Wednesday, June 30, 2021

Steel going into Biden’s infrastructure plan reaches new record price 

A key steel product used in construction and automobiles reached a new record Monday as U.S. President Joe Biden pushes ahead with his infrastructure spending plans.

Hot-rolled coil for July delivery rose as much as 0.7% to $1,801 a short tonne in New York, an all-time high, after gaining 2.7% since the president secured a $579 bipartisan infrastructure deal on Thursday. Prices have more than tripled in a year.
Commodities from steel to iron ore to copper have gained strongly this year, partly on bets that massive U.S. government spending to rebuild infrastructure including railroads, highways and bridges as economies reopen from the pandemic will boost demand.

The infrastructure spending deal, yet to be passed, includes funding for items ranging from fixing bridges to electrifying buses and upgrading airports and waterways. Biden expects Democrats to ram through an even larger bill with more spending alongside the bipartisan legislation.

The total amount of Biden’s infrastructure plan is likely to be greater than the bipartisan compromise, according to Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management.

“This is a scenario that we do not think markets are fully pricing for yet, and thus could provide a tailwind for the reflation trade if momentum for a “two-bill” track builds,” Marcelli said in a note.

Still, “the nature of much of this spending means it will be spread out over a multi-year period, and tax increases could be part of the mix. So, the stimulative impact on markets overall may not be very large,” she said.

For the industrials sectors, the spending deal “will still be a material step up in spending for companies exposed to roads, bridges, transportation, water and broadband communications,” Marcelli added.

Other beneficiaries would be engineering and construction, steel, and building materials related stocks, according to her.

(By Yvonne Yue Li)

Tuesday, June 29, 2021

Oil Falls Sharply Ahead Of OPEC+ Meeting 

As OPEC+ prepares for its next meeting to discuss easing its oil output restrictions for the group, Europe and the United States are possibly staring down the barrel of the Delta variant—and that combination of factors is sending oil prices sharply downward.

Both the WTI and Brent benchmarks were trading down more than 1.5% on Monday as various health experts suggested that the Delta variant of the coronavirus could cause “dense” outbreaks in U.S. states that have relatively low vaccination rates.

In Europe, Portugal, Spain, and Germany have all issued new travel restrictions to mitigate the new variant’s spread.

Moscow and St. Petersburg both reported on Monday their highest death toll, yet as the Delta variant represents about 90% of all new cases. Tighter restrictions are being implemented in Moscow, such as sending a portion of non-vaccinated employees home, and ordering restaurants to disallow anyone in who has not be vaccinated.

The Delta variant couldn’t have come at a worse time for OPEC+, who has been champing at the bit to regain lost market share from its desperate attempt to withhold production in hopes of rebalancing balance the market during the worst of the pandemic.

With oil prices sharply rising over the last couple of months, OPEC could no doubt see the light at the end of the tunnel, with most analysts expecting OPEC to announce this week an easing of its production cuts in line with increased demand. Analysts were even suggesting last week that OPEC’s likely decision to ramp up by 500,000 bpd might not be enough.

But travel and business restrictions in parts of the world could derail OPEC’s plans.

WTI was trading at $72.92 at 4:14 p.m. EDT, down 1.53% on the day, while the Brent benchmark was trading at $74.71 at that time, down 1.93% on the day.

By Julianne Geiger for

Friday, June 25, 2021

Iran stores more oil on tankers as it counts days to enter markets

Adrian Darya oil tanker

LONDON/SINGAPORE, June 21 (Reuters) - Iran could quickly export millions of barrels of oil it is holding in storage if it reaches a deal with the United States on its nuclear programme and has been moving oil into place to prepare for an eventual restart, four traders and industrial sources said.

The U.S. and Iran began in mid-June their sixth round of indirect talks on reviving a 2015 nuclear deal that former U.S. President Donald Trump pulled out of in 2018. Trump reimposed sanctions on Iran’s energy sector, leading refiners in many countries to shun Iranian crude and forcing Tehran to pump well below capacity.

Negotiations for the nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won Iran's presidential election. Two diplomats said they expected a break of around 10 days. read more

Iran sits on the world’s fourth-largest oil reserves and relies heavily on oil revenues. If and when the administration of U.S. President Joe Biden and the Iranian government agree a deal that results in the lifting of sanctions, Iran plans to increase output to 3.8 million barrels per day (bpd) from the current 2.1 million bpd, according to oil ministry officials.

That would return the country’s production level to where it was before the sanctions, but would take time because of years of low investment in mature oilfields and heavily reduced output.

As a stopgap measure while it works on boosting production, the National Iranian Oil Company (NIOC) is expected to export from onshore and offshore storage that contains as much as 200 million barrel, according to energy consultancy and monitoring firms.

This could allow the country to export an extra 1 million bpd, or 1% of global supply, for more than six months.

"Iran will be using its nearly 60 million barrels of crude inventory, of which 30-35 million barrels are built during the past two years, within a few months of sanctions removal," said Iman Nasseri, managing director for the Middle East with FGE consultancy.

An increase of 1 million bpd of Iranian crude would put downward pressure on benchmark global oil prices, but investment bank Goldman Sachs said last month that the global oil market should be able to absorb the additional supply relatively quickly.

Fuel demand is rising as global economic activity recovers from the impact of the COVID-19 pandemic, and OPEC producers and their allies have been cautious about increasing supply to the market in part to avoid a shock should Iranian supply return.

"From a macro perspective, a return of Iranian barrels to the market should not derail OPEC+ intentions to gradually increase production as long as demand in Europe and the United States continues to recover," said Florian Thaler, the CEO and co-founder of consultancy OilX.


Iran has boosted the volume of crude it has stored on oil tankers in recent months, according to data intelligence firm Kpler, in what may be a preparation for a restart to exports. Some of those tankers are already in Asia, historically the biggest market for Iran’s oil.

