Source: World Bureau of Metal Statistics (WBMS)

A concise summary of what’s moving markets, the impact on base, precious and ferrous markets, including Theme of the Day.

What’s moving markets?

• Minutes from the Fed’s April meeting revealed a more hawkish tone and showed that it might be appropriate at some point to begin discussing a tapering plan if the US economy continues to pick up strongly and inflationary pressures persist. Such comments from the FOMC minutes added to general concerns that soaring prices would force the Fed to tight monetary policy sooner. Yields and the USD jumped as Inflation and Covid re-emergence fears are again weighing on investor sentiment dragging equities lower.
• A strategy to cool down commodity price spikes was top of the agenda of China’s weekly State Cabinet meeting yesterday. Chaired by China’s second most powerful politician, Premier Li Keqiang, the cabinet meeting discussed control measures to rein in the “unreasonable price rally”, including ensuring sufficient supplies of main commodities. The aim is to prevent the rising costs passing over to consumers, it said. Key measures include tax waivers and access to credit for small and micro enterprises that are challenged by soaring production costs. Beijing has a lot of levers it can pull in a bid to rein in prices – like withdrawing liquidity from the financial system or rolling back fiscal stimulus.
• Bitcoin dropped below $40,000, erasing all the gains since Tesla announced it had invested $1.5bn in the digital token. While Tesla’s investment was the catalyst for the rally toward $65,000, the Tesla CEO’s recent comments on the environmental costs associated with Bitcoin have coincided with the plunge as comments from China’s central bank restating its regulatory position on digital currencies – it would not allow financial institutions to provide cryptocurrency services and warned investors against speculative trading in bitcoin – have also hurt sentiment.
• Gold fell back amid a stronger USD and soaring Treasury yields. The sharp moves came after several Fed officials struck a somewhat more hawkish tone in its monetary policy update, pointing to the possibility of starting taper talks in upcoming meetings. The potential for higher rates is bearish for the precious metals complex, as they fell across the board.
• Copper is leading base metals down, off roughly 3%. Increasingly strident comments from the Chinese authorities regarding the recent run-ups in various domestic markets appears to have triggered the selling which accelerated after the release of the FOMC minutes. China said that it would strengthen supply/demand management procedures (release of metal from strategic stockpiles?) to curb “unreasonable” price increases and prevent pass-throughs to consumers. In addition, the trade and stockpiling of commodities will be “adjusted” as inspections on both spot and futures markets will be stepped up. So far corrections have been short-lived and shallow. Is this about to change?
• Iron ore and steel prices were lower in response to warnings from Chinese authorities over price spikes and the harm to the economy.

Theme of the Day: Q121 global refined metal markets balances

• The World Bureau of Metals Statistics (WBMS) released preliminary data on supply, demand, inventories, and global market balances for base metals covering Q121. Aluminium, nickel, and lead were in deficit, the others in a surplus.
• It noted that the impact of the Covid-19 pandemic has had a dramatic effect on both the supply and demand for metals worldwide. In particular, production and demand were unusually depressed in many countries early in 2020 and so YoY comparisons may appear distorted.
• The market balance for primary aluminium for Q121 was a deficit of 70kt which follows a surplus of 1,070kt recorded for the whole of 2020. Demand for was 1,389kt more than in the comparable period in 2020. Global production rose by 5.9% compared with Q120.
• The copper market recorded a surplus of 2.2kt in Q121 which follows a deficit of 954kt in the whole of 2020. Global demand was 5.91Mt compared with 5.71Mt in Q120. World mine and refined production was 5.16Mt (2.3%) and 5.91Mt (2%), respectively, compared with Q120.
• The nickel market was in deficit with apparent demand exceeding production by 18.5kt. In the whole of 2020, the calculated surplus was 95.4kt. World apparent demand was 79kt higher YoY. Refined production totalled 585.9kt.
• The zinc market was in surplus by 78kt which compares with a surplus of 620kt recorded in the whole of the previous year. World demand was 279kt (8.9%) higher YoY. Global refined production rose by 4.1% YoY.
• The lead market recorded a deficit of 88kt which follows a deficit of 119kt recorded in the whole of 2020. World refined production from both primary and secondary sources was 3,499kt which was 17% higher YoY.
• The tin market recorded a surplus of 2.2kt which follows a deficit of 12kt recorded in the whole of 2020. Global tin demand was 105.2kt, 12% higher YoY, while global reported production of refined metal was up by 21kt YoY.
• MMSteelClub notes that price trends and global market balances are consistent over the long-term. In the short-term, various factors, both macro and micro, can influence prices.

Q1 2021 YoY % Change

	Supply	Demand
Cu	2	3.5
Al	5.9	8.8
Ni	12	17
Zn	4.1	8.9
Pb	17	n.a
Sn	n.a	12