Monsters of Rock: Red letter day for miners as all commodities share the joy

The threat of supply disruptions across base metals and iron ore as well as continued strength in gold prices have proven a perfect storm for the materials sector.

On a red letter day gold prodded US$1830/oz, iron ore packed on the pounds to hit US$133/t, copper struck US$10,000/t for the third time in the past 12 months and nickel rose to a bit under US$22,000/t, a level not seen since 2011.

The rising tide is all being consumed gleefully by fundies stroking their beards with disquieting optimism that we are walking into a decades long supercycle powered by green energy infrastructure.

Take Blackrock’s Evy Hambro talking to Bloomberg TV this week for example: “We’ve got decades worth of high rates of investment into infrastructure as the world seeks to decarbonise and I think that’s a widely held consensual view,” he said.

“What we’re likely to see is strong demand that will keep prices at very very good levels for the producers for many years into the future, and that could be decades.

“Even if we did see a return to the days where companies were a little bit reckless with their balance sheet and started to wildly invest into new capacity, it’s taking so long to bring new assets into production these days … as a result of that lag, that price elasticity of supply is going to play into the hands of people who’ve got existing production.”

The pressures forcing prices up now are decidedly more short term in nature.

“Industrial metals traded higher, with copper hitting USD10,000/t. Tech Resources flagged risk of a strike at its copper mine Highland Valley in British Columbia aided the move,” ANZ FX Strategist and Macro-Economist John Bromhead said.

“Inventories are depleting across metals, and tighter supply prospects are leaving little hope for any replenishment. Aluminium and zinc production is being challenged by power crises in Europe and China, which could be enough to keep market balance tight.

“Smelters have curbed production due to sky-rocketing power prices in Europe, while Chinese producers are facing higher prices and mounting pressure to reduce emission.

“Rising prospects of short-term supply squeeze are pushing cash-3mth spread higher many metals. Nickel extended its gain to USD22,000/t following news on Indonesia considering to tax nickel pig iron and ferronickel. Tin prices have moved further higher to USD41,000/t.”

Materials rose 2.56% as Rio Tinto (ASX:RIO) and BHP (ASX:BHP) gained 4.13% and 3.83% respectively to seriously bulk up the sector.

Lithium miner Pilbara Minerals (ASX:PLS) hit a new all time high of $3.73, up 4.19%, while South32 (ASX:S32), MinRes (ASX:MIN) and Fortescue (ASX:FMG) were all top 10 large caps.

Exploration and mining supplier Imdex (ASX:IMD) was up 6.81%, while Nickel Mines (ASX:NIC), Champion Iron (ASX:CIA), De Grey (ASX:DEG) and Regis Resources (ASX:RRL) were all big gainers in the mid-tier.

Monsters share price today:

Indonesia coal ban eases further

The supply of seaborne coal is set to ease as Indonesian authorities brought an end to their hard export ban today.

The country is the largest exporter of thermal coal in the world and has been China’s primary supplier of exports since an unofficial ban on Australian coal was instituted back in October 2020.

37 loaded vessels were allowed to leave port after local power company PLN secured 15 days of supply, Reuters reported.

Coal miners were desperate for the ban to be lifted amid high prices for seaborne coal, exacerbated by the supply cuts out of Indonesia.

While thermal and coking coal are near record levels in the seaborne trade, coal can only be sold into the domestic market in Indonesia for a maximum of US$70/t, loss making for many companies who called Force Majeure in the wake of the January 1 ban.

The deal has removed for now the prospect China will turn back to Australia for coal imports, though that was unlikely anyway given China has ample supplies due to a ramp up in domestic production late last year and the impending lower demand period of the lunar new year holidays, when many factories in China shut down.

Whitehaven Coal (ASX:WHC) was up 2.08% today, while New Hope (ASX:NHC), Yancoal (ASX:YAL), Bowen Coal (ASX:BCB) and Cokal (ASX:CKA), which owns the BBM development in Indonesia, were all up.