Wall Street was mixed in premarket trading early Thursday after chipmaker Nvidia reported blowout earnings, pushing Nasdaq futures higher.
Futures for the S&P 500 gained 0.6% before the bell, the Nasdaq jumped 1.3%, while Dow futures lagged, inching back 0.1%.
That comes a day after Wall Street rallied to its best day since June as pressures from the bond market relaxed.
Nvidia shares jumped more than 8% in off-hours trading after the company’s results covering the May-July period exceeded its own projections for astronomical sales growth. That growth has been propelled by the company’s specialized chips that help power different forms of artificial intelligence, such as Open AI’s popular ChatGPT and Google’s Bard chatbots.
Nvidia’s second-quarter sales doubled from the same time last year to $13.51 billion, culminating in a profit of $6.2 billion, or $2.48 per share. That’s than nine times more than the company made a year ago, and the momentum is still building. The Santa Clara, California, company predicted revenue of $16 billion for the third quarter, nearly tripling results from the year-ago period. Analysts had expected $12.6 billion in revenue for that period.
Nvidia shares have more than tripled in price this year and are going for more than $506 each Thursday morning.
Boeing fell nearly 2% after fuselage supplier Spirit AeroSystems said it discovered a quality issue on certain models of the 737 fuselage. Spirit said it would continue to deliver the units to Boeing, which said there is no immediate safety concern associated with the issue.
Outside of corporate news, investors are awaiting news from this week’s conference of central bankers in Jackson Hole, Wyoming, where Fed Chair Jerome Powell will give remarks on Friday.
The hope among traders has been that the Fed has already hiked rates for the final time this cycle and that it will begin cutting rates early next year. But such hopes have been diminishing with each stronger-than-expected report on the economy that’s come in recently.
At midday in Europe France’s CAC 40 added 0.4%, Germany’s DAX gained 0.3%, Britain’s FTSE 100 rose 0.7%.
Japan’s benchmark Nikkei 225 gained 0.9% to finish at 32,287.21. Australia’s S&P/ASX 200 added 0.5% to 7,182.10.
South Korea’s Kospi jumped 1.3% to 2,537.68. The Bank of Korea’s Monetary Policy Board left the base rate unchanged at 3.50%.
Hong Kong’s Hang Seng surged 2.1% to 18,212.17, while the Shanghai Composite rose 0.1% to 3,082.24.
In energy trading, benchmark U.S. crude gained 24 cents to $79.13 a barrel. Brent crude, the international standard, advanced 29 cents to $83.50 a barrel.
In currency trading, the U.S. dollar edged up to 145.56 yen from 144.79 yen. The euro slipped to $1.0850.
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Kageyama reported from Tokyo; Ott reported from Silver Spring, Maryland.
Follow @ktar923
MGL Comment - Fri 06:15, Aug 25 2023Back to Top
Nvidia’s second-quarter sales doubled from the same time last year to $13.51 billion, culminating in a profit of $6.2 billion, or $2.48 per share.
This is a retired AI machine. It's about 4-5 years old; I apologise for memory issues and age. It's an unpretentious little beast. It's the first machine we built here at CI.
(First investment takeaway: its obsolescent, and Nvidia has ~15 year lead in SOFTWARE. We've replaced it with cloud, i.e. it's now has a monthly cost and a SAAS model, i.e. it has duration)
The basic design hasn't changed; it's just gotten better, faster, and more powerful, and today our AI is cloud-based. Which means the actual machine is located in some data centre.
What you should note is the cost basis. It's a fancy PC overloaded with Nvidia chips. It has 1 Intel chip, and 4 Nvidia boards, loaded with Nvidia software. I don't recall the total cost, likely about $4-5k. I remember being shocked at the Nvidia cost component; it was 60-80% of the machine's price. I do recall writing, and saying to anyone who would listen, "Nvidia is the new Intel"
What does it do?
This is my email in-tray, but it is also the input into the AI. Apologies, being the Geek that I am I like to see the flow of data from beginning to end. The problem we all face now is information overload. We go to work, open our email, and it's overloaded with zero alpha crap. I reckon 90% of the emails I receive on commodities go straight in the bin.
Now I just give the AI the whole ball of wax, and let it sort it out. On one level an AI is simply a massive digital shredder. Get rid of the spam, the irrelevant, the nonsense, the inane, the promotional etc ad nauseum. All we want to read is the good stuff.
But out little AI hasn't finished yet. Having shredded the utter rubbish, it starts sorting the good stuff. We have found two models that work well. Firstly, a consensus model, which asks the simple question: "How many eyeballs have read this?" Personally, I find this powerful, to me the first step in evaluating a security or value is to understand the embedded consensus that makes the market that price for that security. Great example, the coppers. I look at Bloomberg and read the valuations and see that copper miners are the most expensive I have ever experienced in 37 years of doing this lark. I read the AI, and I can see that the consensus of all eyeballs is obsessed with the Netzero concept of electrification of everything. Which is copper.