"We currently estimate around 78 million barrels of oil and condensate are stored on water and this compares against only 41 million barrels at the same time last year," said Homayoun Falakshahi, a senior analyst at Kpler.

"A lot of tankers are already parked close to East Asian markets, so it could be a question of days," he added.

Tankers holding 8 million barrels of Iranian oil including condensate were using waters outside Singapore's coast to carry out transfers when needed, two shipping sources said.

Iran reduced exports to China in April and May and pumped more into storage, perhaps with the aim of selling it at a higher price when sanctions are lifted, a senior Chinese trader said.

Iranian oil in floating storage stood at between 50 million and 60 million barrels according to estimates from consultancies FGE, IHS Markit and OilX.

FGE and OilX said most of Iranian floating storage was condensate, a preferred feedstock for petrochemical plants in China, South Korea and the United Arab Emirates.

According to FGE, Iran has around 120 million barrels of crude and condensate in on-land storage, almost one third of it in overseas storage facilities, mainly in China.

Two Western trade sources said there was between 20 to 30 million barrels of storage space in that region of China earmarked for Iranian oil.

A handful of mostly privately controlled Chinese companies which have stepped into the market over the past two years have been leasing up land storage in the eastern province of Shandong - China’s hub for independent refineries- and northeast China’s Liaoning province, said a Chinese trader close to some of these firms. At least 13 million barrels of storage space are dedicated to storing Iranian oil, the trader estimated.


Expecting a deal in coming weeks or months, NIOC's marketing division has been in contact with historical customers.

At least one European refiner has held in-depth discussions with NIOC on resuming purchases and Indian refiners say they plan to reduce spot purchases to make way for Iranian contract barrels. read more

Chinese and Indian firms, and European consumers such as Saras, Eni and Repsol are expected to show interest in Iranian barrels, according to Falakshahi.

Iranian officials are optimistic they can increase production quickly, and one senior Iranian oil ministry official said earlier this month that most output could be restored within a month. Observers expect it will take a little more time.

“We do expect a recovery of 500,000 to 700,000 bpd within 3 months from sanctions removal, and total 1 to 1.2 million bpd of oil production recovery within 6-12 months from sanctions removal,” said Sara Vakhshouri, president of SVB Energy International.

Reporting by Bozorgmehr Sharafedin and Jonathan Saul in London and Chen Aizhu in Singapore, additional reporting by Florence Tan in Singapore, editing by Louise Heavens

Wednesday, June 23, 2021

S. African ‘diamond rush’ unearths only quartz crystals, officials say

S. African 'diamond rush' unearths only quartz crystals, officials say 

The stones discovered in KwaHlathi were not diamonds but quartz crystals. (Image by ButtShark, Wikimedia Commons). 

Unidentified stones that lured thousands of fortune seekers to a rural South African village to mine the land with picks and shovels were not diamonds as hoped, officials said on Sunday, but quartz stones with relatively low, if any, value.

People from across South Africa travelled to KwaHlathi in the country’s eastern KwaZulu-Natal province where villagers had been digging since June 12 after a herder discovered the first stone in an open field and put out the word.

Provincial executive council member for economic development and tourism, Ravi Pillay, told a media briefing on Sunday he had counted some 3,000 there during a visit to the site, where samples were taken to identify the stones.

“The tests conducted conclusively revealed that the stones discovered in the area are not diamonds as some had hoped,” he said, adding they were in fact quartz crystals.

“The value, if any, of the quartz crystals is yet to be established but it must be mentioned that the value of quartz crystals is very low compared to that of diamonds.”

The event had highlighted the socio-economic challenges faced by local people, he continued. Like many areas in South Africa, high levels of unemployment and poverty have left communities living hand to mouth.

People in the area had also raised concerns specifically around roads and water during the visit, which officials at the briefing said they would address.

Meanwhile, the number of people mining the land had dwindled to less than 500, Pillay continued, though significant damage had already been done with an area of around 50 hectares covered in holes of up to one metre, posing a danger to cattle.

He said those that continue to mine in the area, a situation that also risks the spread of covid-19, would be encouraged to leave, though law enforcement could be drawn upon if necessary.

(By Emma Rumney; Editing by Emelia Sithole-Matarise)

Tuesday, June 22, 2021

China steps turn iron ore into world’s most volatile commodity

 China’s Steps Turn Iron Ore Into World’s Most Volatile Commodity

Iron ore shipments at the port of Qingdao. (Image courtesy of China’s Port of Qingdao Authority) 

Iron ore, one of the hottest commodities in the early days of the raw materials rally, has now become the most volatile as bulls and bears joust over the trajectory of prices.

In a series of wild swings, the ore that fuels China’s vast steel industry surged to a record, collapsed into a bear market and then returned to a bull market in the space of about a month. Its gyrations in the past 30 days mark the mineral as the most volatile of the two dozen most traded commodities around the world.

Iron ore is being buffeted largely by confusion over how government policy will affect demand from steel mills in top consumer China.

China wants to cut steel production but control prices, and to reduce investment but maintain employment, said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. “As policy shifts to keep the desired balance between these goals, the outlook for steel will improve or worsen accordingly,” he said.

China has revived an economy that cratered during the pandemic by turning to fiscal stimulus and monetary easing. That has meant churning out enormous amounts of steel to feed a property and infrastructure boom. As a consequence, iron ore prices have more than doubled over the past year.

Now, the pressure is on to contain the inflationary pressures that has created, which means tighter credit and a moderation in spending on construction.

Added to the mix is Beijing’s attempt to chart a course to the carbon neutral economy promised by President Xi Jinping last year. That would involve producing a lot less of the alloy, which contributes 17% of national carbon emissions, according to Goldman Sachs Group Inc. Officials will spend the next month fanning out across the country to check on capacity curbs.

