Mining Monitor (May 2018)

Transcription

1 Mining Monitor (May 2018) Strategic Research Division 11 May 2018 MUFG Bank, Ltd. MUFG Union Bank, N.A.

2 Table of Contents 1. Overview 3 2. Iron Ore 5 3. Coal 8 4. Copper Nickel Zinc Gold 23 Appendix Aluminum 14 Mining Monitor 11 May

3 1. Overview Ryosuke Ohno Strategic Research Division MUFG BANK, LTD. Mining Monitor 11 May

4 1. Overview Mined Commodity Price Trends Trends in most mined commodity prices were flat or downward; however, aluminum and nickel prices were heavily impacted by the US sanctions against Russian aluminum producer Rusal. Trends in most mined commodity prices were flat or downward except for aluminum and nickel. Mined Commodity Price Trends Iron ore price moved sideways and the average price in April was lower than in March. Average coking coal price fell due to worries about weak steel demand and the trade tension between China and the US. Average thermal coal price was almost unchanged backed by restocking demand in China and rise in coal use elsewhere in Asia. Copper price regained some ground, but still remains in the $6,500/t to $7,300/t range. Aluminum and Nickel prices spiked, following the announcement of the US sanctions against Russian aluminum producer Rusal; however, prices fell sharply as the US Treasury signalled an easing of the sanctions in late April. Zinc price moved downward amid an uptick in inventories and increase in mined supply. Gold price remained in the familiar range; however, the price feels downside pressure as the US dollar strengthens Yr Avr Nov Dec Jan Feb Mar Apr Iron Ore ($/t) MoM - 2% 10% 6% 2% -10% -6% YoY 22% -14% -14% -9% -16% -24% -11% Coking Coal ($/t) MoM - 5% 26% 0% -4% -5% -14% YoY 33% -37% -10% 30% 42% 40% -28% Thermal Coal ($/t) MoM - -2% 4% 6% -3% -8% -2% YoY 34% -2% 17% 26% 26% 17% 12% Copper ($/t) 6,192 6,854 6,850 7,118 7,040 6,834 6,871 MoM - 0% 0% 4% -1% -3% 1% YoY 27% 27% 21% 24% 18% 17% 20% Aluminum ($/t) 1,968 2,097 2,080 2,210 2,182 2,069 2,255 MoM - -2% -1% 6% -1% -5% 9% YoY 23% 21% 20% 23% 17% 9% 17% Nickel ($/t) 10,410 11,972 11,495 12,865 13,596 13,393 13,938 MoM - 6% -4% 12% 6% -1% 4% YoY 8% 8% 5% 29% 28% 31% 45% Zinc ($/t) 2,891 3,229 3,196 3,442 3,533 3,269 3,188 MoM - -1% -1% 8% 3% -7% -2% YoY 38% 26% 20% 27% 24% 18% 22% Gold ($/oz) 1,259 1,282 1,267 1,332 1,331 1,327 1,335 MoM - 0% -1% 5% 0% 0% 1% YoY 1% 4% 10% 12% 8% 8% 5% Source: Bloomberg, MUFG Bank, Strategic Research Division Mining Monitor 11 May

5 2. Iron Ore Chern Woon Lam Strategic Research Division (Singapore) MUFG BANK, LTD. Mining Monitor 11 May

6 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Iron Ore 1) Price Trends Prices traded sideways in April, sustained by improving demand post-steel production cuts and declining supply. Cautious near-term outlook given weakening Chinese import demand. In April, iron ore prices traded broadly sideways and ended the month higher at $63/t compared to $61/t at the end of March. Meanwhile, the average price of $63/t in April was -6% lower than March s $67/t. Prices were sustained by improving demand in spring after steel production cuts were lifted. Supply also declined in April. Chinese iron ore port inventories has eased slightly from its peak of 162mn tons to 159mn tons in the last week of April. We are cautious on the near-term outlook. Amid slowing Chinese construction and infrastructure activity, Chinese imports of iron ore fell by - 10% YoY in March. Despite the recent easing, port inventories remain near record highs, posing continued supply pressure. As steel mill profitability remains under pressure, we expect some shift towards lower-grade and cheaper iron ore by steelmakers. Iron Ore Prices and Inventories China Iron Ore Port Inventory (RHS) Iron Ore Fines 62%, CFR China Import Spot Price (LHS) ($/t) (Mt) Source: Bloomberg, MUFG Bank, Strategic Research Division Mining Monitor 11 May