The second model is best described as the anomaly model. The AI looks for articles with high scores on themes which it has been trained to identify as significant.
In Italy, they have 'truffle dogs' which are trained to find buried truffles in woodland. Our AI has a 'truffle dog' model. The analogy is exact, like a truffle dog, sometimes it has a mind of its own, and prefers random scraps of food to useful ideas. Nothing is perfect. Some of you may recall one day, maybe two years back when the daily was composed entirely of Brazilian Soccer stars and their nubile trophy wives. Funny, but not very useful!
For example, the 'Truffle' in copper is that Tesla has moved its architecture from 12v to 36v, and that reduces the copper intensity of an EV by 70%. Which does rather wreck the Netzero copper demand thesis don't you think?
The result is the daily. Now I shall share with you some personal stuff. Way back when I was a wee lad, I was quite good at math, and used to write the answers to math tests down on the exam paper without the workings, the logic, whatever. Imagine my shock when Teachers just gave me a passing grade but no A, simply because I could not be bothered to explain how I had worked out the answer. So, in the daily, you get the detail, ALL the stories, ALL the workings out, and quite a lot of nonsense too. The feature provides the argument, the thesis, the result, and we use the all the various scraps of information to support that argument.
What does the result look like?
OK, here's the data, and be aware this is off a retail brokers platform, so would fail CFA tests of exactitude. Apologies, I can't justify WM with my little pot of money.
And for measure, the top ten stocks:
There's only one commodity stock. To sum it up, there's a tonne of good value out there in commodity land, but no 'oomph', no positive change.
Readers will note the Nvidia position.
Right, you lot, here's a whiff of gunshot. I have never been so humiliated and shamed by so-called investment professionals this year on AI. "it's a bubble". No, it's not. A bubble is when you all believe me, and we all own the same stocks. The AI room is far from crowded. "It's ridiculously overvalued". No it's not. Just for context, when we started selling down energy equity last October, Nvidia was on 6x eps. Exxon was on 11x PEAK earnings. (I still own a slug of Exxon by the way; it's just best in class, and in Texas, too. Political risk you ignore to your peril.
So, in the last 48 hours I spent forensically examining Nvidia. You lot frightened me. Here's the result:
1> The company is 'sold out'; they have 15 years of lead on Intel, AMD, and anyone you care to name. The word is 'shortage'. We funky old farts kinda like that word.
2> The average Anal-ist does not understand this company. "It's a semiconductor company" No it's not, it's a software company. It designs the best massively parallel chips for handling the data you need to run an AI.
3> I think it's on 10x 2026 eps. (Math: 90% net margins, $100bn net income on -say- $30bn per quarter run rate.)
Logic: We've now heard from Arista and Nvidia that the only AI spend comes from the 'titans', Google, Amazon, Meta, etc. True. This is the ChatGPT distraction. We're an SME, and this is an AI machine:
Here's the chilling prediction. You do not have a choice here. It's either use it or lose it. All your companies, investment teams and colleagues will use AI to run your business within ten years. I know some of you would prefer to die than accept this change. Sorry for being brutalist, but you need to be terrified.
You need to be terrified by supermarkets using AI and RFID chips to buy only 10 packets of cornflakes rather than 11.
You need to be terrified by the digital world consuming the real world at a rate of knots that accelerate from here.
It would help if you were terrified by the deflationary bust destroying real assets' like offices and China.
This is why the subsequent biggest holding I have is 2-year dollar TIPs with a 2% actual real yield. That's the most significant buy I have made this year.
Aug 23 (Reuters) - U.S. crude oil inventories fell last week as refinery processing surged and crude output reached their highest since the coronavirus pandemic decimated fuel consumption, Energy Information Administration data showed on Wednesday.
Crude inventories (USOILC=ECI) fell by 6.1 million barrels in the week to Aug. 18 to 433.5 million barrels, compared with analysts' expectations in a Reuters poll for a 2.8 million-barrel drop.
Refinery crude runs (USOICR=ECI) rose 30,000 barrels per day (bpd) last week to 16.78 million barrels per day, their highest since January 2020, even as refinery utilization rates (USOIRU=ECI) ticked down 0.2 percentage point to 94.5% of total capacity.
Crude exports fell by 340,000 bpd last week but remained seasonally strong at 4.3 million bpd. Net U.S. crude imports (USOICI=ECI) edged up by 116,000 bpd, the EIA said.
"Ongoing strength in refining activity and crude exports have encouraged a solid draw to oil inventories, while peak summer refinery runs have resulted in builds for both gasoline and distillates," said Math Smith, lead oil analyst for Americas at Kpler.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 3.1 million barrels last week - the biggest weekly draw since October 2021 - as barrels are pulled to the Gulf Coast to meet peak summer refining needs and export demand amid OPEC+ production cuts.
