What are metals producers saying about the short-term outlook? A lazy March quarter review
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For miners — who are grappling with a constantly shifting, multifaceted supply and demand picture — these are unprecedented times. Here’s some insight (read: educated guesses) from a few ASX-listed producers on the outlook for iron ore, gold, copper, lithium and nickel in 2020.
BHP (ASX:BHP), April 20
“The Platts 62 per cent Fe iron ore fines price index has been resilient to the COVID-19 shock so far.
“This outcome reflects solid Chinese pig iron production in the year-to-date (1.7 per cent increase from last year), and a continuation of the relatively soft seaborne supply picture that was in evidence prior to the shock.
“Based on our bottom-up analysis, informed by engagement with our customers, we expect that steel production ex-China could contract by a double-digit percentage in the 2020 calendar year.
“Weakness ex-China is less consequential for price formation in iron ore than in other commodities, with China’s 1.1-billion-tonne import requirement set against Japan’s 120Mt, Europe’s 100Mt and South Korea’s 75Mt, for example.
“If China can avoid a second wave of COVID-19, steel production may rise slightly in the 2020 calendar year.”
Evolution Mining (ASX:EVN), April 23
“Should current spot metal prices be maintained during the June quarter, net cash flow is expected to be $90-95m higher, but AISC would be negatively impacted by ~$20-25/oz due to higher royalties and lower by-product credits.”
Gold Road Resources (ASX:GOR), April 21
“The current operating environment is not ‘business as usual’.
“Supply chain risks have been reviewed with no current material issues identified. Bulk commodities and reagents are sourced through Australian suppliers, and inventory levels of some consumables have been increased.
“Monitoring and expediting of critical supplies is being performed on a daily basis.”
Westgold Resources (ASX:WGX), April 29
“Whilst impacts from COVID-19 have so far been limited and operational workforce and output continues to be at an estimated 92-95 per cent of capacity, there still remains potential for unforeseen impacts and/or imposts to operations in the next quarter.
“As such, Westgold believes it is not prudent to provide any forecast or guidance predictions for the period.”
BHP, April 20
“Copper prices fell sharply to levels close to cost support in March 2020 amidst depressed macro investor sentiment. They have since stabilised a little above the March lows.
“Our judgement, informed by our regular customer engagements, is that the decline in ex-China demand will be less severe than for steel.
“Conversely, in China, copper demand could be marginally weaker than steel in the 2020 calendar year.”
OZ Minerals (ASX:OZL), April 17
“Notwithstanding the recent pressure on the copper price as a result of the reduced global economic activity due to COVID-19, we remain positive that the copper market, and by implication the copper price, will remain supported through these extraordinary events we are experiencing.
“Copper will be much needed as the world and its economies re-bound from this crisis and as society demands a lower carbon footprint.”
“And, as one of the lowest cost producers in the world, we remain in a relatively much stronger position, financially and strategically, than many other larger copper producers.”
Galaxy Resources (ASX:GXY), April 23
“Market conditions in the lithium sector continued to decline due to volatile macroeconomic factors that were heightened from disruptions arising from the COVID-19 pandemic.
“Despite continued underperformance in Q1 2020, the outlook still remains positive in the midterm with increasing public awareness of climate change risks and significant investment downstream in electric vehicle production capacity and battery manufacturing.”
Orocobre (ASX:ORE), April 22
“The existing challenges in the lithium market were compounded by the spread of COVID-19 during the March quarter impacting operations and logistics throughout the supply chain.
“Orocobre shares the view that the ex-China battery supply chain will be impacted by up to six months and economic factors are expected to delay the recovery of battery and non-battery demand to 2021.”
Western Areas (ASX:WSA), April 24
“Wider base metal market prices, including nickel, fell during the quarter largely due to COVID-19 economic and financial impacts across the global markets.
“The accompanying fall in the Australian dollar over that same period has however partially cushioned the impact of the nickel price movements.
“Prices continue to be volatile; however, some early signs of stability are starting to become evident.
“The closure of various international nickel operations due to COVID-19 related government suspensions or lower prices is expected to assist in rebalancing the wider nickel market.”