7 2. Iron Ore 2) News Flow China s war on pollution fuels state takeover of heavy industry 23 April, 2018 China s push to curb pollution and excess capacity in steel is also consolidating government control in the industry. The share of steel capacity owned by the state rose to 67% in 2017 from 60% in While the reforms have boosted corporate profits and stabilized debt growth, the private sector is at risk of being crowded out. 80% of the 50mn tons of steel capacity cuts in 2017 occurred at private steel mills while 75% of additions occurred at state enterprises. BHP lowers target for iron ore output 18 April, 2018 BHP Billiton has lowered its target for iron ore output in the year ending June The world s top miner said its recent quarterly production missed estimates due to impact from Cyclone Joyce and unplanned car dumper maintenance. The guidance for full-year iron ore output was lowered to mn tons from a previous forecast of mn tons. However, the company expects to lift output to 290mn tons by mid-2019 as it has received regulatory approval to increase capacity at its Port Hedland operations. China to allow foreign investors to trade iron ore futures 13 April, 2018 China will allow foreign investors to trade iron ore futures on the Dalian Commodity Exchange from 4 May, according to the China Securities Regulatory Commission. This continues China s efforts in liberalising its commodity markets. The county is the world s largest importer and consumer of iron ore and policymakers want to develop the futures market as hubs for setting prices. Source: Various sources, MUFG Bank, Strategic Research Division Mining Monitor 11 May

8 3. Coal William Cheung Strategic Research Division (Hong Kong) MUFG BANK, LTD. Mining Monitor 11 May

9 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Coal 1) Price Trends Average coking coal price fell in April due to worries about weak steel demand and trade tension in China. Average thermal coal price held backed by restocking demand in China and rise in coal use in other Asian countries. Average global coking coal price fell by 14.0% from previous month to $188/ton in April. The price was pressured by worries that demand for steel in China may be weaker than expected during the period. Also, worries over trade tension between China and the United States have negative impact on investor sentiment, which put further downward pressure on price. Average global thermal coal price was almost flat, holding up at $93/ton in April. The price was supported by restocking activities by utilities in China after the Chinese Lunar New Year. Elsewhere in Asia, coal demand in Korea remained strong as more than 40% of the country s nuclear generation was offline. Also, India and Japan have seen robust use of coal during the period. Overall, thermal coal price was defying its typical seasonal slowdown in April. Coal Prices ($/t) Spot Price (Coking Coal) Spot Price (Thermal Coal) Source: Bloomberg, MUFG Bank Strategic Research Division Mining Monitor 11 May

10 3. Coal 2) News Flow Strong Asian demand continues to hold up thermal coal market 27 April 2018 Asian thermal coal demand is defying its typical seasonal slowdown, with price holding up around $100/ton in April Restocking activities by utilities in China after the Chinese Lunar New Year remained strong, as coal imports jumped by 20% year-on-year in March While in other parts of Asia, coal imports by South Korea also was resilient, as more than 40% of the country s nuclear generation was offline, which has driven the need for coal use. Also, India and Japan have seen robust use of coal during the period. As a result, benchmark Australian thermal coal price stood at $93.4/ton on 27 April 2018, which was the highest seasonal level in five years and $15/ton above the five-year average price. China sets 2018 targets for cutting coal capacities 23 April 2018 China s NDRC (National Development and Reform Commission) has announced the capacity reduction target for coal. The country top economic planner said coal capacity is expected to be cut by 150 million tons in This year marks the third year of China s overcapacity reduction program, which has focused on coal and steel sectors. In 2016 and 2017, coal capacity in China was reduced by 250 million tons and 170 million tons respectively. If the 2018 target is met, the initial goal set in 2016 to remove coal capacity by 500 million tons in three to five years will be achieved ahead of schedule. Apart from capacity cut, the Chinese government will focus on zombie companies in coal industry that have stopped production and suffered losses for years. NDRC emphasized that financial institutions should no longer lend money to these companies. China imposes restrictions on coal imports at eastern and southern ports 16 April 2018 Several ports in eastern and southern China have introduced controls on coal imports, ranging from bans on unloading to tightening customs clearance. For example, Zhoushan port near Shanghai is restricting the number of vessels allowed to dock, while Xiamen, Quanzhou and Meizhou ports in Fujian province would no longer be able to receive any coal imports. It is unclear how severe these restrictions are, however, it is certain that the Chinese government aims to restrict growth in coal imports in order to encourage domestic production and support domestic coal price, according to Reuters comments. News of restrictions boosted domestic price with benchmark thermal coal future on the Zhengzhou Commodity Exchange rising almost 3% to $90.9/ton (or RMB570.2/ton) on 16 April China coking coal sinks nearly 2% on slow demand and trade argument 12 April 2018 Coking coal price fell almost 2% to $193/ton on 10 April 2018 pressured by worries that demand for steel in China may be weaker than expected during the period. According to CRU, a global consultant on metal, mining and fertilizer industries, there is a sustained decrease in steel inventories at Chinese traders, however, a large scale improvement in steel demand has not been observed so far. Also, worries over trade tensions between China and the United States have negative impact on investor sentiment, as China s commerce ministry said trade negotiation with the United States would be impossible. This put further downward pressure on price, CRU said. Source: Various sources, MUFG Bank Strategic Research Division Mining Monitor 11 May

