Platinum and palladium were two of the biggest losers among commodities in the week ended March 20, with platinum prices down 22% to US$625 per ounce and palladium prices down 14% to US$1,702/oz from the week before.
The World Platinum Investment Council attributed decreased palladium prices to a combination of weakened Chinese demand, investors liquidating long positions to cover losses elsewhere, and BASF's development of new autocatalyst technology requiring less palladium, according to a March 20 note from BMO Capital Markets.
The industry group also flagged declining platinum demand from the jewelry sector, which may lead to a decrease in platinum consumption of approximately 100,000 tonnes per year and is expected to be exacerbated by the coronavirus outbreak and its effect on the broader commodities market.
Price ring
Silver prices on the London Metal Exchange took a 14.7% dive to US$12.38 per ounce on March 20 from US$14.52 on March 13, while gold prices inched down 2.6% to US$1,481.90/oz.
Only cobalt increased in price week over week, up 5.6% to US$28,500 per tonne. Other base metal prices decreased, with copper down 12.2% week on week to US$4,854/t, nickel slipping 9.5% to US$11,365/t, zinc decreasing 5.4% to US$1,879/t, and lead prices dropping 6.0% to US$1,672.50/t.
The S&P Global Platts IODEX 62% iron ore CFR North China price was US$86.55/t as of March 20, decreasing 4.9% from US$91.00/t on March 13.
Aluminum prices fell 5.8% to US$1,580/t.
Talking points
Metal-intensive value chains across North America and Europe are on track to replicate the path taken by China in February due to the spread of the coronavirus, with unprecedented demand shock expected to result in a supply reaction, according to BMO Global Commodities Research analyst Colin Hamilton.
Production will decrease as more workers and consumers are forced to stay home as part of broader efforts to arrest the spread of the virus, Hamilton said in a March 20 note. The analyst highlighted the automotive industry as an example, with the majority of producers in Europe and the U.S. announcing the curtailment of operations.
"Of course, downturns don't last forever, and if the metals industry can adjust quickly and prevent significant inventory build over and above that which has occurred in China already, it can benefit from the recovery," Hamilton wrote.
The Chinese government must enact stronger policies to stem the effects of the global spread of the coronavirus to its economy, according to investment bank Natixis. China's supply-demand recovery will be bogged down by disruptions to the global supply chain and a combination of weaker external and domestic demand, the investment bank said in a March 19 note.
To that end, the Natixis analysts said the People's Bank of China could enact certain unorthodox measures including fiscal subsidies on consumption, investment in infrastructure, and possibly relaxing restrictions on the purchase of real estate assets.
With a sharp drop in growth in the first quarter and the impact of the pandemic on the global economy, China's growth rate is not expected to exceed 3% in 2020 and could drop further if the pandemic spreads beyond the second quarter, Natixis estimated.
Market observers said in February that China's investment-driven economic model was nearing its limits, with the country's government focusing on deflating a local government debt bubble.
Financings
Nippon Steel Corp. and ArcelorMittal joint venture AMNS Luxembourg Holding SA entered a US$5.15 billion, 10-year term loan agreement with several banks, with proceeds to be used to fully refinance funds borrowed by the joint venture to acquire ArcelorMittal Nippon Steel India Ltd., formerly Essar Steel India Ltd.
Newmont Corp. received aggregate net proceeds of approximately US$985 million upon closing its public offering of US$1 billion in 2.250% senior notes due 2030, which will be used to fund the repurchase of its 2022 and 2023 notes, together with Goldcorp's 2023 notes.
PolyMet Mining Corp. agreed to issue up to US$30 million in unsecured convertible debentures to Glencore AG to secure funds for ongoing litigation related to its permits for the NorthMet copper project in Minnesota.
China Molybdenum Co. Ltd. raised 1 billion Chinese yuan through a short-term debt offering. The interest rate of the notes was fixed at 2.95%, with maturity set at 180 days.
Steelmaker Evraz PLC signed a US$750 million syndicated unsecured credit facility that will mature in 2025. The company will use the proceeds for general corporate purposes, including refinancing debt maturing in the first quarter of 2021.
Resolute Mining Ltd. secured a syndicated loan facility of up to US$300 million. The company will use the facility to refinance a US$63 million secured project loan facility provided by Taurus Funds Management Ltd. for the initial construction of the Mako gold mine in Senegal and to replace US$195 million of existing senior bank debt facilities.
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