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Gold rises on fresh Iran sanctions amid buoyant copper ahead of China deal

The entire London Metal Exchange base metals complex rose in the week ending Jan. 10 as the U.S. followed through on its threat of fresh sanctions on Iran's metal producers; gold was also up ahead of China signing a "phase one" trade agreement with the U.S on Jan. 15 during a Washington visit.

The sanctions followed a week of tensions after a U.S. airstrike killed top Iranian commander Qassem Soleimani on Jan. 2 followed by Iran firing ballistic missiles at Iraqi airbases hosting U.S. military.

Wall Street stocks rallied after U.S. President Donald Trump signaled a move toward deescalating tensions with Iran before the U.S. Treasury Department designated 17 Iranian metals producers and mining companies for new sanctions, plus three China and Seychelles-based entities the agency believes are helping Tehran conduct trade in metals.

Yet things are looking up on the China trade front, with its vice premier and chief trade negotiator Liu He set to sign the aforementioned deal during a Jan. 13-15 visit to Washington. The Asian giant and the U.S. agreed to the deal in December 2019 to slow their trade war.

Price ring

The hopes derived from that deal have sent copper prices on an upward trajectory in 2020, with LME three-month copper prices rising to average US$6,132/t so far in January from an average of US$6,103/t in December 2019. LME copper closed Jan. 10 at US$6,153/t, up from US$6,075/t a week prior.

Zinc closed Jan. 10 at US$2,381/t, rising from US$2,282/t a week earlier, aluminum rose to US$1,771/t from US$1,757/t, nickel rose to US$14,040/t from US$13,735/t, lead increased to US$1,921.50/t from US$1,889/t and tin jumped to US$17,250/t from US$16,725/t.

S&P Global Platts IODEX iron ore fines 62% CFR North China edged down to US$93.25/t, from US$93.90/t a week prior.

Tehran-based observers told Platts that Trump has actually helped make Iranian steel more competitive as Iran's steel mills and iron ore producers have continued to increase their exports of a variety of products in recent months despite secondary sanctions while also benefiting from a weaker Iranian rial.

LME gold ended the week at US$1,558.70/ounce, up from US$1,549.70/oz a week prior, though silver edged down from US$18.10/oz to US$18.08/oz.

Talking points

The earlier-than-expected trade deal agreement between the U.S. and China led S&P Global Market Intelligence to marginally increase its global copper consumption estimate for 2020 by 34,000 tonnes, to 24.72 million tonnes.

Maintaining its refined copper supply estimate at 24.68 Mt, Market Intelligence lifted its forecast 2020 refined copper deficit to 41,000 tonnes from 7,000 tonnes.

Having increased its refined market deficit estimate for 2020, Market Intelligence also boosted its 2020 LME cash copper price forecast to US$6,211/t from US$6,033/t.

Bernstein said in its Jan. 8 outlook note for the next three years that the mining sector is "poised for a rebound in the near-term," after a tumultuous 2019 when supply-demand fundamentals were supportive for most metals yet prices were more tied to macro sentiment impacted by developments such as trade tensions.

The firm is more bullish long term than consensus on iron ore, for which it is estimating a price of US$75/t versus the US$67/t consensus. It also is on copper, estimating a price of US$8,200/t versus US$6,600/t consensus, and nickel at US$18,500/t versus the consensus of US$16,200/t.

However, Bernstein is more in line with the consensus on aluminum, whose market "appears to be amply supplied across the value chain for many years going forward." Its long-term price on zinc is US$2,700/t, with the key question there being China's continued ability to self-supply its metal need.


Russian fertilizer producer PJSC PhosAgro is planning the sale of a new batch of dollar-denominated eurobonds, Interfax reported Jan. 9, citing an anonymous banking sector source, as the company offered to buy back up to US$150 million of its 3.95% notes due in 2021.

Yanzhou Coal Mining Co. Ltd. raised 1.5 billion Chinese yuan through a short-term bond issuance Jan. 8.

Codelco issued US$2 billion in bonds to secure funding to upgrade projects and refinance debt, reported Jan. 7, citing a company statement.

Sociedad Quimica y Minera de Chile SA intends to launch an offering of senior unsecured notes to repay its US$250 million of 5.50% notes due April 21, 2020.

Gulf Manganese Corp. Ltd. executed a binding term sheet to secure a €52 million structured loan facility to complete the construction and commissioning of its first two smelting furnaces at the Kupang smelting hub in Indonesia.

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