11 4. Copper Katia Tavarez Strategic Research (NY) MUFG UNION BANK, N.A. Mining Monitor 11 May

12 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Copper 1) Price Trends Copper prices regain some ground, but remain bound to familiar ranges. Copper prices regained some ground in April, but still remain bound to the $6,500/t to $7,300/t range. Market sentiment improved somewhat evident in positioning at exchanges. According to CFTC data, managed money net longs rebounded modestly in April following their sharp decline in March. Also helping was a drawdown in copper inventories at LME and SHFE warehouses. Labor contract negotiations in Chile have so far settled without major hitches, but with the bulk of the negotiations still pending, supply disruption remains a threat to balanced fundamentals in ($/t) 12,000 10,000 8,000 6,000 4,000 2,000 Copper Prices and Inventories COMEX Inventories (RHS) SHFE Inventories (RHS) LME Inventories (RHS) LME Spot Price (LHS) (Kt) 1,200 1, Source: Bloomberg, MUFG Union Bank Strategic Research Mining Monitor 11 May

13 4. Copper 2) News Flow No early labor agreement reached at Escondida 26 April, 2018 Chile s Escondida mine, the world s largest copper mine, noted that early contract negotiations with union workers ended without an agreement, pushing out the negotiations to June as per the original schedule. Back in March, the union accepted an offer to start negotiations with mine owner BHP earlier than planned in an effort to avoid another strike. After the 44-day strike that took place last year, the union agreed to extend the previous contract for 18 months, until July 31, with contract discussions set to begin no later than June. Freeport shares fall 14 percent on Indonesia environment demand, lower guidance 24 April, 2018 Freeport shares fell more than 14 percent after the company revealed heavy environmental demands from the Indonesian government, which wants to change where the miner deposits tailings. The market took the news as a sign that the ongoing divestment discussions between the Indonesian government and Freeport could drag on longer. During the first quarter earnings call, CEO Richard Adkerson told analysts that Freeport was surprised by shocking and disappointing environmental claims from the Indonesian Ministry of Environment and Forestry. Nobody could mine this ore body in consistency with these decrees. You just physically can t do it. Freeport also lowered its copper sales guidance for 2018 and 2019, and raised its outlook for costs. Chinese copper imports rise in March 13 April, 2018 In March, China imported 309Kt of refined copper (+34.6% m-o-m, +5.7% y-o-y). So far this year, Chinese refined copper imports have held up relatively well, with refined imports up 6 percent year-to-date amid tighter regulations that have resulted in a 40% drop in scrap imports and a higher import demand for copper in other forms. Source: Various sources, MUFG Union Bank Strategic Research Mining Monitor 11 May

14 5. Aluminum Erik Lambert Strategic Research Division (London) MUFG BANK, LTD. Mining Monitor 11 May

15 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Aluminum 1) Price Trends Aluminum prices shot upward as US sanctions on Russian producer Rusal drove expectations of market tightness. Aluminum prices spiked in April, ending the month up nearly 14%, following the announcement of US sanctions against Russian aluminum producer Rusal. Rusal s market position (responsible for around 7% of global production) led to speculation that aluminum imports to Western countries could be displaced. Prices continued to rise throughout April on supply concerns, and were boosted later in April as the LME suspended trading of aluminum from Rusal in order to avoid the sanctions. However, prices fell sharply later in April as the US Treasury Department signalled it may lift or limit sanctions if Rusal s owner, Oleg Deripaska, relinquished control of the company. The Treasury also extended market participants deadline to complete business with Rusal, in order to avoid sanctions, by five months, to October This drove sharp price declines, as the longer timeframe could allow the reorientation of Rusal s aluminum exports to countries not impacted by the sanctions (in the Middle East and Asia). Mining Monitor 11 May Aluminum Prices and Inventories ($/t) LME Inventory (RHS) LME Spot Price (LHS) 4,000 3,000 2,000 1,000 0 Source: Bloomberg, MUFG Bank Strategic Research Division (Kt) 8,000 6,000 4,000 2,000 0

