Metals roundup Nov’24: November reality bites as dollar vader strikes again

Image: Mike and Wombo collaboration

Take home points for November 2024 🕐

  • The November RBA commodities price index print proves that October’s pop in bulks and bases was a false dawn built on over-optimistic Chinese dragon spirits—or is that far too much drinking of those spirits?

  • The November monthly rate of change in base metal prices was negative (prices slowed). LME copper prices declined 5.6% across November. Zinc got belted despite large warehouse purchasing.

  • Bulk mineral prices did not move much—a nothing burger.

  • Reasons for reversal back to the bearish trend? Strong USD (massive DXY print) and China (mainly) but Europe (also) in decline. But it was the dollar’s month, and that seems to have continued into December as well.

  • 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 only currency of import to our export industries—Dollar Vader (aka the USD wrecking ball).

  • As I’ve been noting since June 2024, commodity prices are locked in a bearish head and shoulders reversal pattern which completed in August—with prices breaking below the neckline since then, signalling a major reversal from bullish to bearish.

  • In November there was an ever so slight uptick in that chart, but none of the uptick came from bulk minerals and base metals—both of which are still locked in bearish downtrends.

  • 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 promise to roll back AUKUS and parts of Biden’s Inflation Reduction Act (IRA)—the implication being lower demand for bulks, copper, other bases and green minerals—and his love of blunt instrument tariffs which he will pair with reshoring manufacturing and ‘made in America’ tax breaks as he escalates his 7-year-old trade war on the world—but mainly China.

  • Yes, mainly China. And at the top of his playbook is protecting and strengthening the USD ‘dollar standard’— meaning that this will unseat any China stimmy unless that stimmy is truly and profoundly massive which Xi does not appear to have the ideological stomach for.

  • And DO NOT expect massive increases in USD swap lines under Trump 2.0 as he rolls out his U.S.S. Mercantile agenda. Starving sovereigns of USD is a potent weapon that I expect to see dangled—and only the U.S. can dangle that weapon.

  • Gold is down and consolidating following a massive run up and peace talks but looking great a bit further out due to no change to the long-term currency debasement/monetary inflation thesis. Expect greedy gold producers to overpay for undeveloped ounces—so make sure you’re on the receiving end, not the paying end!

  • 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 as we near the end of the year, if you’d like to discuss how you might do that, you’ll need to make time for a 🍔 and 🍻!

Your charts 📈

Here are your charts 👇👇👇.

  • Base Metals 🔗🏮🔌

Confirmation: October was an outlier.

Copyright, NextLevelCorporate Advisory

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

Confirmation: October was an outlier.

Copyright, NextLevelCorporate Advisory

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 October, it had ticked up 2.8% over the past 30-day period to US$8,910/t.

But that’s still an annual decline of 81% (!) as the price deceleration continues despite false narratives of lithium’s return and new chemistries threaten to overtake while China sleeps on the mat with hollow consumption and tariffs hanging over the dragon like the proverbial falling sword.

Although not included in the index, uranium spot was US$77.8/t—still well below its peak in January and still no change to the ALP’s stance on uranium.

Commodity price index head and shoulders

The bearish pattern continues as does Dollar Vader strength.

See you in the market.

Mike

With decades of success across six continents, NextLevel Corporate Advisory expertly navigates the intersection of M&A, financial advisory, and business strategy—bringing you exceptional corporate development outcomes.

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