Bets on how these contrary polices could play out has whipsawed the iron ore market, which typically moves in lockstep with steel. The benchmark futures contract in Singapore topped out at a record $233.75 a ton on May 12. Two weeks later, it had fallen to $170.50 — although that’s still more than double the average since trading began in 2013.

Record steel

There’s not much room for iron ore to rise anymore, said a Singapore-based futures trader with five years experience in the market. China has started credit tightening and that signals that commodity prices should fall, the trader said, declining to be named because of company policy.

At the same time, China’s steel mills continue to break records. Production hit an all-time high in May and has reached 473 million tons over the year to date. That’s well on its way to surpassing last year’s mark of 1.05 billion tons, which the authorities had vowed would be a high-water mark as China seeks to curb emissions from the highly pollutive sector.

That’s left supply struggling to catch up with demand.

The structural problems that affect iron ore supplies in China remain prominent, said the head of a Shanghai-based investment firm affiliated to a steel mill in western China, who asked not to be named discussing his company’s positions in the market.

He pointed to historically low inventories, insufficient shipments in recent weeks from major suppliers Australia and Brazil, and the possibility of curbs on domestic production after recent mining accidents.

In the short term at least, China seems to have decided that reducing raw materials prices, including for iron and steel, is its most pressing concern. To that end, Beijing has ratcheted up its campaign to tame commodities inflation in recent weeks, with a particular focus on deterring the speculation that it blames, at least publicly, for driving prices higher.

One irony of that policy is the important role speculators play in actually reducing volatility by boosting liquidity in futures markets, according to a recent note from Goldman. Put simply, more buyers and sellers mean that price adjustments become less abrupt

While the policy outlook for iron and steel markets remains murky, the summer is a slow season for construction and manufacturing in China, which should weigh on ferrous prices, said Lu Ting, senior analyst at Shanghai Metals Market.

Longer term, China’s efforts to squash prices should find support from a turn in the economic cycle as measures to support the economy are wound back.

Steel demand may moderate as “China is stepping out of large-scale stimulus and seeking domestic consumption-led growth,” said Richard Lu, senior analyst at CRU Group.

Scrap alternative

And China continues to seek alternatives to its heavy reliance on mostly foreign iron ore by encouraging imports of scrap steel imports.

But none of these factors will necessarily mean a collapse in iron ore prices, as lower steel production should raise prices and improve margins at mills, making more-efficient, less-polluting grades of the mineral more affordable, said SMM’s Lu, who expects benchmark prices to move between $180 and $210 a tonne over the next three months.

So, once iron ore prices settle, it’s likely they’ll be in a historically higher range, particularly given the weight of stimulus driving demand elsewhere in the world.

“Looking forward, we expect government policy in China to remain supportive of steel demand through 2021,” said Elizabeth Gaines, chief executive officer of Australian miner Fortescue Metals Group Ltd., the world’s fourth biggest supplier of iron ore.

“We are also seeing economic indicators outside of China continue to improve, with steel production in the rest of the world increasing by around 11% year-on-year in the first four months of 2021 to pre-Covid levels,” she said.

(By Annie Lee, with assistance from Krystal Chia, Alfred Cang and James Thornhill)

Tuesday, June 15, 2021

Shipping industry welcomes Nigeria’s “Deep Blue” to stamp out piracy in the Gulf of Guinea

 Nigerian Navy could take delivery of more FPB 72 patrol boats produced by OCEA 925 001

OCEA FPB 72 light patrol boat. (Picture source Twitter account Defense Nigeria)

The Round Table of Shipowner Associations and OCIMF have expressed their full support for the launch of Nigeria’s Deep Blue Project.

Nigeria has announced a significant investment in military and law enforcement infrastructure to secure its maritime domain as part of a stepping up of actions to address the ongoing piracy issue in the Gulf of Guinea. Managed by the Nigerian Maritime Safety Agency (NIMASA), the multi-agency project will significantly increase maritime security in the region, an area blighted by piracy, armed robbery, and other maritime crimes.

A central command and control centre based in Lagos will oversee a network of integrated assets including two special mission vessels, two special mission long- range aircraft, 17 fast-response vessels capable of speeds of 50 knots, three helicopters, and four airborne drones, providing 24/7 cover for the region.  These complement the Yaounde ICC structure offering real capability to both Nigeria and the region.  

It is the hope of the industry organisations that Deep Blue, coordinated with other navies and programmes through the mechanism of the GOG - Maritime Collaboration Forum/SHADE, will seriously impact on the ability of pirate groups to prey on merchant shipping.

Katharina Stanzel, Managing Director of INTERTANKO, said: “INTERTANKO believes that the launch of the Deep Blue Project is a tangible demonstration that the tide has turned against the scourge of piracy. This project has the potential to greatly contribute to seafarers being once again able to carry out their duties without fear for their safety.

“We thank the Nigerian authorities for recognising the issue and putting these measures in place – all within the constraints of the ongoing Covid-19 situation.”

David Loosley, BIMCO Secretary General, said “Deep Blue becoming operational represents a significant opportunity to expand law and order at sea in cooperation with international forces in the area. We look forward to seeing Nigeria make the best of these assets to the benefit of Nigeria, it’s citizens and economy, and of course the seafarers from all over the world going about their daily business in the Gulf of Guinea.”

Guy Platten, ICS Secretary General said, “The Deep Blue Project can be a game-changer in the fight against piracy in the Gulf of Guinea, and we congratulate Nigeria in launching the project despite the significant difficulties presented by COVID.”

“We look forward to continuing our close cooperation with NIMASA and the Nigerian Navy to realise our shared vision of a region free from the threat of piracy and armed robbery.”