Inventories are falling despite an increase in crude production, which rose 100,000 bpd to 12.8 million bpd, its highest since March 2020, when restrictions around the coronavirus pandemic caused a drop-off in fuel demand.
"The incentive to drill is just off the charts at this point," said John Kilduff, partner at Again Capital LLC in New York.
Gasoline stocks (USOILG=ECI) rose by 1.5 million barrels last week to 217.6 million barrels, the EIA said, compared with forecasts for a 900,000-barrel drop.
Distillate stockpiles (USOILD=ECI), which include diesel and heating oil, rose by 900,000 barrels to 116.7 million barrels, versus expectations for a 200,000-barrel rise.
Crude prices rose on the data but remained in the negative. U.S. West Texas Intermediate crude futures fell 54 cents to $79.10 a barrel by 10:58 a.m. EDT (1458 GMT) after reaching a low of $77.63 earlier in the session. Brent fell 68 cents to $83.35 a barrel after reaching a session low of $81.94 before the data was released.
MGL Comment - Fri 09:29, Aug 25 2023Back to Top
Refinery crude runs (USOICR=ECI) rose 30,000 barrels per day (bpd) last week to 16.78 million barrels per day, their highest since January 2020, even as refinery utilization rates (USOIRU=ECI) ticked down 0.2 percentage point to 94.5% of total capacity.
So if output is rising, but utilisation rates are falling then capacity must be increasing.
Most heard myth: "after years of underinvestment". Note to self - worth a feature on collapsing capex per unit of output!
Oil prices dropped on Wednesday, as traders were cautious ahead of potentially gloomy manufacturing data and an annual meeting at Jackson Hole, where heavy-hitter central bankers including from the United States will talk interest rates.
Brent crude was down 51 cents to $83.52 a barrel at 0738 GMT, while US West Texas Intermediate crude was at $79.15 a barrel, down 49 cents.
Markets await hints on the outlook for interest rates when Federal Reserve officials and policy makers from the European Central Bank, the Bank of England and the Bank of Japan head to Jackson Hole, Wyoming, for an annual meeting later this week.
"Investors are reluctant to take big positions ahead of the Jackson Hole symposium as they want to find clues for the next step by the US Federal Reserve," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Earlier on Wednesday, Japan posted shrinking factory activity for a third straight month in August, and the euro zone, France, Germany, Britain and the United States are set to release their own purchasing managers' index (PMI) data later in the day.
"What oil watchers should be concerned with is that all of the predictions of their manufacturing PMIs are under 50, therefore they are all in contraction territory and readings below expectations will sound warnings again of lower oil demand," said John Evans of oil broker PVM.
Crucial to shoring up oil demand over the rest of the year is China, the world's second-largest economy. But weak growth has frustrated markets as pledged stimulus has fallen short of expectations, including a smaller-than-expected cut in a key lending benchmark on Monday.
On the supply side, members of the Organization of the Petroleum Exporting Countries and its allies have opted to curb supplies to buoy prices, with Saudi Arabia cutting output by another 1 million barrels per day (bpd) from July through September. Russia plans to reduce exports in August by 500,000 bpd.
MGL Comment - Fri 08:44, Aug 25 2023Back to Top
"What oil watchers should be concerned with is that all of the predictions of their manufacturing PMIs are under 50, therefore they are all in contraction territory and readings below expectations will sound warnings again of lower oil demand,"
This is a great AI consensus story. No alpha, really, but we know, because it is here that it is widely read. No anomaly to trigger the 'truffle dog' model. Consensus is back to fretting on demand.
Saudi Arabia cutting output by another 1 million barrels per day (bpd) from July through September. Russia plans to reduce exports in August by 500,000 bpd.
Saudi curtails supply. More consensus. Interesting tweak, the author is unsure whether Russia has cut supply yet, so he writes 'plans'.
What do we see? Refiners reported an 18% contraction in Russian barrels, from India and China, but Iran ramped up exports to to the 2mbpd mark.
Inference: Russia is switching barrels away from expensive logistics (Vladivostok, crowded, large distance) to cheap logistics (Iran swap, Russia supplies Iran internal demand, Iran ramps up exports)
The truffle dog has brought one home.
MEXICO CITY, Aug 23 (Reuters) - Mexico's Pemex is the biggest liquidity and debt concern among its Latin American peers, Fitch Ratings said on Wednesday, despite billions of dollars in government support for the state energy company.
Having issued some of the world's most widely held emerging market bonds, Pemex (PEMX.UL) is still popular among investors betting on unstinting support from Mexico's energy nationalist president, Andres Manuel Lopez Obrador.
The world's most indebted state energy company, Pemex has $25 billion in short-term debt and $4 billion in bonds still to mature in 2023, rating agency Fitch said in a report.
