What’s rocking and what’s not: how our favorites (potash, REEs, graphite, uranium, critical metals) are performing
The Belarusian/Russian potash battle, and the collapse of that cartel, was the most dramatic development of the September quarter. That seems to be the conclusion to be drawn from Roger Bade’s summary of the past three months in his regular quarterly commodity survey for London brokers Whitman Howard.
If for nothing else, Bade’s writings are always worth reading because of the forthright way in which he expresses his views. Not for him the measured words and caution employed by the bulk of analysts. All our subjects are covered here: apart from potash and phosphate, he runs the ruler over graphite, critical metals, rare earths and uranium.
He sees the Belarus/Uralkali dispute as the cause of the sharp drop in spot prices, but more significantly it has “prompted a buyer’s strike as traders and farmers look to consume high-priced stocks. It has been suggested that the important North American fertilizer application season may have been lost and demand will recover only next spring”. This is based on a recent warning from Agrium.
It appears that the short-term turmoil in demand for potash has also impacted nitrogen and phosphate demand. Phosphate has been further affected by the indications that the world’s largest exporter, Morocco, is happy to increase supply and is willing to offset any supply disruptions caused by political turmoil elsewhere in North Africa and the Middle East, he says.
(Meanwhile, the latest commodity news from Toronto-based Scotiabank says potash prices FOB Vancouver eased from $417.50/tonne in July to $389/tonne in August, and are estimated to be now around $335/tonne. Scotiabank is also of the opinion the collapse of the Russian/Belarus cartel was the cause of the market going quiet. Brazil is now buying potash for near-term application given its record soybean and good corn harvests. The bank does not expect the price to fall below $300/tonne.)
Back to Bade, and his other comments:
Get our daily investorintel update
TIN: He notes the sudden rise in tin prices due to Indonesia imposing new rules that are so onerous that exports have, effectively, been prevented. “Presumably some modifications of the rules will occur to allow exports and, when this happens, tin prices will fall back”, he says. (Yes, but in our view, not for long: as outlined last week. See: The critical metal whose price is about to soar” on the Investor Intel Rare Earths and Critical Metals page.)
URANIUM: It continues to weaken (it lost another 15c this week to a new spot price of $35/lb) but Bade says at the end of the September quarter there were some signs of bottoming out. He notes that uranium has, however, disappointed as the bulls were expecting some impact in 2013 from the end of the U.S./Russian mega-tonnes to megawatts program as well as reactor starts in Japan.
MINOR METALS: In general, Chinese production constraint has provided a fillip to minor metal prices in the September quarter with gallium, germanium and indium seeing a gentle recovery trend. Antimony — another of the critical metals — has recovered sharply on falling Chinese production. Prices are back to where they were in May 2013. However, tungsten prices have ended their gains with more production coming out of China.
LITHIUM: Increasing production from Australia and new output from Argentina and Chile has caused some caution to enter the lithium market.
RARE EARTHS: Chinese production constraints seem finally to have kick-started a price recovery. Bade notes, however, that considerable customer reluctance is being seen, such that the attempted price rally “has developed with a few exceptions into a damp squib”. While the market still has to absorb production from Lynas and Molycorp, things are not all gloom: some of the price recovery due to magnet demand has stuck.
GRAPHITE: “Little recovery in sentiment has been seen this quarter and this has not been helped by considerable exploration success seen worldwide,” notes Bade.
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.