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Steel market performance weighs on iron ore while Fed rate cut boosts gold

The S&P Global Platts IODEX 62% iron ore CFR North China price fell over 7% in the week ending Sept. 20 as steel market performance weighed on iron ore demand amid growth concerns more broadly, highlighted by the U.S. Federal Reserve's second rate cut for the year Sept. 18.

The Fed cut lowered the target range for its key interest rate by 25 basis points to between 1.75% and 2%, only the second time the central bank has cut interest rates since 2008, which it said was aimed at shoring up the country's economy amid "uncertainties" about future growth.

Price ring

The Platts 62% price fell to US$91.60 per dry tonne Sept. 20 from US$99.10/t a week prior, with a US$4.10/t fall Sept. 19 alone as a steelmaker told Platts that the fourth quarter "is no longer the usual peak season for steel demand. We [are] worried about steel margins due to great volatility."

The Fed's move helped London Metal Exchange gold recover to US$1,507.40 per ounce, from US$1,491.80/oz a week prior, having fallen from a multi-year high of US$1,551.50/oz on Sept. 4, though gold ended up nearly evening out for that particular week.

The same growth concerns that prompted the Fed to act also pushed copper down to US$5,777/t from US$5,868/t, aluminum to US$1,765.50/t from US$1,767/t, zinc to US$2,309/t from US$2,381, and tin to US$16,400/t from US$17,225/t.

However, even reports of Nyrstar NV restarting operations at the old sinter plant at its Port Pirie lead smelter in South Australia did little to dampen lead's continued rise, which edged up to US$2,105/t, from US$2,093/t a week prior.

Lead has been on a broadly upward trajectory since hitting a three-year low in May.

Silver rose to US$17.81/oz, from US$17.51/oz a week prior, while Nymex Palladium futures gained 1.5% to $1,636.60/oz in New York morning trading Sept. 20, Mining.com reported.

Nickel was slightly up after a volatile period of plunging from US$17,810/t to US$16,975/t before recovering to close Sept. 20 at US$17,955/t.

Talking points

Nickel's recovery indicates near-term tightness. S&P Global Market Intelligence upgraded its 2019 LME three-month nickel price forecast to US$14,087/t from US$13,292/t and expects Indonesia's nickel ore export ban to have a "major impact" on primary market fundamentals and thus on prices in 2020 and 2021.

Market Intelligence expects minimal short-term upside for copper, forecasting LME copper cash contract prices to average US$5,972/t in 2019. It marginally lifted its LME zinc cash price forecast for 2019 to US$2,528/t from US$2,523/t.

Financings

Sirius Minerals PLC terminated a proposed US$500 million senior secured notes offering due to poor ongoing bond market conditions. The issuance of the notes by Oct. 29 was a condition under the company's US$2.5 billion revolving credit facility to fund the second stage of development for the Woodsmith potash project in the U.K.

Southern Copper Corp. unit Minera México SA de CV priced its offering of US$1 billion of 4.500% senior notes due 2050.

Zhaojin Mining Industry Co. Ltd. said it would issue up to 1.5 billion Chinese yuan in debt Sept. 19 for general working capital and to repay loans.

GFG Alliance Ltd. Chairman Sanjeev Gupta injected US$150 million into the group's Australian steel manufacturing business, Infrabuild, as equity financing following the halt of the company's listing in the country and its failure to raise debt, Reuters reported.

Stelco Holdings Inc. unit Stelco Inc. plans to offer about US$300 million in senior secured notes due 2024 through a private placement to fund capital expenditure requirements and potential acquisitions.

Maverix Metals Inc. secured commitments to increase its revolving credit facility to US$120 million from US$75 million for future royalty and stream acquisitions and general corporate purposes.

Peabody Energy Corp. terminated its previously announced tender offers to purchase for US$1 billion outstanding notes and concluded its refinancing activities. It said earlier in the week that it also plans to sell $900 million of senior secured notes due 2026 to repurchase outstanding securities, subject to market and other conditions.

China's National Development and Reform Commission approved Aluminum Corp. of China Ltd.'s plans for a bond offering of up to 10 billion yuan.

Osisko Gold Royalties Ltd. increased its revolving credit facility to C$400 million with an additional uncommitted accordion of up to C$100 million, for a total availability of C$500 million, from the previous C$350 million in November 2017.

PT Aneka Tambang Tbk entered into a corporate investment loan agreement with PT Bank Mandiri (Persero) Tbk to refinance the company's US$129 million investment loan, which will mature in June 2024.

Metals X Ltd. launched a A$32.7 million equity raising to fund its reset plan and exploration activities for its Nifty copper project in Western Australia and for general working capital needs.

Nemaska Lithium Inc. intends to cancel a senior secured bonds offering of US$350 million due to a delay in completing the Whabouchi lithium project and the Shawinigan electrochemical plant in Quebec.

Metinvest BV offered to purchase up to US$440 million of its outstanding US$944.5 million senior notes due 2023.

Aspire Mining Ltd. received a conditional letter of intent from major shareholder Tserenpuntsag Tserendamba to support Aspire's early development plan for the Ovoot coking coal project in Mongolia through a corporate guarantee of up to A$100 million in future project financing.

Pretium Resources Inc. entered into an agreement to fully repurchase its gold off-take for about US$80 million from Triple Flag Mining Finance Bermuda Ltd. and Osisko Bermuda Ltd., eliminating all components of a 2015 funding package for building the company's Brucejack gold-silver mine in British Columbia.

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