"Pemex poses the greatest maturity and liquidity concern," Fitch said, noting that as most corporate borrowers refinance shorter-term debt maturing between 2024 and 2026, it risks creating significant competition for the Mexican company.
Among its peers in the region - including Argentina's YPF, Brazil's Petrobras and Colombia's Ecopetrol - Pemex also has the highest total debt-to-proven reserves ratio at $14.70 per barrel of oil equivalent (boe), Fitch said.
Meanwhile, Pemex's lifting costs increased to $26.15 per barrel in 2022 from $19.14 per barrel a year earlier.
In 2020, Pemex became the world's largest "fallen angel": a borrower whose rating descends to junk from investment grade.
"Pemex's ratings are four notches below those of the sovereign as a result of the company's weak standalone credit profile and slow government reaction to strengthen Pemex's capital structure and ESG (environmental, social and governance) considerations," Fitch said.
Pemex did not immediately respond to a request for comment.
Last month, Pemex Chief Financial Officer Carlos Cortez told investors during an earnings call that despite government support, management was evaluating whether it would tap bond markets this year or next.
Pemex's financial debt now stands at $110 billion, mostly in bonds. Between 2019 and the end of June, Pemex received more than 730 billion pesos ($42 billion) from the government.
MGL Comment - Fri 08:42, Aug 25 2023Back to Top
The world's most indebted state energy company, Pemex has $25 billion in short-term debt and $4 billion in bonds still to mature in 2023,
Pemex's financial debt now stands at $110 billion
Another useful AI quality, it covers companies most of us ignore because they aren't quoted.
US Crude Oil Production Projections Climb Higher Driven by Increased Well Productivity and Prices
The August Short-Term Energy Outlook (STEO) has raised the projected U.S. crude oil production for the Lower 48 states (L48) in the years 2023 and 2024. This adjustment is attributed to the combination of improved well productivity and higher expected crude oil prices compared to previous estimations.
In this same STEO release, it is anticipated that crude oil production in the L48 during the latter half of 2023 will reach an average of 10.6 million b/d. This reflects a noticeable increase of 360,000 b/d from the figures presented in the July STEO. Additionally, the forecasted L48 crude oil production for 2024 has been revised upwards by 240,000 b/d in comparison to the previous July STEO projection, now standing at 10.8 million b/d.
This upward adjustment to the U.S. crude oil production outlook is notable, particularly in the context of recent declines in rig counts. Data from Baker Hughes indicates that, during the week of August 18, 2023, 520 oil-directed rigs were operational in the United States. This represents a reduction of 81 rigs compared to the same week the previous year. However, the increase in well productivity has managed to offset the decline in active rigs throughout the course of 2023. Looking forward to 2024, a rise in active rigs is anticipated, which is projected to contribute to the expansion of crude oil production in the latter part of the year.
The driving force behind the predicted growth in L48 crude oil production remains centered on activities in the Permian Basin. Forecasts indicate that production in the Permian Basin is on track to rise by 430,000 b/d between January and December of the current year. This growth figure surpasses the projected total L48 production growth (410,000 b/d) for the same time frame. This divergence stems from predicted production declines in other regions that partially offset the expected growth in the Permian Basin.
In the August STEO analysis, a forecast of Brent crude oil prices indicates an average of $87 per barrel (b) for the period from August to December 2023. This is an increase from the previous July forecast of $79/b for the same duration. The rise in crude oil prices is primarily attributed to extended voluntary production cuts in Saudi Arabia, in addition to the anticipation of heightened global demand. The confluence of these factors—the production cuts and an increase in demand—is projected to lead to a reduction in global oil inventories and consequent upward pressure on oil prices throughout the remainder of the year.
MGL Comment - Fri 08:26, Aug 25 2023Back to Top
US Crude Oil Production Projections Climb Higher
The first AI story we ever ran was over ten years ago now. It went like this:
A group of geeks were presenting to a refinery manager in Houston. They had plugged their AI into the refinery process architecture, and were busy measuring things, as you do. Suddenly the refinery manager stood up and left the room. The Geeks looked at each other in dismay. "What did we do?"
Some minutes later, the manager returned.
The lead Geek: "Is everything OK?"
The manager: "Fine, now. Your AI spotted a potential explosion risk; I had to deal with it urgently".
Just imagine what AI is doing to subsurface geophysics and fracking.
Gazprom Neft, the oil arm of Russian state gas giant Gazprom, reported a 43% annual slump in its second-quarter net profit amid lower sales.
For the first half of 2023, Gazprom Neft’s net income fell by 40% to $3.2 billion (304 billion Russian rubles), but was higher than analyst estimates, according to Russian news agency Interfax.
Last year, Gazprom Neft did not publish an annual results report. Analysts had expected worse performance so far this year than the results the company announced on Thursday, Interfax reports.
