Take home points for December 2024 🕐

• Industrial metal and mineral prices are still slowing and caught in a negative downtrend.

• The December monthly rate of change in base metal prices was again negative (slowing prices).

• Actual LME aluminium and copper prices declined 2% across December, with Nickel falling by 4.1%.

• Bulk mineral prices (iron ore and coal, mainly) sped up by an insipid 2% month on month—still a nothing burger.

• Reasons? Still strong USD (massive DXY print) and weak China (mainly) but Europe (also) in decline.

• Massive weakening in the AUD against the USD towards the end of the month and into January as we hit a 61c handle.

• Why? China peaked before COVID. It’s post-COVID lockdown opening never happened as it was hampered by Russian sanctions despite back door purchases and the end of fake state-owned money/debt. The dragon is growing at a very slow clip compared to the past.

• Expect more China demand volatility in light of Trump 2.0, and as a result a weaker AUD (declining GDP) against the USD as I have been guiding and predicting.

• I’ve also been noting since June 2024 that commodity prices are locked in a bearish head and shoulders reversal pattern.

• In November and December there were ever so slight upticks in the chart, but none of the uptick came from bulk minerals and base metals—both of which are still locked in bearish downtrends. It’s all agricultural commodities.

• It is now clear that China’s fake stimulus is insufficient to neutralise the negative trend, cheapen the cost of capital, weaken/counteract an omnipotent Dollar Vader, juice up emerging market economies, and light a fire under industrial minerals. Waiting always.

• No change to the nextlevel thesis: For there to be real positive price action and a reversal from bearish to bullish, we need to see: (a) significant weakness in the USD (not there yet); as well as (b) the return of material demand from China (not there yet), presumably after broad-based stimulus in China (not even close) as well as a return of consumption (same jury, same caveat) and not just from unhinged Government spending (aka wallpapered welfare spending that’s occurring in most economies and masking the real pain on main street).

• Add to this Trump’s blunt instrument policies likely to soften demand for incremental inputs, and his promise to strengthen the USD ‘dollar standard’— meaning that he could easily cancel out the impact of any China stimmy unless that stimmy is truly and profoundly massive—which Xi does not have the ideological stomach for thus far.

• Aussie export commodities are in for a few volatile years—so, you may want to revisit and potentially recalibrate your investment thesis and corporate development strategy if you’ve built your strategy for yesterday’s macro and geopolitical drivers.

• And if you’d like to discuss how you might do that, give me a buzz.

Your charts 📈

• Base Metals 🔗🏮🔌

Downtrend still intact. Freeport maybe starting to look like value?

• Bulk minerals - inch by inch, still no help from USD 🧱👷‍♀️🌉

Fortescue popped, but it’s the on-again off-again green narrative 🥱

Energy minerals (ex-coal and oil) ⚗🧲☢

The July 6, 2023, price high for LME Lithium Hydroxide CIF was US$46,046. On the last day of December, it was US$9,470 and while that print was the first month on month increase, I remember seeing for many months, it still represents a decline of 79% from its July 2023 peak. Ouch.

Once small move does not a recovery make—and we still have new chemistries threatening to overtake while China sleeps on the mat with hollow consumption and tariffs hanging over the dragon like the proverbial falling sword—and way too many EV units still being dumped.

Although not included in the index, uranium spot is currently US$74.9/t—down from last month and still well below its peak in January and still no change to the ALP’s stance on uranium.

Commodity price index head and shoulders

With metals down 12% over the past 12-month period, the only thing holding up the right elbow below is some strength in agricultural commodity prices. Dollar Vader is still at work and whereas food is a necessity, industrial metals and minerals are not.

USD still strong. China still weak. Downtrend until further notice. Make sure your projects are profoundly robust. Still time to get positioned. See you in the market.

Mike