16 5. Aluminum 2) News Flow Aluminium prices, US premiums jump after US Russian sanctions - 06 April, 2018 Aluminum prices rose as traders were caught off guard by US announcements to sanction Rusal, a major aluminum producer. LME spot prices were up 2%, while the premium (i.e. the surcharge for immediate delivery of aluminum from US warehouses) jumped 3% to 18 cents per pound, the highest level reached on the CME Exchange. Prices were influenced by concerns that Russian aluminium imports to the US could be restricted, while buyers of Russian aluminum could also be restricted. Russia is the second largest aluminum supplier to the US, behind Canada. Analysts expected greater volumes of Australian and European aluminum to come to the US, whereas Russian aluminum could be diverted to Europe and Asia. Aluminum premiums had already doubled in 2018 following US announcements of import tariffs. China s aluminium exports break records with Rusal boost still ahead 13 April, 2018 Chinese aluminum exports rose to a record high level in the first quarter of China exported 1.27m tonnes of aluminum in the first quarter, up 20% on the same period in There are expectations that increased Chinese aluminum exports could fill a gap in global markets as aluminum from Rusal, which has been hit by sanctions, is displaced from several Western markets. Aluminium falls on US signals over Rusal sanctions 23 April, 2018 Aluminum prices fell as much as 10% as the Trump administration signalled it may ease sanctions on Rusal. The US Treasury Department said it may reduce or completely lift sanctions on Rusal if Russian billionaire Oleg Deripaska, a target of the sanctions, sold his stake in Rusal. A range of industries including the aerospace and auto sectors, depend on Rusal for alumina supplies, and there were concerns the sanctions could significantly raise costs for these sectors. Alumina prices had risen up to 80% since the announcement of the sanctions. Source: Various sources, MUFG Bank Strategic Research Division Mining Monitor 11 May

17 6. Nickel Erik Lambert Strategic Research Division (London) MUFG BANK, LTD. Mining Monitor 11 May

18 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Nickel 1) Price Trends Nickel prices were driven higher by US sanctions concerns, although these concerns have eased leading to a pullback to previous levels. Nickel prices spiked in mid-april above $15,000/tonne, a level not achieved since early Prices were up as much as nearly 15% compared to early April due to speculation that US sanctions on Russian companies could reduce global nickel supply, before falling back to earlier levels and ending the month up only around 2.5%. After US sanctions against Russian aluminum producer Rusal caused a spike in aluminum prices, speculation that future sanctions could be applied to Norilsk Nickel, a Russian nickel producer with major global operations, caused nickel prices to spike. As the US Treasury signalled an easing of sanctions in late April, concerns that the Treasury may apply new sanctions on Norilsk Nickel abated; this led to a sharp decline in nickel prices. After the pullback, there was increased awareness in the market that nickel was not as vulnerable to the US sanctions as aluminum was. ($/t) 40,000 30,000 20,000 10,000 Mining Monitor 11 May Nickel Prices and Inventories LME Inventory (RHS) Source: Bloomberg, MUFG Bank Strategic Research Division LME Spot Price (LHS) (Kt)

19 6. Nickel 2) News Flow Philippines Duterte Warns Open-pit Mining Ban Could Continue Until April, 2018 Phippines President Rodrigo Duterte has threatened to ban open-pit mining in 2019 if mining companies do not follow through on required tree-planting projects. Duterte s position has raised concerns regarding the nickel supply from the Philippines, which has become the top exporter of nickel ore to China as Indonesia banned ore shipments in There has been a ban on open-pit mines in place in the Philippines since April 2017, affecting 26 mines including the US$5.9 billion Tampakan copper and gold project. The mining council of the Philippines is expected to release its review of the ongoing suspension of open-pit mining licenses in August of Nornickel exec says in talks with battery makers on investments, cooperation - 18 April, 2018 Norilsk Nickel (Nornickel) is in discussions with battery makers regarding the possibility of investments in Nornickel s mining assets. Anton Berlin, marketing director for Nornickel, noted having discussions with battery makers regarding future cooperation, including potentially creating downstream joint ventures in China. The announcement comes as Chinese battery makers are looking to purchase equity stakes in producers of key ingredients in EV batteries (nickel, cobalt, lithium) that are based outside of China. Berlin noted that given growing global demand for EV battery materials such as nickel, miners have more leverage to secure agreements that are more favourable than simple offtake agreements, and instead seek to attract investment. LME Nickel Follows Aluminum In Price Slide 26 April, 2018 Nickel reversed its large gains of early and mid-april, falling almost 11% as the US Treasury signalled willingness to ease sanctions on aluminium producer Rusal. The reversal of nickel prices, which spiked following sanctions on Rusal, is positive for electric vehicle manufacturers, which are increasingly looking to utilize nickel in the production of lithium-ion batteries. Source: Various sources, MUFG Bank Strategic Research Division Mining Monitor 11 May