Kostas Gkonis, Secretary General of INTERCARGO, said “Along with our sincere congratulations to the Nigerian authorities on the launch of this important initiative, on behalf of the dry bulk shipping sector, we very much anticipate that the Deep Blue Project will make a significant impact in reducing piracy and armed robbery, protecting seafarers, ships, and the essential trade that serves the peoples of countries in the region.”

Robert Drysdale, Managing Director of OCIMF, said “the launch of the Deep Blue Project marks a milestone of delivering state of the art, multi-faceted, maritime capability.  It presents a great opportunity to protect seafarers and the maritime domain.  The collaborative approach by all stakeholders to deliver Deep Blue is commendable and proves what can be achieved when all work together.  OCIMF congratulates Nigerian authorities and welcomes this historical moment, Deep Blue will benefit, Nigeria, the region and all those who trade in the Gulf of Guinea waters.

Friday, June 11, 2021

Iron ore price jumps as Chinese inventory drops to the lowest since February

 Iron-ore jumps as Chinese ports inventory drops to the lowest since February

 Vale’s Ponta da Madeira terminal in in São Luís, Brazil. (Image courtesy of Vale SA).

Iron-ore rose on Wednesday as worries mount over supply boosted prices.

Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were up 1.4%, changing hands for $212.67 a tonne on Wednesday afternoon, according to Fastmarkets MB.

The most-traded September iron-ore contract on China’s Dalian Commodity Exchange ended daytime trading 4% higher at 1,175 yuan ($183.78) a tonne, after earlier advancing to 1,191.50 yuan.

Iron-ore inventory at Chinese ports dropped to 127.65 million tonnes last week, the lowest since February 5, while shipment arrivals were lower than the prior-week and year-ago volumes, according to metals data provider SMM.

Shipments from Rio Tinto were seen declining, while Vale has interrupted production at its Timbopeba mine and part of its Alegria mine after prosecutors ordered the evacuation of an area around the nearby Xingu dam, in the state of Minas Gerais.

The closures reduce its output by 40,000 tonnes of iron ore a day.

“We should start seeing the impact of this week’s stoppage in next week’s export numbers,” RBC Capital Markets mining analyst Kaan Peker said in a note.

“We anticipate marginal weaker (month-on-month) imports from Brazil and Australia,” Peker said, noting that Indian volumes had been impacted by wet weather.

A source at Ponta da Madeira – Vale’s main port in Maranhão state – told MINING.COM that shipment of high-grade Carajas ore could be around 15 million tonnes in June, lower than the 17 million tonnes expected.

One of the company’s 5 piers was hit by a fire in January and still can’t operate with the ultra-large Valemax ships.

On the demand side, some analysts said the outlook for Chinese steel products remained bright despite subdued May trade data, citing a solid global economic recovery that will likely boost Chinese exports.

(With files from Reuters)

All the copper from giant new Congo mine destined for China

 Zijin and Citic to buy copper from Ivanhoe’s Kamoa-Kakula mine

Trucks transporting bulk copper concentrate from the Kamoa-Kakula to the Lualaba smelter via the recently-completed by-pass road connecting the mine to Kolwezi. (Image courtesy of Ivanhoe Mines.) 

Canada’s Ivanhoe Mines (TSX: IVN) has inked deals with China’s Zijin Mining’s subsidiary and trader Citic Metal to sell each 50% of the copper production from the recently-launched first phase of its Kamoa-Kakula mine in the Democratic Republic of Congo (DRC).

The copper concentrate and blister copper off-take agreements will see wholly-owned Zijin unit Gold Mountains (H.K.) International Mining Co Ltd and Citic Metal split the initial offtake from Kakula, Ivanhoe’s first of the two mines at the concession.

Ivanhoe said it won’t have any issues holding its end of the bargain as the DRC government has fully authorized it to export blister copper and concentrate to international markets.

Ivanhoe said the DRC government had fully authorized the company to export blister copper and concentrate to international markets

The permit came as Ivanhoe inked a 10-year agreement with the Lualaba Copper Smelter, located outside the town of Kolwezi, for the processing of a portion of Kamoa’s copper concentrate production.

The miner delivered its first copper concentrates to Lualaba on June 1, and will receive first blister copper ingots within 30 days of delivery, it said.

Congo, the world’s no.1 cobalt producer and Africa’s biggest copper miner, reinstated a ban on exports of concentrates last month to encourage miners to process and refine the ore locally.

It said at the time it would grant exceptions on a case-by-case basis following an application by an interested party.

Ivanhoe said buyers will be responsible for arranging freight and shipment of the copper to its final destination, initially via the port of Durban, South Africa.

Citic Metal and the Zijin unit will each provide an advance payment of up to $150 million, which can be drawn on by Kamoa Copper from June 10 this year until May 31, 2023.

“The facility will bear an annual interest rate of 8% and will be offset against provisional payments due to Kamoa Copper from product deliveries,” the miner said.

Ivanhoe anticipates Kamoa-Kakula’s first-phase output to be about 200,000 tonnes of copper per year.

World’s no.2, and the greenest

Operations at Kamoa-Kakula are set to ramp up this year to reach between 80,000 and 95,000 tonnes of copper in concentrate. After several phases of expansion, the mine’s peak annual copper production will be more than 800,000 tonnes.

Ivanhoe’s co-chairperson Robert Friedland believes the project will become the world’s second-largest copper mine and also the one with the highest grades among major operations. The concentrator is slated to produce concentrate grading around 57% copper.

“If we came from Mars and we were sent in our flying saucer to orbit the Earth to find copper, we would definitely go to Katanga in the southern part of the Democratic Republic of the Congo as the richest place on the planet for copper,” Friedland said in a Bloomberg interview on Tuesday.

See how Kamoa-Kakula fares among the world’s top 10 biggest copper mines:

This image has an empty alt attribute; its file name is Top-10-copper-mines.jpeg

Ivanhoe has also vowed to produce the industry’s “greenest” copper, as it works to become the first net-zero operational carbon emitter among the world’s top-tier copper producers. Friedland has not set a target date for achieving that goal.

