Base Metals Weekly Round-Up: Iron Ore the Shining Star

While many base metals started the week out strong, a handful hit snags on Tuesday (July 2) that would set the course for a downward trending week.

One major example is nickel, which started Monday (July 1) at US$12,330 per tonne on the London Metal Exchange (LME) and crashed to US$12,015 by Tuesday. However, the commodity managed to recover through the week and rise back up to US$12,300 by Thursday (July 4).

Lead was a similar story as it started the week at US$1,921.5 per tonne on the LME only to fall to US$1,875 on Tuesday; however, unlike nickel, it made little to no movement for the rest of the week.

Meanwhile, copper hit its weekly low on Wednesday (July 3) when it dropped to US$5,873 per tonne on the LME, down from Monday’s high of US$5,998. The red metal perked up on Thursday as it grew to US$5,897 per tonne.

As for zinc, the base metal zigzagged downwards through the week; it gained some strength between Tuesday and Wednesday, but its efforts were wasted as it fell further on Thursday to US$2,439 per tonne.

After hitting 5 year highs of US$123.19 per tonne this week, iron ore prices found themselves simmering by Friday. As of 2:15 a.m. EDT, the commodity had cooled off to US$114.23.

Top News Stories

1. Iron Ore Prices Hit 5 Year High as Supply Concerns Wage On

As iron ore continues to be a hot topic in the investing space, this week saw the commodity’s price point shoot past highs not seen since early 2014.

The base metal has been gradually climbing over the last year, but started gaining serious traction in February following the tailings dam collapse at Vale’s (NYSE:VALE) Córrego do Feijão mine in Brazil.

With an annual iron ore production loss of approximately 90 million tonnes, and due in part to subsequent issues Vale faced after the January disaster, prices have grown as supply has tightened.

2. Australia Ready to Help Iron Ore Supply Gap: Report

As Vale continues to pick up the pieces from its Brumadinho tailings dam collapse, Australia is stepping up to help fill the new gap in iron ore supply.

In the most recent edition of Australian government report Resources and Energy Quarterly, officials touted a “significant change” to commodity forecasts for the country down under. Previous forecasts had indicated export earnings would peak in 2018 and 2019, with expected record earnings of AU$278 billion during that time.

However, the newest prediction is that the peak will be in 2019 and 2020, with resource and energy commodities now docketed to bring in AU$285 billion; iron ore earnings alone are expected to reach AU$79 billion in that time.

3. Freeport Expects Q2 Losses Amidst Lower Copper Prices

In the face of lowered copper prices, Freeport-McMoRan (NYSE:FCX) is bracing itself for potential losses in its Q2 results.

In a company update released Monday (July 1), Freeport stated that at the end of Q1, it expected to sell 364 million pounds of copper at an estimated price of US$2.94 per pound.

However, the company noted that London Metal Exchange prices for the red metal averaged US$2.77 per pound in Q2, putting a dent in the company’s plans.

According to Freeport, the impact of the lowered copper price will see Q2 revenues drop by approximately US$85 million.

Also in the news

In Africa, Zambia is making moves to lawfully require mining companies to procure an undisclosed amount of goods and services from local suppliers, according to Reuters. Mines Minister Richard Musukwa told the outlet that over US$4 billion worth of imported goods and services are brought in by the mining sector, but that only 10 percent goes to local suppliers.

Solaris Copper subsidiary Solaris Copper Chile entered an earn-in option agreement with Minera Freeport-McMoRan South America regarding the latter’s Tamarugo copper porphyry target in Chile. The agreement grants Solaris the option to earn up to 75 percent in Tamarugo for US$5.5 million in expenditures and the delivery of a pre-feasibility study.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.