Wednesday, 24 September 2014

Commodity Bust in Slow Motion - (Including Copper and Iron Cost Curves 2013-2018) - Handelsbanken

Handelsbanken Report - Dating from May 2014.
They appear to have been spot on regarding Iron Ore so far to $80/T.
Project copper to $5500/T or $2.50/lb......much more.....

They see Gold as simply a "directional" metal as the mine supply dynamic is not necessarily the key driver. A general commodity deflationary environment through excess supply will mean the on/off US$ vs on/off commodity bets of previous years could be much more selective.
Could precious metals act differently from general commodities?

The report includes current and forward looking cost curves showing  the increases in mine supply due to come online from the miners as demand growth appears set to weaken until the next growth cycles become apparent in India and other emerging economies which combined may surpass China.

Iron Ore's Changing Cost Curve  (Compare also Credit Suisse cash>AISC curves)

Rather than smoothing booms and busts, the scrapped projects may well pave the way for the next copper price boom by limiting supply. But before we see any such boom, we believe that there is all the reason in the mining world to see a copper price bust. .....Unlike in iron ore, surplus in copper is not structural but more temporary in nature; as copper prices decline, we expect that postponed projects will aid the supply/demand balance and that incentive pricing again will be a reasonable floor for long-term assumptions, which we expect to be some USD 6,700/tonne from 2018 and onwards. The Chinese copper financing trade has merely delayed the price decline A topic that normally emerges parallel to discussions of lower growth in Chinese 

The phases of brownfield and greenfield mine development in the commodity boom.

No comments:

Post a Comment