20 7. Zinc Erik Lambert Strategic Research Division (London) MUFG BANK, LTD. Mining Monitor 11 May

21 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Zinc 1) Price Trends Zinc prices trend lower amid an uptick in inventories, and a ramp up in mined supply. Zinc prices continued to move lower in April, down almost 5% for the month. Rumours that China s State Reserve Bureau would sell stockpiled zinc undermined trading sentiment in early April and led some traders to sell the metal. Additionally, a 10% rise in LME inventories in late April, driven by a single large delivery, reinforced sentiment of market weakness and led to a price decline of almost 2%. The fundamental backdrop for some near-term weakness in zinc prices however continues to be increasing production levels at mines, as miners have ramped up production in response to higher long-term zinc prices. This is expected to translate into greater supply of refined zinc metal. In April miner Vedanta reported a 3% quarter-on-quarter rise in its Indian production for Q1, and is expected to ramp up zinc production over the next three to six months. Other companies reporting results included MMG, which doubled Q1 production compared to 2017, and Goldcorp which reported 2017 production increasing by 37%. Mining Monitor 11 May Zinc Prices and Inventories ($/t) LME Inventory (RHS) LME Spot Price (LHS) 4,000 3,000 2,000 1,000 0 Source: Bloomberg, MUFG Bank Strategic Research Division (Kt) 2,000 1,500 1,

22 7. Zinc 2) News Flow Aluminium slides on profit-taking, surging inventories 12 April, 2018 While metals including aluminum fell, zinc prices declined 4% as market rumours circulated that China s State Reserve Bureau (SRB) was selling stockpiles of zinc. SRB did not comment on the rumours. Hindustan Zinc reports 18% yoy rise in zinc production for FY18 12 April, 2018 Hindustan Zinc reported a rise of 18% year-on-year in FY18 of zinc production. The company viewed zinc prices as remaining stable over the medium term, due to a continued market deficit. BHP raises fiscal 2018 zinc production guidance at Antamina 19 April, 2018 Miner BHP increased guidance for zinc production from its Antamina mine in Peru for the fiscal year ending June 30, 2018, to 110,000 tonnes from 100,000 tonnes. The improved production guidance was partly due to the company producing higher grades of the metal ore. Source: Various sources, MUFG Bank Strategic Research Division Mining Monitor 11 May

23 8. Gold Katia Tavarez Strategic Research (NY) MUFG UNION BANK, N.A. Mining Monitor 11 May

24 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr Gold 1) Price Trends Gold prices feel some downside pressure as the US dollar strengthens. Gold prices remain bound to the $1,300 to $1,360/oz range of recent months. But over the past two weeks, a firmer US dollar and easing geopolitical concerns have been pressuring prices lower. Gold is, for the third time since January, testing the $1,300/oz psychological support. Further US dollar strengthening may be need for a push below that level. Fund positioning rose, but only slightly, with money manager net length at the COMEX remaining near their lowest level this year. Gold ETF holdings also rose, reaching five year highs. ($/oz) 2,000 1,800 1,600 1,400 1,200 1, Gold Prices, ETF Holdings, DXY Index and 10Yr US TIPS Yield ETF Holdings (RHS) Gold Price (LHS) Source: World Gold Council, GFMS, Bloomberg, MUFG Union Bank Strategic Research Note: ETF Holdings are expressed in aggregate tons. Index DXY Inverse (LHS) 10Yr UST Yield (RHS) (%) (t) 2,800 2,500 2,200 1,900 1,600 1,300 1, Source: Bloomberg, MUFG Union Bank Strategic Research Mining Monitor 11 May

