotiations between China and the U.S., as the phase-one deal still does not address some fundamental conflicts, such as differences over government subsidies and the role of state-owned enterprises.

Economists from the bank noted in a Jan. 16 report that the two parties still hold the right to suspend an obligation, adopt a remedial measure, or in the worst case, withdraw from the agreement if their respective concerns cannot be resolved, as the interim agreement already makes provisions for.

"As such, the phase-one deal is only an interim agreement between China and the U.S. In fact, to push for negotiation in the next stage, the U.S. will keep existing tariffs on imports from China unless the two countries manage to reach a phase-two deal," the economists wrote.


First Quantum Minerals Ltd. said it plans to redeem all of its outstanding US$300 million in 7.00% senior notes due Feb. 15, 2021.

Sociedad Quimica y Minera de Chile SA said it will issue and sell US$400 million in 4.250% senior unsecured notes due 2050.

Cleveland-Cliffs Inc. started offers to exchange outstanding US$270.2 million of 6.375% senior notes due 2025 and US$391.6 million of 7.00% senior notes due 2027 issued by an AK Steel Holding Corp. unit.

Hindalco Industries Ltd. unit Novelis Corp. priced an offering of US$1.6 billion 4.75% guaranteed senior notes due 2030 at par.

Shandong Energy Group Co. Ltd. launched a bond offering of 2 billion Chinese yuan on Jan. 13 to repay its bank loans and for general working capital.

As of Jan. 17, US$1 was equivalent to 6.86 Chinese yuan.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.