Kamoa-Kakula is a strategic partnership between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the DRC government (20%).

The Lualaba smelter, which began operations in early 2020, is 60%-owned by Beijing-based China Nonferrous Metal Mining Group (CNMC). Yunnan Copper, based in Kunming, China, owns the remaining 40%.

Thursday, June 10, 2021

Secretive world of diamonds is in the grips of a buying frenzy

 Secretive World of Diamonds Is in the Grips of a Buying Frenzy

Diamonds recovered from Star-Orion South. Credit: Star Diamond 

At the latest De Beers diamond auction this week, buyers shopping for the kind of stones used to make an average engagement ring were in for a sticker shock: some prices had ballooned by 10% since the last sale.

News of the unusually sharp increases spread swiftly through the community of 80-odd handpicked De Beers customers, according to people familiar with the discussions. But what followed was even more remarkable: within hours, some of those same stones were trading hands at a further 10% markup, as buyers who have access to De Beers flipped them to traders and manufacturers that don’t.
The spiking prices — and buyers’ willingness to pay them — are the latest sign of roaring demand in the secretive rough-diamond trade. Just nine months ago, the industry had been brought to a standstill by the pandemic. Now, the cutters and polishers who form the backbone of the global diamond market are competing fiercely for stones.

Fierce competition for stones has led some manufacturers to even buy polished diamonds to fill demand from retailers, rather than compete for rough goods to polish and cut for sale

There’s several reasons behind the surge: major retailers in the U.S. and China are buying aggressively to keep up with strong sales, while rough diamond supply is tight because De Beers and rival Alrosa PJSC have limited supply to put onto the market. Perhaps most importantly, polished diamond prices — which have long weighed on the industry — are finally rising.

Diamonds have been a big winner from lockdowns around the globe as access to rival luxury offerings was limited. That first showed with stronger-than-expected holiday sales, from Thanksgiving through to Chinese New Year, and has since continued.

“The rough market is hot. There’s enthusiastic buying across all rough categories,” said Anish Aggarwal, a partner at specialist diamond advisory firm Gemdax. “There are supply shortages at the moment. That’s creating a sense of scarcity at every stage of the pipeline.”

For some in the industry, there are worries the market could be running too hot. It takes about three months to cut, polish and sell a diamond, so stones bought cheaply at the start of the year are now being sold for a big profit. That also means those buying at today’s prices are betting that polished stones will continue to appreciate in value.

And then there’s the risk that the renewed consumer interest in diamonds, driven by the lack of competition from other luxuries such as experiences and travel, could cool as more economies open up.

For now, demand shows no sign of letting up. In the secondary market, where accredited De Beers and Alrosa buyers sell to other gem manufacturers, boxes of diamonds have been changing hands for premiums between 5% and 10%, with some select parcels even higher, people familiar with the matter said.

It takes about three months to cut, polish and sell a diamond, so stones bought cheaply at the start of the year are now being sold for a big profit

The fierce competition for stones has led some manufacturers to even buy polished diamonds to fill demand from retailers, rather than compete for rough goods to polish and cut for sale.

Russia is also looking to capitalize on the strength of demand and tight supplies, as it considers selling more rough diamonds from state stockpiles. The government is preparing a decree to increase planned sales of diamonds from the state repository, known as Gokhran, according to people people familiar with situation. Alrosa, is likely to bid at the sales to replenish its own inventories, which have declined to a record low.

Prices have been rising all year, with De Beers increasing its prices at almost every sale so far this year and pushing most larger stones up in price by between 5% and 10% this week. Some two-carat rough diamonds — the size that generally yields a 1-carat polished stone for an engagement ring — were up 10%.

Both of the big miners have also managed to sell down billions of dollars of stock that they built up last year, peaking when De Beers sold $663 million in January.

Still, last month’s sale reaped just $380 million and industry participants said they expect a similar size offering this week, while asking not to be identified discussing private information, because De Beers has little extra to sell. That promises to keep supply tight as retailers such as China’s Chow Tai Fook Jewellery Group Ltd. and Costco Wholesale Corp. continue to place big orders for polished stones.

“There’s genuine demand on both the rough and polished level,” said Aggarwal. “Ultimately, this is driven by consumers buying diamond jewelry.”

(By Thomas Biesheuvel)

Wednesday, June 9, 2021

OPEC+ lifts May output by 430,000 b/d as Saudi Arabia eases its voluntary cut: Platts survey

 Image by Maksym Yemelyanov - AdobeStock

Image by Maksym Yemelyanov - AdobeStock 


OPEC hits 13-month high, non-OPEC allies flat on month

Saudi pumps 8.50 mil b/d; Russia at 9.51 mil b/d

OPEC+ quota compliance stays stable at 111%

Crude oil production from OPEC and its allies jumped 430,000 b/d in May, the latest S&P Global Platts survey found, led by Saudi Arabia, which accounted for about 84% of the total monthly rise.

The OPEC+ alliance, which held almost 7 million b/d of production offline in April to speed the market's rebalancing, began significantly relaxing its output quotas last month, in anticipation of rising summer oil demand and a healthier global economy.

OPEC's 13 members pumped 25.71 million b/d in May, its highest since April 2020, when Saudi Arabia launched a brief price war after a breakdown in talks with Russia over how to manage the oil market through the pandemic.

Its nine non-OPEC partners, led by Russia, produced 13.21 million b/d, unchanged from the previous month.

Despite the production gains, the looser quotas meant OPEC+ compliance stayed mostly steady at 111.45% compared to 111.16% in April, the survey found.

Saudi Arabia saw the biggest rise month on month, adding 360,000 b/d, which included unwinding a quarter of its extra voluntary 1 million b/d production cut, as it had previously signaled, along with a higher quota.

