Resource Market Weekly Recap – November 19, 2009
By Melissa Pistilli-Exclusive to Resource Investing News Diamond Investing News The big four diamond miners, who account for 90 percent of the market, have all cut production as demand has significantly waned under the global economic crisis. There is a glimmer of hope in the diamond industry that the sector will make a recovery in …
The big four diamond miners, who account for 90 percent of the market, have all cut production as demand has significantly waned under the global economic crisis.
There is a glimmer of hope in the diamond industry that the sector will make a recovery in 2010. Speaking at the Antwerp Diamond Symposium November 16, moderator Chaim Even-Zohar and economist Pranay Narvekar forecasted a modest 0.4 per cent increase next year.
The diamond industry is now looking to emerging markets in China and India for growth and recovery, but there is still some concern these markets won’t come close to making up for shortfalls elsewhere.
There are questions swirling around the gold market about a possible (to some obvious) bubble on the verging of bursting.
In recent weeks, the gold price has soared to new heights by moves from two distinct types of investors: those whose inflation fears have them seeking safe-haven assets; and those daring, thrill-seeking types for whom the financial meltdown did nothing to quell their appetite for risk.
While the most ardent goldbugs are pushing $2,000 or even $3,000 per ounce gold, others are sure this latest upward trend will quickly lose steam causing prices to plummet.
The idea is that the current price is drastically overinflated and not based on real supply/demand fundamentals, but rather fear and greed.
For anyone paying attention to the current climate of fear-mongering and political posturing in the US, the numbers of those seeking safe haven assets for what seems to be building up into either a double-dip recession or a biblical doomsday scenario (if you’re of the tin-hat wearing crowd) will undoubtedly send the gold price higher.
Under the Obama Administration, the United States has begun turning towards greener energy alternatives. The White House has begun to focus on electric vehicles as one strategy for lowering carbon emissions. Obama wants to have one million electric vehicles on US roads by 2015.
To make this happen, the government has already given $9 billion in federal loans to Ford, Tesla and Nissan.
Lithium batteries are expected to play a key role in the automotive industry’s future and Nissan is planning to build an automotive lithium ion battery plant in Tennessee.
However, there are fears that while electric cars may be touted as a way for the US to sever its dependency on foreign oil, the move will instead create a dependency on foreign lithium. Earlier this year, the US Government Accountability Office warned Congress that by moving from fossil fuels to lithium batteries, the US would essentially “substitute reliance on one foreign resource for another.”
Perhaps the Obama Administration’s latest actions show that the government is committed to electric car production despite the thereat of exchanging one dependency for another. This week Pres. Obama and China’s Pres. Hu Jintao signed the U.S.-China Electric Vehicle Initiative.
Nickel has been “the worst performing metal in recent weeks” and falling prices are to blame for recent layoffs and employee wage decreases at some nickel mines.
Crowflight Minerals [TSX: CML] has temporarily laid off 45 employees at its Bucko Lake mine in Manitoba. Workers for Vale Inco, owner of the world’s largest nickel mine in Sudbury, Ontario, are striking over what they believe are unnecessary cuts to their pay, pensions plans and social assistance programs.
The strike has decreased nickel production from the mine in the third quarter by 45 percent from the previous quarter and 55 percent from the third quarter of 2008. FNX Mining CEO Terry MacGibbon reportedly said he believes the recent slight jump in the nickel price is related to the strikes at Sudbury and Voisey’s Bay, which have “skewed” the spot market price.
The economic crisis of the past few years has obviously had an impact on the nickel industry and it will probably be a while before demand is up to pre-crash levels. There is a surplus of nickel stocks and these will be absorbed once consumption picks up as it is expected to in 2010.
While the rare earths market has barely ever raised a blip on the commodities market’s radar screen, it may prove to be the most geo-politically controversial market in the future.
As it stands, China has a stranglehold over the emerging rare earths market. “As much as 90 per cent of the world’s total supply of rare earth metals is under Chinese control,” reports Cyrus S Darabshaw.
Rumours are circulating that China may restrict exports of really rare earths like terbium, europium and dysprosium.
China could also set dual pricing standards on rare earth metals mined within its borders, making ore and end products cheaper for domestic consumption and twice the price for the rest of the world and creating a very unequal playing field for those competing with Chinese manufacturers.
On November 3, US President Obama took preemptive measures by signing the US National Defense Authorization Act for Fiscal Year 2010, which mandates the General Accounting Office (GAO) to conduct an assessment of the rare earths used in the US Department of Defense (DOD) supply chains. The GAO report to the White House is expected by April 2010.
This news is good for the rare earth industry because it means supply constraints are being taken seriously. The US government, rare earth industry leaders and the Defense Metals Technology Center are planning to bring industry players together with government officials and end users together to discuss how the US’ “policymakers can focus on securing the nation’s defense supply chain.”
Silver’s rich cousin gold and its blue-collar buddy copper are both boosting the silver price to new heights for 2009 this week. Silver is up 7 per cent from this time last month and 94 per cent year to date.
Rising inflation, dollar weakness and expectation of rising industrial demand after positive economic data from China and Japan have all contributed to boosting silver’s precious and industrial metal status.
Keep an eye on dollar movements and news out Asia for help predicting silver’s short to medium term movements.
The recent signing of the Canada-India nuclear cooperation agreement, which includes Canadian exports of uranium to India, has really ruffled the tail feathers of Australia’s Liberal Party. Deputy Party Leader Julie Bishop has spoken out against the Rudd government’s refusal to rethink its position on uranium sales to India.
To Bishop, the Canada-India agreement symbolizes a missed opportunity for Australia to garner a foothold in one of the world’s leading emerging uranium markets.
The Rudd government has said it will not even consider exporting uranium to India, who has refused to sign the Nuclear Non-Proliferation Treaty. However, there are rumours Rudd might cave around election time in 2010.
Vanadium prices are likely to remain stable at current levels through the end of the year. While present demand remains low, new applications of the metal are predicted to increase its market value.
One sign that demand for vanadium is growing is that prices are about 60 percent higher than they were two years ago. Emerging economies are predicted to buy more of the additive used to strengthen stainless steel and titanium alloys
Reuters reported that global demand for vanadium is expected to rise along with the electrical car battery industry and the market for utilities storage. Reportedly, vanadium can be combined with lithium to produce a longer battery life.