Concerns over an escalation of trade tensions eased last week following a meeting between the European Commission and Washington.
European Commission President Jean-Claude Juncker and U.S. President Donald Trump signaled that they will work toward a new deal that will bring down trade barriers, and Trump agreed not to impose new tariffs on car imports from Europe.
Global markets welcomed the news, and metals sentiment steadied as a result.
However, the ongoing dispute between the U.S. and China continued to weigh on sentiment amid worries that it will slow the growth of the global economy.
Price ring
Most major mined commodities saw the first week of solid gains this year.
Iron ore climbed 4.4% over the week to close July 27 at US$61.4/t.
With the exception of aluminum, which fell 1.0% to US$2,054/t, base metals also made a recovery. Copper was up 2.4% to US$6,267/t, lead added 2.0% to US$2,141/t, nickel increased 1.8% to US$13,677/t, and zinc shifted 0.4% higher to US$2,628/t.
However, precious metals failed to gain momentum, with gold dropping a marginal 0.2% to US$1,227/oz and silver staying flat at US$15.5/oz.
Talking points
RBC Capital Markets predicts a temporary but meaningful price correction for iron ore amid challenging economic conditions in China.
According to a July 25 note, there is "real concern" that prices will drop below US$50/t due to declining steel demand in China.
The team cut its estimate for 62% Fe iron ore China in the second half to US$49/t from US$65/t and now expects iron ore to average US$59.23/t for full year 2018, compared to US$64.25/t previously. On a quarterly basis, the outlook was cut to US$50/t from US$60/t for the third quarter and to US$47.50/t from US$70/t for the fourth quarter.
Recovery is set to push prices up again as of 2019. However, RBC also lowered its forecast for 2019 to US$63/t from US$70/t. Thereafter, the bank continues to expect prices to average US$70/t.
"Our analysis suggests that a drop in Chinese steel demand will cause steel margins to fall from their current highs and this is likely to see both de-stocking and an unwind of iron ore premiums and discounts as China margins fall," the team said.
The analysts also said the nearing price decline is set to be "the last bad phase" for the iron ore market as it exits the spending binge of the early 2010s.
"Although we do expect economic conditions to be weak in the near term, over the medium term, Chinese supply side reforms have created an environment where it will be difficult for utilization rates to fall much below 80%," the analysts said. "This should lead to a period of strength for iron ore and very likely increase premiums for grade, quality and pellets."
Financings
Last week was again relatively quiet in terms of financing deals.
Largo Resources Ltd. was among the few companies that announced a larger transaction as it priced its underwritten secondary share offer. Company shareholders seek to sell 60 million shares at C$1.40 apiece in a bid to raise C$84 million.
Smaller deals included a C$12.0 million private placement by Advantage Lithium Corp., Winmar Resources Ltd.'s A$8 million capital raising for cobalt deals in the Democratic Republic of the Congo and Nova Minerals Ltd.'s plans for a C$24 million IPO of subsidiary Snow Lake Resources Ltd.