The kingdom produced 8.50 million b/d in May, some 730,000 b/d below its official quota of 9.23 million b/d.

Take away the Saudi voluntary cut, and OPEC+ quota compliance would fall to 99.51%, according to Platts calculations.

Saudi crude exports were up sharply in the month, in response to strong demand from its key customers, while its crude inventories and refining runs also observed a sturdy rise, according to the survey.

Saudi Arabia has promised to further ratchet back its extra cut by 350,000 b/d in June, and 400,000 b/d in July, as it prepares to unleash more barrels on a market that is starting to show some robust economic signs.

Graph: OPEC+ production at highest since pandemic cuts

Iraq, Russia compliance improves

Meanwhile, the OPEC+ group's largest producer, Russia, tightened its compliance to 94% in May, the survey found.

Russia, which has overproduced its cap since March, had significantly ramped up output in April, and in May, production was only up 10,000 b/d, averaging 9.51 million b/d.

This is Russia's highest production since the price war of April 2020, and still well above its quota of 9.42 million b/d.

Iraqi compliance, also historically lackluster, improved slightly to 88.6% in May, as it pumped 3.99 million b/d, an increase of 20,000 b/d from the previous month.

Despite a fall in exports, its crude inventories grew, while direct crude burn was also up on the month, due to summer demand, according to the survey. The May figure is almost 90,000 b/d above its OPEC+ production quota of 3.91 million b/d.

Gulf states the UAE and Kuwait also added more barrels, in line with their May allocations, producing 2.64 million b/d and 2.36 million b/d, respectively, the survey found.

Iranian output steady

Much of the alliance's – and the market's – focus in recent weeks has been on Iran, which is in deep negotiations with US and European diplomats to revive the nuclear deal and cast off sanctions that have crimped its oil production.

Iranian crude production has been on the rise in recent months in anticipation of a deal, but was unchanged from April at 2.43 million b/d in May, according to the survey, as talks appear to have bogged down.

OPEC+ ministers, who have said they will seek to accommodate Iran's return to the market in the event of a nuclear accord, have left production quotas for August and beyond unsettled, with plans to convene July 1 to discuss the matter. Iran is exempt from quotas under the OPEC+ agreement.

Libya, another exempt member, produced 1.15 million b/d in May, a rise of 30,000 b/d despite a slight fall in exports, the survey found.

Many of the country's key fields are poised to pump more this summer as demand from Europe -- its major customer -- accelerates, boosted by higher mobility and rising vaccinations.

Venezuela, the third exempt country, rebounded slightly to 540,000 b/d as survey panelists noted that crude output in the Orinoco Belt rose steadily.

Exports to China, which have seen a sharp rise recently, could however fall in the coming months, due to a new Chinese consumption tax on imports of bitumen blend.

The Platts figures, which measure well-head production, are compiled by surveying oil industry officials, traders and analysts, as well as reviewing proprietary shipping, satellite and inventory data.

Tuesday, June 8, 2021

Gold is good but Bitcoin’s better for $7.5 billion hedge fund

Gold Is Good But Bitcoin’s Better for $7.5 Billion Hedge Fund  

The gold outlook is rosy. (Stock image) 

Gold will surge to fresh highs in the next year, but investors seeking currency alternatives as global debt balloons should look to Bitcoin, according to a $7.5 billion hedge fund.

Both are likely to rally even as the Federal Reserve moves to taper asset purchases, said Troy Gayeski, co-chief investment officer and senior portfolio manager at SkyBridge Capital. The two are frequently compared by investors, with former Treasury Secretary Lawrence Summers saying cryptocurrencies could stay a feature of global markets as something akin to digital gold.

“We’re going to stick to Bitcoin and crypto because we just think there’s more upside,” Gayeski said in a telephone interview last week. While there’s more volatility, “you’re going to capture a little bit more juice than you will in gold from that same phenomenon,” he added.

“We’re going to stick to Bitcoin and crypto because we just think there’s more upside”

Investors are tracking commentary by the U.S. central bank as inflation ticks higher and policy makers move closer to paring the huge asset purchases that rescued the economy from the turmoil caused by the pandemic. The monetary support has driven the Fed’s balance sheet to a record, while muscular fiscal spending has boosted government debt. Both may pose an eventual risk to the dollar’s value, potentially burnishing the appeal of alternatives.

“All fiat-currency alternatives — which have all gone through fairly recent substantial corrections — are in a much better place now to handle that eventual taper and gradual slowing of money-supply growth, than they were as they were making higher-highs after higher-highs,” Gayeski said.

Gold Is Good But Bitcoin’s Better for $7.5 Billion Hedge Fund

Both Bitcoin and gold have seen substantial swings this year, which unfolded amid a debate about whether the cryptocurrency was drawing demand away from bullion. The digital token soared to a record near $65,000 in April, before plunging. It was last around $36,000. Gold, meanwhile, came close to sinking into a bear market in March, but reversed course to erase year-to-date losses.

Leading Wall Street banks are divided on the relative merits of the pair — Citigroup Inc. has said gold is “losing luster” to cryptocurrencies, while Goldman Sachs Group Inc. made the case that the two assets can coexist. Tesla Inc. boss Elon Musk, whose tweets have roiled Bitcoin prices this year, said in May he supports cryptocurrencies over fiat, or paper, currencies.

Record metal prices

Bullion, which hit a record above $2,075 an ounce last year, has now established a floor, according to Gayeski. A lot of the taper talk concerns have been pulled out of the market, and even when it’s announced, the Fed is not going to start to reducing the pace of its purchases until 2022, he said.

“Going forward, the probability of gold continuing an uptrend is fairly high, making new highs over the next year,” he said.