For the second quarter of 2023 alone, Gazprom Neft’s net profit dipped by 43% to $1.5 billion (140.1 billion rubles). Revenues were also lower, as sanctions on Russia’s exports, and the lower oil prices this year compared to last year’s highs in the spring, resulted in a decline in realized prices for the company’s production.
This past quarter, all major companies in the West also reported lower earnings, primarily due to the lower crude oil prices compared to the triple digits seen last year after the Russian invasion of Ukraine.
Russia’s total crude oil exports by sea slumped to a 21-month low in July, according to estimates by Energy Intelligence from earlier this week. Last month, Russia was estimated to have shipped 4.62 million barrels per day (bpd) of crude, the lowest level since November 2021.
It looks like Russia is trying to abide by its pledge to reduce its crude oil exports in August and September. Russia has promised a cut to its shipments by 300,000 bpd in September after a 500,000 bpd reduction in August.
Total Russian crude oil and refined products exports remained steady at around 7.3 million bpd in July, while higher oil prices and narrower price differentials for Russian crude pushed Moscow’s revenues higher compared to June, according to estimates by the International Energy Agency (IEA).
MGL Comment - Fri 09:27, Aug 25 2023Back to Top
Russia’s total crude oil exports by sea slumped to a 21-month low in July, according to estimates by Energy Intelligence from earlier this week. Last month, Russia was estimated to have shipped 4.62 million barrels per day (bpd) of crude, the lowest level since November 2021.
Energy intelligence is credible, but based on our reading, their conclusion is incredible!
India is expected to ban mills from exporting sugar in the next season beginning in October
Due to low cane yields caused by a lack of rain, India is anticipated to forbid mills from exporting sugar starting in the next season in October, reported news agency Reuters citing three government sources.
India's exclusion from the global market would probably push up benchmark prices in New York and London, which are currently trading at multi-year highs, raising concerns about future food market inflation.
"Our primary focus is to fulfil local sugar requirements and produce ethanol from surplus sugarcane," said a government source who asked not to be named in line with official rules. "For the upcoming season, we will not have enough sugar to allocate for export quotas."
After allowing mills to sell a record 11.1 million tonnes of sugar previous season, India only permitted them to export 6.1 million tonnes of sugar during the current season through September 30.
India imposed a 20% tax on sugar exports in 2016 to curb overseas sales.
According to weather department data, monsoon rains have been up to 50% below average so far this year in the key cane-growing regions of the western state of Maharashtra and the southern state of Karnataka, which together produce more than half of all the sugar produced in India.
An industry executive who wished to remain anonymous warned that patchy rainfall would lower sugar production in the 2023–2024 season and even decrease planting for the 2024–2025 season.
For nearly two years, local sugar prices have increased this week, prompting the government to enable mills to sell an additional 200,000 tonnes in August.
"Food inflation is a concern. The recent increase in sugar prices eliminates any possibility of exports," said another government source.
Retail inflation in India increased to 7.44% in July, a 15-month high, and food inflation to 11.5%, the highest level in more than three years.
India's sugar production could fall 3.3% to 31.7 million tonnes in the 2023/24 season.
"We've allowed mills to export large volumes of sugar during the past two years," said the third government source. "But we also have to ensure sufficient supplies and stable prices."
Last month, India surprised customers by forbidding the export of non-basmati white rice. In an effort to lower food prices in advance of the state elections later this year, New Delhi also placed a 40% levy on onion exports last week.
Lower output in Thailand is also anticipated to restrict shipments, according to a Mumbai-based dealer with a global trade business, and Brazil, a big manufacturer, would not be able to make up the difference on its own.
MGL Comment - Fri 08:18, Aug 25 2023Back to Top
Rice, onions, sugar, and exports are either banned or taxed.
I suggest we stock up on Tea.
With India losing its La Nina monsoon and China suffering La Nina floods, we have a definite yellow flag on the cereals.
I've been nibbling CF industries; call it a starter for ten.
Editor's note from Chairman James Burdass:
Go to Costco.... 20% cheaper than supermarkets!
Gold Prices Surge on Easing Bond Yields and Weaker Dollar
Gold prices soared to a nearly two-week high, climbing 1%, supported by a decline in U.S. bond yields and a weakened dollar. Investors are eagerly awaiting the Jackson Hole symposium for guidance on interest rates.
At 2:17 p.m EDT (1817 GMT), spot gold rose 1% to $1,916.20 per ounce, the highest level since August 11. This surge is poised to mark the largest daily percentage increase in over a month. U.S. gold futures also settled 1.1% higher at $1,948.10.
According to Bob Haberkorn, senior market strategist at RJO Futures, gold was previously oversold and is now experiencing a bounce due to bargain hunting and short covering. The slight drop in bond yields is also contributing to the uptick in gold prices.
The fall in benchmark 10-year Treasury yields, which reached a near 16-year high in the previous session, and the weakening of the dollar following weak U.S. PMI data have made gold more appealing to investors holding other currencies.
