• Commbank says gold and base metals prices could falter in late 2023 before staging a comeback in 2024
  • Indonesia puts cat among pigeons with battery nickel supply
  • Fortescue refers 40Mtpa Pilbara iron ore mine to WA EPA


The commodity market has been a real brain-melter this year, which kind of makes you long for the stonking days of early 2021 when stimulus was running rampant and everything was on an obvious upwards trajectory.

Nowadays things zig when they should zag and zag when they should zig. China’s up then it’s down. Interest rates are up, then they’re up, but investors are pricing it in as a down.

Many have given up their early rallies this year, defying fundamentals like low inventory stocks which make the physical market seem very tight indeed.

Need some guidance?

Commbank has come out with some key commodity forecasts today to provide a little clarity on where a grab-bag of metals are headed and why.


First up, gold

Gold prices have been whipsawing around this year, briefly breaking the US$2000/oz barrier, kind of its equivalent of the four-minute mile.

They’re back below US$1900 ($2950/oz Aussie) and Commbank mining expert Vivek Dhar sees it tracking lower to US$1875/oz in the fourth quarter.

But there are blue skies, with a shift back to US$1975/oz expected by the fourth quarter of 2024 on a weaker US dollar and treasury yields.

“Our forecast for the US dollar to weaken by 8% through 2024 should help gold futures rally modestly next year. Our view for the US dollar to weaken next year is tied to a recovery in the world economy, particularly advanced economies, as interest rates are cut,” Dhar said.

“A recovering global economy typically weighs on the US dollar. The other notable driver of our weaker US dollar outlook next year is the reduction in the Fed Funds rate relative to interest rates of other major economies.

“We see the Fed Funds rate falling 275bp through 2024. That compares with a 200bp cut by the ECB and the Bank of England, a 175bp cut by the Bank of Canada and a 125bp cut by the RBA and RBNZ.”

However, Dhar says, there is a downside risk if the US dollar remains around current levels.


What about nickel?

Spot prices are around US$9/lb and dropped below US$20,000/t for the first this year in recent weeks.

Commbank sees prices dropping further to US$8.50/lb by year’s end and US$8/lb in 2024 before recovering to US$9.25/lb by the end of 2025.

“Over the near term, we think International Nickel Supply Group’s (INSG) oversupply outlook for nickel markets in 2023 is likely to be realised, particularly in light of our view that China’s commodity demand will likely continue to ease through H2 2023,” Dhar said.

“We think surplus conditions will likely persist into 2024, especially with the pipeline of High-Pressure Acid Leaching (HPAL)projects in Indonesia. We think nickel prices will therefore continue to track lower over the next 18 months.”

Indonesia’s rapid expansion of battery grade nickel supplies mean the market is under less pressure to boost than other battery metals, Dhar said, with Commbank planning to review its long term price forecast of US$17,000/t.

But price risks remain ’tilted to the upside’.

Nickel has become a two-sided market, with the oversupply in nickel more likely to be seen in stainless steel markets than ‘class 1’ nickel destined for EV batteries, meaning LME nickel prices could remain sticky, even as overall nickel supply increases.

“These upside risks are amplified by the potential risk of additional Chinese stimulus for China’s infrastructure and property sectors, particularly if China’s economy threatens to grow below 5% in 2023,” Dhar added.

“And even if Chinese policymakers are willing to stomach a weak economic recovery in 2023, there will likely be a limit to China’s tolerance for low economic growth. That could see policymakers prioritise economic growth and commodity demand once again in 2024.

“Indonesia’s roll out of HPAL is worth watching closely, too.

“Most HPAL projects to date have faced operational issues that has meant that supply has failed to reach nameplate capacity. Indonesian HPAL may prove an outlier, but history suggests downside risks to Indonesia’s supply growth projections. This is another key upside risk for nickel prices in 2024.”


Copper to fade

Copper is among the commodities most expected to prosper from the energy transition. The world could need as much copper in the next three decades for things like EVs, wires and renewables as it’s mined until now.

For now, though, the market is walking into a surplus thanks to China’s demand impulse.

Commbank expects the red metal to slide through the second half from US$3.73/lb to US$3.55/lb before stabilising and heading back to US$3.75/lb by the end of 2024.

“The International Copper Study Group (ICSG) forecasts deficit conditions in copper markets to ease from 2022 to 2023, before shifting into a surplus in 2024,” Dhar said.

“The ICSG has factored in a rebound in global copper demand in 2023 and an even stronger recovery in 2024. Our outlook for a recession in most advanced economies, alongside growing evidence of fading demand in China, heightens the risk of a global copper surplus in 2023.

“We forecast copper prices will fall through H2 2023. We see copper prices stabilising in 2024 as surplus expectations are countered by a weakening US dollar.”

Aluminium (US95c/lb) is similarly expected to be in a surplus at the end of 2023, before rebounding with the Chinese economy to US115c/lb by the end of 2025, though Dhar says supply growth will likely continue to outpace demand.


FMG takes baby steps at Nyidinghu

Fortescue (ASX:FMG) has hinted at what could be the next step in the development of its Pilbara iron ore operations, referring its 40Mtpa Nyidinghu iron ore deposit in its Chichester hub to WA’s Environmental Protection Authority.

It comes a decade after Fortescue, under then CEO Nev Power, ditched the approval process and placed the development near its Christmas Creek and Cloudbreak mines on hold.

It was deemed to be a controlled action at the time, since the project 80km north-north-west of Newman ran through what was believed to be night parrot habitat. The rarely sighted bird has been identified on a handful of occasions since across WA’s north.

Fortescue recently delivered record output of 192Mt at its Pilbara operations, with the introduction of the new Iron Bridge magnetite mine expected to increase its top end of guidance to 199Mt in FY24.

But it has approvals now to export as much as 210Mt of hematite iron ore from its berths in Port Hedland, meaning it has leeway to scale up if additional tonnes are more than mere replacements.

The company says the project, which comes along with a separate but connected referral for rail infrastructure to connect the mine to FMG’s existing railway line 14km north-west of Cloudbreak, will be mined for 26 years.

We chucked a line out to FMG for some additional comment on the cost and other matters, nothing doing, it’s all too early to say they said.

It is worth noting the supporting doc for the proposal suggests first ore could be on train by 2028, with a massive 200MW solar farm also part of the plans.

There has been a massive shift to develop new sources of iron ore within the majors’ portfolios in recent years.

BHP (ASX:BHP), which reports its full year results tomorrow, wants to ramp up from a record 285Mt in FY23 to as much as 294Mt next year and, eventually, 330Mtpa.

It recently opened the 80Mtpa South Flank mine, still ramping up to full capacity, at a cost of over US$3b.

Rio Tinto (ASX:RIO) has fully ramped up its 43Mtpa Gudai-Darri and will produce almost 330Mt this year. It wants to eventually deliver 345-360Mt, with the future development of the Rhodes Ridge JV with Wright Prospecting likely the jewel in the crown of that expansion.

Its Western Range JV with Baowu is also under development, while Mineral Resources (ASX:MIN) plans to open the 35Mtpa Onslow Iron project next year and Gina Rinehart’s Hancock Prospecting is also in expansion mode.

Despite woes in the Chinese economy and property sector, steel production has remained strong in recent weeks against expectations productions curbs will be coming this half.

Iron ore prices were a solid US$106.65/t in Singapore this afternoon.

The materials sector was up 0.09%, led by lithium stocks Allkem (ASX:AKE), Liontown (ASX:LTR) and Pilbara Minerals (ASX:PLS).


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