• Westpac’s Commodity Index dropped 5% last month
  • Thermal coal was the biggest loser, with base metals also dropping
  • Miners enjoy solid end to a tough week


Feel like it’s been a tough ride of late in the commodities complex?

You’d be right, according to analysis from Aussie big bank Westpac, which says its Commodities Index tumbled 5% in February.

The major drop was punctuated by a 23% fall in thermal coal prices, despite a 2% firming in iron ore and mild 3% drop in coking coal prices as steel demand recovered in China.

Base metals were turgid as well.

“Base metals prices have been under pressure, with some taking the view that the National People’s Congress (NPC) was not as conducive for demand as hoped for,” Westpac’s Justin Smirk said.

“We do not subscribe to this view but nevertheless base metal prices are down a bit more than 4% with nickel leading the charge (-12%) and aluminium (-5%) and zinc (-3%) also taking a hit. Our rural commodities index fell 7% in the month.”

On the plus side, Smirk says China’s pig iron production lifted 6% in the final week of February and is up 9% on the year after the end of the Lunar New Year holiday, while crude steel production is up 2% on the year.

That is compared however to a relatively slow start to 2022 when China downed stumps across a range of polluting industries to prevent the Winter Olympics and Paralympics in Beijing from being covered in smog.

Smirk says steelmakers remain under pressure despite higher rebar prices because of high input costs.

“Iron ore demand from the rest of the world remains weak at -9%yr and is unlikely to lift in a significant way in 2023,” he said.

“We continue to forecast a correction in iron ore prices though the year, to US$100/t by year-end, as we expect demand to be broadly flat through the year while the supply of ore from Australia and India is set to lift while high prices will continue to draw out more scrap steel.”


It was a week

After a tough week of trade miners have ended on a postive note, up 0.35% on a day of recuperation across the ASX after a 2.58% weekly and 7.31% monthly fall.

The bank led bloodletting of the past two days gave way to a still air on Friday as miners returned to the winners’ list and gold stocks gave up many of their safe haven gains.

It came after Credit Suisse’s central bank bailout salvaged the investment bank’s flagging share price overnight and improved property sales data in China led to a brighter outlook on economic conditions there.

Battery metals players were ascendant, with South32 (ASX:S32), Pilbara Minerals (ASX:PLS), Lynas Rare Earths (ASX:LYC) and Mineral Resources (ASX:MIN) all up.

Among the mid-tier players lithium developer Liontown Resources (ASX:LTR) was a standout, rising 8.2%.

The company plans to open its $895 million Kathleen Valley mine in WA by the middle of 2024.



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