The S&P Global’s flash U.S. composite PMI index revealed that U.S. business activity is nearing a standstill in August, with the service sector experiencing its weakest growth since February as demand for new business contracts.
Investors are particularly focused on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday for further insight into the direction of interest rates. The CME’s FedWatch Tool currently indicates an 88.5% probability that the Fed will leave rates unchanged at its September meeting.
Gold is extremely sensitive to rising U.S. interest rates as they increase the opportunity cost of holding non-yielding bullion. Daniel Ghali, commodity strategist at TD Securities, predicts that Chair Powell will maintain a hawkish tone and is unlikely to indicate any policy loosening on the horizon.
In addition to gold, other precious metals experienced gains. Spot silver surged 4.1% to $24.34 per ounce, platinum increased by 1.4% to $931.65, and palladium rose by 0.9% to $1,273.53.
MGL Comment - Fri 08:52, Aug 25 2023Back to Top
Crisis watch.
Enron's recovery, for comparison was 53%.
There's a proper debt crisis brewing. We're not yet buyers of gold or gold equity, but I might add some coin.
MGL Comment - Fri 09:33, Aug 25 2023Back to Top
unease surrounding high interest rates curbing global growth offset optimism about an uptick of demand in top metals consumer China.
That ICSG estimate is echoing through the halls, ICSG said Chinese copper demand is up 9% ytd.
China's Yangshan copper premium SMM-CUYP-CN rose to $48 a ton, the highest since July 7, indicating rising demand for imported copper.
Readers may recall China's most prominent physical trader went bust in a cloud of lawsuits on fraud, so the entire copper supply chain may still be trying to sort out the mess. If I were a purchasing manager at a wire mill, I might seek credible metal from reputable sources rather than the local Joe claiming a warehouse full of copper.
Copper rises on improved China demand prospects
100% of the calls I receive on the subject of China start with "It's over no?" The 'China is broken' theme is still a pain trade.
The 'China' story lifted copper from $2000 to $8000, and thats where it has stayed for a decade now.
Cheap observation: Lose China, Add Netzero. Call it a 1-1 draw and go home.
Horrific thought: Copper goes back to $2000. Surely not feasible? The cost curve would not allow such a result.
Despite the expectation that the low point in the current cycle had been reached, prices for steel coil continued to decline in mid/late July, albeit modestly.
The mills’ attempts to raise their selling values failed, and discounts were offered to fill order books.
Most producers, particularly those in southern Europe, are currently not offering, due to scheduled maintenance outages. They are likely to resume quoting in late August or early September.
Target figures of €680/700 per tonne for hot rolled coil and €780/800 per tonne for cold rolled coil are expected, for October deliveries.
However, many buyers doubt that demand will be sufficient to support any rises. Those that do forecast increases believe that they will be modest and short-lived.
In the distribution sector, conditions in Germany and Spain are reported to be particularly weak, with activity in France faring slightly better in comparison.
Resale prices have mainly stabilised, but downward pressure persists amid continuing strong competition.
Although some sellers state that their stock levels are high, most comment that their inventories are normal-to-low.
Seasonal stock replenishment is predicted in the autumn. However, it may be limited by weak end-user demand and buyers’ cautious sentiment.
The outlook for steel consumption in the rest of this year is weak.
Conditions in the construction, white goods, packaging and mechanical engineering industries are being adversely affected by rising interest rates, high inflation and weak investor sentiment.
The German economy – which provides a major source of industrial activity across Europe – is close to recession.
One of few positives for steel coil demand is the automotive sector.
Vehicle output is recovering, following previous supply chain problems related to the Covid pandemic and the Ukraine-Russia war.
Most auto-related service centres maintain an optimistic outlook for sales volumes in September, following the restart of carmaking plants after maintenance shutdowns in August.
https://www.hellenicshippingnews.com/eu-coil-price-outlook-deteriorates/
MGL Comment - Fri 09:26, Aug 25 2023Back to Top
expectation that the low point in the current cycle had been reached, prices for steel coil continued to decline
Hopium fizzles.
Global crude steel production increased by 6.6 per cent in July to 158.5 million tonnes (mt) against 148.9 mt in the same period a year ago. For the January-July period, production in the 63 nations that account for 97 per cent of world steel output was pegged at 1103.2 mt, down 0.1 per cent.
According to the World Steel Association (worldsteel), top producer China produced 90.8 mt in July, up 11.5 per cent compared with the year-ago period. For the January-July period, China’s output was 2.5 per cent higher at 626.5 mt.
India reported a 14.3 per cent rise in production at 11.5 mt. Overall, for the January-June period, India’s steel output increased by nine per cent at 79.9 mt.