Even as signs of recovery accumulate, the Fed is still buying $120 billion of Treasury and mortgage-backed securities a month, and its balance sheet has surged toward $8 trillion, about a third of gross domestic product. Talk on tapering that support — which carries the potential to boost Treasury yields and the dollar, tarnishing gold’s appeal — is moving closer.

Bullion, which has hit a record above $2,075 an ounce last year, has now established a floor

SkyBridge, a fund-of-funds manager, has a small exposure to a gold miner that’s leveraged to a continued gold price rally. Its primary exposures are to U.S. cash-flow-generative strategies, backed by tangible assets, distressed corporate credit and convertible-bond arbitrage among others. The company’s Bitcoin fund is up 51.2% since its inception last December through to June 1.

SkyBridge founder Anthony Scaramucci has teamed up with First Trust Advisors on an exchange-traded fund that plans to buy and sell Bitcoin, and Gayeski expects the Securities and Exchange Commission to approve the product by the fourth quarter of 2021 or the first quarter of next year.

“The only reason we exist professionally is to find interesting ways to generate attractive non-correlated returns that also have an attractive risk-reward profile,” said Gayeski. “The mix of strategies in our broader portfolio is amplified by having a small-but-meaningful position in alternatives to fiat currencies like Bitcoin.”

(By Ranjeetha Pakiam)

Monday, June 7, 2021

U.S. records show Iran oil cargo landed one month after ship seizure



Oil/Chemical TankerOil/Chemical TankerIMO: 8008008 

A cargo of 1.033 million barrels of Iranian crude oil landed on U.S. shores in March, data from the U.S. Energy Information Administration (EIA) showed, the second shipment of Iranian oil to be imported into the United States since 1991.

The cargo was registered in EIA data released late last week for the month following the seizure by U.S. authorities of the Liberian-flagged tanker Achilleas, which was transporting Iranian crude.

The EIA gave no other details on the Iranian cargo, and the agency could not be reached for comment outside of U.S. office hours. Monday is a holiday in the United States.

The United States last recorded Iranian crude and petroleum imports of 3,000 barrels per day for October 2020, EIA data showed, also oil Washington had seized under its sanctions programme.

Refinitiv Eikon shipping data showed that the Achilleas discharged its cargo at the U.S. Gulf port of Galveston in March.

The seizure was in line with tough economic sanctions imposed by Washington on Tehran over its nuclear programme and the U.S. designation of a number of Iranian groups as terrorist organisations, continuing decades of rancour between the two nations. Iran rejects U.S. accusations of wrongdoing.

Iran has been in talks with world powers since April, working on steps that Tehran and Washington must take on sanctions and nuclear activities to return to full compliance with the 2015 nuclear pact.

Friday, June 4, 2021

Mining stocks in broad sell-off as copper, gold prices pull back 

Mining stocks retreated across the board on Thursday after the gold price fell sharply and copper dropped below $10,000 for the first time in almost a month.

US gold futures fell by more than $40 an ounce, or 2% from Wednesday’s settlement, hitting a low of $1,866.70 on the Comex market in New York while copper was trading down more than 3% in early afternoon trade, gapping to $4.429 a pound ($9,765 per tonne). Selling was heavy for both metals with contracts equivalent to 26 million troy ounces and over 3 billion pounds changing hands.

Iron ore prices held up well, consolidating above the $200 a tonne mark with the price of Fastmarkets MB, benchmark 62% Fe fines imported into Northern China assessed at $210.99 on Thursday, down from a record high of $237 a tonne reached mid-May.

Losses were heaviest among gold stocks, wiping out most of the sector’s strong gains in May with AngloGold Ashanti, Yamana, Gold Fields all dropping more close to 5% in New York. Top producers Newmont and Barrick were down 2.2% and 3.8% respectively after regaining some lost ground in afternoon trade. 

[Click here for an interactive chart of gold prices]

Copper stocks also came in for a beating with Freeport down 3.5%, Southern Copper giving up 3.4% and First Quantum sliding 4.3%.

Click here for an interactive chart of copper prices

Among the major diversified, Anglo American was hardest hit, retreating more than 3%, but iron ore’s big three: Rio Tinto, Vale and BHP managed to limit losses to less than 2% by mid-afternoon. Glencore lost 2.7% of its value on Thursday but year to date it is the best performer of the diversified majors with a 45% advance.

Units of iron ore pure play Fortescue trading in the US escaped the carnage on Thursday, but year to date the counter is one of only a handful of stocks showing a decline.

Thursday, June 3, 2021

120 year chart shows copper price supercycle only starting 

While hedge funds have gone soft on copper, the metal continues to trade within striking distance of all-time highs, but whether this is as good as it gets or just the beginning of a supercycle for the bellwether metal is far from settled.

The uberbull camp – led by Goldman Sachs – has seen its ranks grow and the predictions of inveterate contrarians like Goehring & Rozencwajg Associates of $30,000 copper no longer seem outlandish

Copper and mining’s central role in the green energy transition has been well documented and as BMO’s Colin Hamilton put it with exquisite understatement in a recent report:

“Copper has rarely been a market short in confidence about future fundamentals.” 

With the demand picture going from rosy to crimson, the bulls have seized upon long-standing issues around copper supply to buttress their arguments. 

Falling ore grades (G&R has a convincing argument that porphyries, responsible for 80% of global supply, are nearing a reserves cliff), decades of underinvestment in exploration and development, and the vexing role of scrap have underpinned price expectations for a long time.

Voodoo Chile, Perumania, copperbelt tightening

To these factors, add the spectre of an unfavourable investment environment – to put it mildly – in Chile under a new constitution and left-leaning government. Goldman says some 1 million tonnes of future supply from the country could be in danger

In Peru, the lurch leftward could make Chile’s proposed 75% royalty rates at today’s copper price look market friendly. If the frontrunner in presidential elections promises not to nationalize mines but would rather negotiate, you know how far the goalposts have shifted. 

