Gold prices last week were helped by growing tensions between the U.S. and Turkey, after the government of Recep Tayyip Erdogan arrested a U.S. consulate employee in Istanbul. Both the countries suspended all nonimmigrant visa services for travel between them.
Meanwhile, U.S. President Donald Trump announced his administration will no longer back the Iranian nuclear agreement because it was not in the interests of the U.S. Even though he stopped short of pulling out of the deal, the move prompted criticism by European leaders, who said the move could lead to a military confrontation with Tehran.
On its own soil, the Republican Party was divided over Trump's latest attempt to undermine former President Barack Obama's healthcare law by no longer paying the cost-sharing reduction payments under "Obamacare." The U.S. dollar shifted lower as a result, fueled by concerns that the Trump administration could struggle to pass a new tax plan in Congress. Trump also started repealing the existing Clean Power Plan to cut greenhouse gas emissions, potentially leading to a revival of coal.
Price ring
The weakening greenback and expectations last week that China's Communist Party congress will pave the way for stronger metals imports lifted prices across the board.
Base metals in particular had a good run last week, with copper on track for a three-year high after rising 3.7% to US$6,859/tonne. Nickel jumped a staggering 10.4% to US$11,611/t, while aluminum was up 0.9% to US$2,140/t. Zinc and lead remained flat at US$3,294/t and US$2,542/t, respectively.
Precious metals also gained. Palladium shifted 7.4% higher to US$991/oz, while silver gained 3.5% to US$17.4/oz and gold increased 2.1% to US$1,304/oz.
Iron ore edged marginally higher to US$62.5/t.
Talking points
Macquarie upgraded its price forecast for a number of metals, in particular key battery metals used in electric vehicles, amid expectations that sales of the cars will surge a "conservative" 5% to 5.55 million units by 2022, from 1%, or 1.26 million units, in 2016.
In an Oct. 9 note, the bank increased its long-term estimates, with lithium up to US$9,000/t from US$7,000/t, cobalt increasing to US$26/lb from US$16.5/lb and nickel up to US$17,500/t from US$13,000/t.
The upgrade reflects a 34.6% hike for long-term nickel prices, a 57.6% lift for cobalt and a 28.6% lift for lithium carbonate.
In line with this, the bank raised its 2017-2022 price estimates for the three commodities. While it now guides nickel 1.8% higher at an average of US$10,131/t in 2017, it revised upward its 2018-2022 estimates by between 10.6% in 2018 and 25.0% in 2022.
For lithium carbonate, the deck was lifted by 13.2% this year to US$11,496/t and by 2.5% to 47.1% for 2018 through 2022, with the 2.5% increase forecast for 2019 and the 47.1% increase forecast for 2022. The outlook for cobalt was increased by 8.0% to US$27/lb this year and by a range of 19.4% to 95.2% for 2018 through 2022 with a 36.3% increase predicted for 2018.
"Electric vehicles promise — or threaten — major changes to commodity demand and prices," the team said. "The major implication ... is a price outlook upgrade for some of the key battery metals, including lithium, cobalt and nickel."
Macquarie also revised its price forecast for other mined commodities, including aluminum, copper, manganese ore and iron ore.
For iron ore, the analysts increased 2019 estimates by 10% to US$55/t, from US$50/t previously, while 2017 iron ore prices were cut 1.4% to US$70/t. "[We] maintain our fundamental view that a fall in the mid-50s is required in the next couple of years to clear a cumulative surplus of approximately 120 million tonnes," the team said.
Copper price estimates were lifted by between 1.3% and 9.3% for 2017 through 2022, with the 9.3% increase forecast for 2021. Average prices for the red metal are expected to exceed US$7,000/t in 2021, and Macquarie raised its price deck by 9.3% to US$7,188/t for 2021 and by 7.1% to US$7,500/t for 2022.
Financings
Larger financing deals last week included a US$45 million debt facility secured by New Century Resources Ltd. from Sprott Resource Lending. The money is earmarked to fund the restart of the company's Century zinc mine in Queensland, Australia.
IGO Price at posting:
$3.94 Sentiment: None Disclosure: Not Held
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