Korea and Brazil output slip
Steel production in Japan and United States went up by 0.9 per cent and 0.5 per cent, respectively, to 7.4 mt and 6.9 mt. Output in South Korea and Brazil dropped by nine per cent and 4.7 per cent, respectively, at 5.7 mt and 2.7 mt. Production in the US and Russia was pegged at 6.9 mt and 6.3 mt, respectively, up by 0.5 per cent and 5.8 per cent year-on-year (y-o-y).
Germany’s production took a slight dip, going down by 0.5 per cent to 3.0 mt. Turkey production has shot up 6.4 per cent at 2.9 mt but Iran’s output dipped by 1.5 per cent to two mt.
MGL Comment - Fri 08:15, Aug 25 2023Back to Top
top producer China produced 90.8 mt in July, up 11.5 per cent compared with the year-ago period.
This is not an AQI picture that supports a 11.% rise in final demand. This is a disaster.
New Delhi: Hindustan Zinc Limited (HZL), a subsidiary of Vedanta Limited, plans to increase its zinc production capacity from 1 million tonne per annum (mtpa) to 1.5 mtpa this fiscal.
“Zinc will play a key role in India’s growth story... We are looking forward to at least 3-4% growth in the sector and plan to ramp up our production from 1 million tonnes to 1.5 million tonnes per annum," Priya Agarwal Hebbar, chairperson of HZL and non-executive director of Vedanta Ltd, said at the company’s 57th annual general meeting (AGM).
“Our growth efforts include expansion of capacities, maintaining a portfolio of mines with long life, strengthening cost leadership, expansion of product portfolio through customer centricity, and progressing towards a sustainable future," she added.
Through FY23, the company recorded production surpassing 1 million tonne of refined metal while recording 257 kilo tonne of metal production in the first quarter of the new fiscal year, Hebbar said.
To become more sustainable, Hindustan Zinc will further reduce its coal dependency by 50% within the next two years as part of the company’s environmental, social, and governance (ESG) goals.
“Today, our Pantnagar Metal Plant is powered 100% by renewable energy, and with our solar & wind projects accounting for 180- MW and 250 MW respectively, HZL will reduce its coal dependency by 50% by 2025," she said.
She said HZL became the first in the country to introduce battery-operated electric vehicles (EVs) in underground mining.
Hebbar believes the company will be able to achieve its ESG targets by 2030, ahead of parent Vedanta Group’s goal of 2050.
The company, in a filing to the bourses earlier today, said its promoter has released a pledge on 13.94 crore shares or nearly 3.3% of the total equity. Axis Trustee Services Limited (ATSL) will be acting as the pledgee. Anil Agarwal, chairperson of Vedant Ltd., owns a 64.92% stake in HZL, most of which is pledged.
Hindustan Zinc reported a 36.5% fall in its net profit for the first quarter of FY24 at ₹1,964 crore from ₹3,092 crore in the corresponding quarter of last year, due to lower metal prices. The company’s revenue in Q1FY24 declined 22.4% to ₹7,282 crore from ₹9,387 crore, on a year-on-year (YoY) basis. The topline fell on account of lower zinc and lead LME, lower lead volumes, and differential strategic hedging impact. Earnings before interest, tax, depreciation, and amortization (Ebitda) in the April-June quarter stood at ₹3,347 crore with an Ebitda margin of 46%.
VEDANTA More Information
MGL Comment - Fri 05:59, Aug 25 2023Back to Top
1 million tonne per annum (mtpa) to 1.5 mtpa this fiscal.
Do we think that Zinc prices justify this expansion?
There are only two answers:
Either
a> Hindustan's expansion is amazingly cheap, in which case we will see more expansions, ergo Zinc is not cheap.
Today, our Pantnagar Metal Plant is powered 100% by renewable energy,
This raises uncomfortable thoughts about negative electricity prices, and Zinc is very energy intensive.
b> Hindustan's Zinc has management that believes Zinc goes higher, and this is a speculative build.
This raises uncomfortable thoughts about India Inc seemingly desperate 'to do a China' on us. Note the crazy steel moguls.
Aug 24 (Reuters) - Iron ore futures advanced on Thursday, with Singapore prices scaling a four-week peak in their longest rally since early June and the Dalian benchmark hovering around a two-year high, as traders continued betting on demand improvement in China.
Dwindling port stockpiles of the steelmaking ingredient in top steel producer China added fuel to the rally, as mills ramped up production ahead of a seasonal pick-up in domestic construction activity from September to October.
Iron ore's benchmark September contract on the Singapore Exchange SZZFU3 climbed as much as 1.1% to hit $114.50 per metric ton, its strongest since July 26.
The most-traded January iron ore on China's Dalian Commodity Exchange DCIOcv1 rose 1.3% to 828.50 yuan ($113.85) per ton, near Wednesday's two-year peak of 832.50 yuan.
Spot iron ore also hit a four-week high at $115.50 per ton on Wednesday, SteelHome consultancy data showed SH-CCN-IRNOR62, as China's policy support for its sputtering economic recovery also bolstered risk-on sentiment.