The Democratic Republic of Congo (DRC) has gone from 96,000 tonnes in 2007 to 1.3 million tonnes last year, and thanks to Ivanhoe and Zijin’s Kamoa-Kakula and greenfields like Deziwa, will soon overtake China as the no. 3 producer (that is if you don’t consider the DRC a de-facto mining province of China).  

Inspired by Indonesia’s success with raw nickel bans, the central African nation reinstated its concentrate export waiver system, creating another choke point in an already tight global supply chain. 

Zambia, closing in on 1mtpa, cannot be far behind.

Crude but effective    

Imagine if these resource nationalism developments in copper were happening in global oil markets; where would crude be trading now? 

It’s worth repeating that Chile is not the Saudi Arabia of copper, it’s the Saudi-Iran-Iraq-Emirates of copper.  And Peru the Russia. And Congo, Nigeria and Angola combined. 

And it’s not as if oil workers in Saudi Arabia are wont to strike or local communities regularly blockade oilfields in Russia or that offshore rigs can be swarmed by artisanal  diggers.  

(And just to draw that analogy out a bit further, the irony of course is that copper is the metal that’ll rid us of fossil fuels.)

All of which makes a purported White House policy of relying on other countries to supply metals to the US because “it’s not that hard to dig a hole. What’s hard is getting that stuff out and getting it to processing facilities,” seem particularly short-sighted.

But that’s a story for another day, perhaps for 2022 or 2024.

Froth flotation  

Roskill attempted to answer the question ‘is copper entering a new supercycle?’ with a virtual copper summit last week.

Neal Brewster, chief economist at the fast-growing metals and chemicals research firm headquartered in London, presented a graph that puts copper’s current rally in perspective. A 120-year long perspective.  

The chart not only shows some correlation between copper and oil prices and with it broader inflation, but also with nationalization and privatization trends for natural resource assets through the decades.

Bears’ most convincing argument that the copper market is already too frothy, is a slowdown in China as Beijing withdraws post-pandemic stimulus and steers its economy away from breakneck fixed investment-led growth in copper intensive sectors like the electrical grid, housing and transport. 

Even in a similar scenario to the one that terminated the most recent supercycle where weakening Chinese demand conspired with an investment surge in new supply, the graph suggests the rally may have legs for a few years yet.  

And on top of that in real terms copper has traded higher than today during at least five periods.  

Wednesday, June 2, 2021

Iron ore price back above $200 on hopes of output curb easing in China

 Iron ore price back above $200 on hopes of output curb easing in China

Iron ore stockpile (Credit: Rio Tinto) 

Iron ore price jumped on Tuesday, boosted by reports that steel hub Tangshan plans to ease requirements for production cuts at its mills.

The Tangshan government held a symposium on Monday, mulling to lower output curtailment ratio for some mills that had finished ultra-low emission upgrades, according to state-backed Securities Times, citing media reports.

Last month, officials in Tangshan warned its steel mills to maintain market order and safeguard companies’ normal operations.

The local government there said it would look into illegal behaviour including market manipulation and hoarding, and would punish and suspend businesses found guilty.

But an industry source told Reuters the plan is still under discussion and has not been officially approved yet.

Capital Economics’ latest report predicted iron ore prices could drop back to around $140 per tonne by end-2021, and $120 per tonne by end-2022.

However, Tuesday morning Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were up 5%, changing hands for $208.67 a tonne, according to Fastmarkets MB.

The most-traded iron ore futures on the Dalian Commodity Exchange, for September delivery, surged 7.3% to 1,170 yuan ($183.53) a tonne.

Citi Research analysts said in a note the move by Tangshan could put some pressure on steel prices in the near run as the market heads into the weak season.

“However, we still expect more production measures in other provinces in 2H in order to reduce carbon emissions.”

China’s environment ministry said it would tighten approvals for energy-intensive and polluting projects such as steel, aluminium and coking coal.

(With files from Reuters)

Tuesday, June 1, 2021

Iran to Start Bypassing Strait of Hormuz in June with New Pipeline

File:Goreh-Jask Pipeline.svg

 Goreh-Jask Pipeline

NIOC says that the pipeline and terminal are part of a national strategic plan and will guarantee the continuation of Iran’s crude oil exports

The National Iranian Oil Company (NIOC) will soon begin transferring oil through the Goreh-Jask pipeline, which runs from the Goreh oil terminal in the Bushehr Province to Jask oil terminal along the Gulf of Oman.

The 1,1000-km Goreh-Jask pipeline cost about $1.8 billion to build and will be able to transfer 1 million barrels per day (bpd) of crude oil from the Goureh oil terminal in the northwest of Iran to the Jask region on the Sea of Oman, without tankers having to pass through the Strait of Hormuz, a busy passageway into the Persian Gulf which slows deliveries by several days.

“After the oil reaches Jask, which takes less than a month, in the near future, the official opening ceremony and commissioning of this national project will be held in the presence of the President,” says NIOC CEO Masoud Karbasian.

NIOC says that the pipeline and terminal are part of a national strategic plan and will guarantee the continuation of Iran’s crude oil exports and the decentralisation and diversification of export terminals, as well as creating jobs on the Makran coast.

Dubbed as the largest ongoing project in Iran’s oil industry, the Goreh-Jask pipeline is the country’s second major oil terminal, constructed by Pars Oil and Gas Company on 60 hectares of land and with nearly €260 million of investment. Masoud Karbasian said: “Production of transmission valves, electric pumps, laying a thousand kilometres of pipeline along with the construction of storage tanks, terminals and the single point mooring (SPM) in Jask port using domestic capacities shows the national determination for completing this great and strategic project.”

Iran has been planning since at least 2012 to set up the Jask terminal, just outside of and bypassing the Strait of Hormuz, and NIOC recently said it plans to start shipping crude from the terminal next month.