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Copper, iron ore book gains amid positive signs in US-China trade talks


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Copper, iron ore book gains amid positive signs in US-China trade talks

As the U.S. and China made progress in talks aimed at easing trade tensions, copper gained and the price of iron ore held steady in the week that ended Oct. 11.

President Donald Trump said trade talks with China were "going really well" and laid out a partial agreement between the two countries Oct. 11. He said a "substantial phase-one deal" would be hammered out in the coming weeks, according to reports.

Meanwhile, the U.S. Federal Reserve announced it would start buying US$60 billion in Treasury bills per month to dampen market volatility and boost liquidity in the market. It expects to make the purchases at least until the second quarter of 2020.

In Europe, Britain appears to have avoided falling into recession ahead of its departure from the EU, with GDP 0.3% higher in the three months to the end of July than the prior three months, Reuters reported.

A sluggish European economy also drew more warnings from economists and market leaders. Blackstone CEO Stephen Schwarzman joined the chorus of those calling for Europe to increase spending to avoid stagnation.

"The alternative is what Japan did for 25 years," Schwarzman said, according to CNBC. "It basically didn't grow and it froze."

Price ring

Iron ore closed Oct. 11 at US$92.86 per tonne, rising from US$92.18/t on Oct. 4.

In base metals, copper climbed 3% on a weekly basis to US$5,763.50/t, while nickel slipped 1% to US$17,736.50/t. Lead rose 1% to US$2,177.25/t, while zinc climbed 5% to US$2,456/t. Aluminum was up 1% to US$1,717.75/t.

In precious metals, gold lost 2% to close the week at US$1,482.15 per ounce, while silver was nearly flat at US$17.60/oz. Palladium continued to show strength, up 2% to US$1,700/oz. The price of platinum gained 2%, closing at US$888/oz on Oct. 11.

Talking points

In an Oct. 9 note, BMO analyst Colin Hamilton said that while China dominates global refined output in metals, its mine supply continues to shrink as higher-grade ore dwindles, regulation increases and the sector takes a financial backseat to others. The analyst said to expect Chinese mined output of many metals to drop in the coming years as the country increasingly turns to imports.

But Hamilton made the case that China remains unperturbed about shrinking domestic mine output and sees ample opportunity to source ores abroad. "As we have discussed numerous times, the China commodity business model is clear," Hamilton said. "Buy raw materials from wherever they are available, process these domestically and ideally export a small amount of the finished product."

Trade tensions may be an issue in this regard, upsetting once stable supply lines for refined products, but the impact is limited. "Even with stuttering demand, China's production of refined metals continues to rise, prolonging what is a 20-year trend of China gaining share in the global market," the analyst said.

Just two decades ago, China accounted for less than 20% of industrial metal production, but now it captures between about 40% and 60% of output, Hamilton added.


PJSC Polyus priced 20 billion Russian rubles in 10-year bonds at a coupon rate of 7.40% per annum as part of the company's plans to refinance debt.

Cash-strapped Bounty Mining Ltd. signed a A$90 million debt agreement with QCoal Pty. Ltd. to refinance after it defaulted on an upsized A$35 million loan.

Lake Resources NL said it hired SD Capital Advisory Ltd. to help it secure up to US$25 million in debt funding to back the development of its Kachi and Cauchari lithium brine projects in Argentina.

Nord Gold SE raised US$400 million in five-year eurobonds bearing interest of 4.125% to help bolster growth plans, including the development of projects in Russia and French Guiana.

Altech Advanced Materials AG, minority-owned by Altech Chemicals Ltd., plans to raise US$100 million as it seeks to acquire a stake in a high-purity alumina plant in Johor Bahru, Malaysia.