25 8. Gold 2) News Flow Barrick will now focus on growth 23 April, 2018 Barrick Gold said that it is done with asset sales to reduce debt, and will instead use funds from future sales for growth or to pay dividends. Barrick reported above-expected adjusted earnings, and noted that its focus would increasingly be on the growth of its projects and operations in Nevada and the Dominican Republic. It also noted that it had suspended work on a prefeasibility study on its large Pascua-Lama gold and silver project in South America, as it does not meet its investment criteria. In a statement, Barrick said that it continue to evaluate opportunities to de-risk the project while maintaining Pascua-Lama as an option for development in the future if economics improve, and related risks can be mitigated. The company s production has declined around 40 percent over the past decade, and following two credit upgrades in 1Q 18, it appears that Barrick is ready to focus on growth. Newmont beats estimates in 1Q 9 April, 2018 Newmont reported a higher-than-expected quarterly profit as higher gold prices provided a boost to sales that increased 7.5 percent in 1Q 18 to $1.82 billion despite a slight decline in production volumes. The company said total gold volumes fell 2 percent to 1.21 million ounces. Even so, this level is higher than rival Barrick s 1.05 million ounces that it recorded over the same period and 2019 gold production guidance was unchanged at million ounces cash cost guidance was also unchanged at $ ounces for Net debt rose 22% versus last quarter; nonetheless, annualized net debt-to-ebitda ratio remains low at under 0.5x. Source: Various sources, MUFG Union Bank, Strategic Research Mining Monitor 11 May

26 Appendix : Mined Commodities Price Forecasts by Strategic Research Division as of 24 April Yr Avg 1Q 2Q (f) 3Q (f) 4Q (f) 1H (f) 2H (f) 1H (f) 2H (f) Iron Ore ($/t) YoY 21% -16% 10% -9% -1% -10% -6% -3% 0% QoQ - 11% -5% -3% -3% Coking Coal ($/t) YoY 30% 38% -5% -12% -21% -29% -14% -8% -6% QoQ - 15% -21% -9% -5% Thermal Coal ($/t) YoY 34% 23% 16% -2% -9% -11% -11% -10% -4% QoQ - 4% -10% -2% -1% Copper ($/t) 6,192 6,996 6,820 6,800 6,850 6,810 6,850 6,950 7,050 YoY 27% 20% 20% 7% 0% -1% 0% 1% 3% QoQ - 2% -3% 0% 1% Aluminum ($/t) 1,968 2,154 2,090 2,110 2,163 2,163 2,146 2,179 2,089 YoY 23% 16% 10% 5% 3% 2% 0% 1% -3% QoQ - 2% -3% 1% 3% Nickel ($/t) 10,412 13,284 13,369 13,729 13,970 14,288 14,502 14,105 14,498 YoY 8% 29% 45% 30% 20% 7% 5% -1% 0% QoQ - 15% 1% 3% 2% Zinc ($/t) 2,893 3,415 3,335 3,301 3,139 3,045 2,955 2,847 2,772 YoY 38% 23% 29% 11% -3% -10% -8% -7% -6% QoQ - 6% -2% -1% -5% Gold ($/oz) 1,259 1,330 1,315 1,300 1,280 1,265 1,250 1,250 1,250 YoY 1% 9% 5% 2% 0% -4% -3% -1% 0% QoQ - 4% -1% -1% -2% Source: Bloomberg, MUFG Bank, Strategic Research Division, MUFG Union Bank, Strategic Research Mining Monitor 11 May

27 Disclaimer This report is intended only for information purposes and is not intended to constitute an offer or solicitation to buy or sell securities or any other products. Contents of the report are information as at publish date and are subject to change without notice. This report has not been prepared to provide legal, taxational, financial, market-judgmental, or any other advises on propriety of any transactions. In taking any action, each reader is requested to act on the basis of his or her own judgment upon consulting certified lawyers, accountants or other professionals regarding the accuracy, validity and reliability of information appeared in this report. MUFG Bank is regulated by the Financial Services Authority. No part of this publication may be reproduced, stored in a retrieval system or transmitted without the prior written permission of MUFG Bank Limited. Copyright 2018 MUFG Bank, Ltd. All rights reserved. Publisher:MUFG Bank, Strategic Research Division 2-7-1, Marunouchi, Chiyoda-ku, Tokyo , Japan Contact details for inquiries : Ryosuke Ohno (TEL: riyousuke_oono@mufg.jp) Mining Monitor 11 May