With no clear and fresh directives from Chinese authorities about the anticipated steel output limit this year, mills ramped up production amid low inventories.
"The market is expected to continue to play games before the implementation of the production restriction policy," Zhongzhou Futures analysts said in a note.
The average daily crude steel output of China Iron and Steel Association members increased 2.9% to 2.22 million tons over Aug. 11-20 from the prior ten days, Mysteel consultancy said.
"Falling iron ore port inventories in China, which are currently hovering at their lowest levels since the end of August 2020 SH-TOT-IRONINV, might also encourage domestic mills to start restocking," ING commodity strategists said in a note.
Steel benchmarks in Shanghai and other steelmaking ingredients in Dalian also advanced.
Coking coal DJMcv1 gained 1.1% and coke DCJcv1 added 0.1%.
Rebar SRBcv1 rose 0.3%, hot-rolled coil SHHCcv1 added 0.1%, and wire rod SWRcv1 climbed 2.9%. Stainless steel SHSScv1 dipped 1.1%.
MGL Comment - Fri 09:21, Aug 25 2023Back to Top
"The market is expected to continue to play games before the implementation of the production restriction policy,"
Futures traders have a way with words. This exactly describes iron ore.
(Bloomberg) -- Fatal accidents continue to undermine China’s coal industry, with the latest incident in Shaanxi set to impede plans to raise production if authorities once again ramp up scrutiny of mine safety.
A gas explosion on Monday at a mine in China’s third-largest coal province killed 11, halting operations there and ending a month-long run of declining prices for thermal coal. It’s the worst accident since February, when a mine collapse in Inner Mongolia claimed 53 lives and triggered nationwide checks on safety.
If regulators respond in similar fashion, it’ll be difficult to keep raising average monthly levels of output, Hou Jian, an analyst at the China Coal Transport and Distribution Association, told a briefing on Wednesday. The association cut its forecast for annual production by almost 100 million tons to 4.6 billion tons.
China mined nearly 4.5 billion tons last year, a record, as Beijing prioritizes production of its mainstay fuel to safeguard energy security after the economy was blighted by power outages in recent years. But the limits of that expansion are becoming apparent, as the quality of coal declines and all-too-frequent accidents hamper operations.
The latest disaster affected coal used by the steel industry and coking coal futures in Dalian have climbed over 8% this week to above 1,500 yuan ($206) a ton. Most of China’s coal goes to power generation and the domestic spot price for the thermal variety inched up to around 820 yuan a ton on Wednesday, after falling for nearly a month, according to CCTD.
https://www.bnnbloomberg.ca/another-deadly-coal-accident-in-china-threatens-output-growth-1.1962784
MGL Comment - Fri 09:55, Aug 25 2023Back to Top
Fatal accidents continue to undermine China’s coal industry, with the latest incident in Shaanxi
Beijing is very sensitive to coal mine accidents, and will reflexively respond, likely curtailing some dodgy mines.
The domestic steel industry has drawn the government’s attention to imports from South Korea and China saying the consequent lowering of prices is hurting local producers.Imports of steel products from China surged during the first quarter of this financial year, even as South Korea remained the highest steel exporter to India despite a year-on-year decline in shipments.“A sharp rise in the imports of finished steel was recorded in the first quarter of the current financial year. The surge in imports, driven by countries with Free Trade Agreements (FTAs), as well as China, is eating into domestic demand,” Ranjan Dhar , chief marketing officer, ArcelorMittal Nippon Steel , told ET.Imports of steel products into the country in the April-June period stood at 2.23 million tonnes, 31% more than 1.70 mt a year ago. Imports of metal products, including finished steel, scrap and ferro alloys , surged during this period.According to official data, imports of steel from South Korea fell to around 713,000 tonnes in the first quarter of this fiscal from about 686,000 tonnes a year ago. However, Chinese steel exports to India surged to about 570,000 tonnes from around 352,000 tonnes a year ago.“The current challenge goes beyond a simple supply-demand shift. It involves the issue of predatory pricing - a practice that is severely harming this key sector,” said Dhar.According to steel traders, there has been a sequential drop of Rs 5,000-6,000 per tonne in hot-rolled coil prices from earlier this year. Since hot-rolled coil is used as an input for most steel products, its price is used as an industry reference.“Domestic steel prices had climbed up to Rs 65,000 per tonne in the first quarter of the previous fiscal. These have now come down to Rs 56,000 per tonne. But despite the fall, imported steel from Vietnam, Japan, China and Russia is trading at Rs 54,000 per tonne, and is expected to come down further next month,” said Vedant Goel, managing director at Neo Mega Steel, a trading company.
MGL Comment - Fri 09:20, Aug 25 2023Back to Top
consequent lowering of prices
The AI consistently delivers detail, and lets face it the above is all you need to know.
