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Earlier this month, Chinese steelmaker giant Baowu released commentary that saw iron ore prices drop when it declared a “long and harsh winter” ahead for iron ore miners and related industries. That stormfront has already hit Australian shores. This week, we saw CuFe – a small iron ore miner on the ASX (for whom the elemental symbol for iron forms part of its name) – ditch its iron ore project.
This feels a lot like the start of the lithium and nickel downturns respectively, where those companies with the least cash were the first to buckle. Fenix Resources could be another one to watch – shareholder returns are down nearly -38% over the last month; the company is another iron ore miner on the small side of things (relative to our majors, anyway.)
BHP pointed towards similar struggles in its earnings report this week. While it revealed internal analysis at the Big Australian suggests the Chinese property market will stage a partial recovery over the next 12 months – good news for iron ore demand fundamentals – there was perhaps a more telling clue. BHP used the word “copper” more than 70 times in its FY24 report – “iron ore” was mentioned less than 15 times.
But perhaps of most concern was a rebuke from China’s official metal market journal China Metallurgical News taking aim at iron ore traders. When prices climbed back above US$100/tn this week, it went as far to describe the gains as “irrational.”
Looking at the Australian economy outside of exports, we got the latest monthly CPI data this week, and July came in at 3.5% vs 3.8% in June. While the easing was appreciated by the market, the quarterly data series is far more in-depth and most analysts will be waiting to see that instead.
We got private sector expenditure data this week for Q2 of CY2024; Oxford Economics’ Sean Langcake sees a risk that Australian Q2 GDP growth was negative. Q1 growth was 0.1%; a “technical recession” kicks in at two consecutive negative quarters – but try telling anybody accessing food banks we aren’t currently in a recession. Or anybody else, really.
Those without mental defences against negative headlines may desire to argue the point, but looking at the last four years of insolvencies, it feels like deliberate ignorance to suggest we’re not in a recession for all intents and purposes. Consumer and business sector sentiment has definitely suggested that for years in a row, now.
In the US, we got somewhat more meaningful economic commentary from Democratic nominee Kamala Harris this week; in an interview with CNN, she said that strengthening the American middle class would be her main focus. Read: cost of living, the predominant issue on most American voters’ minds. Harris has also vowed not to ban fracking.
Harris continues to gain a lead on Trump in the polls – it looks like the world is tired of Trump’s brand of mockery, which is perhaps because he’s starting to have more and more Biden moments. Look up his speech about sharks and batteries for an example.
FInally, the three big stories that took HotCopper users’ attention this week were Pilbara Minerals’ FY24 earnings – no surprises, the company’s bottom line took a hit on lower lithium prices – followed by Strike Energy’s declaration of raised mud gas levels downhole Erregulla Deep-1, and, Spartan Resources’ 27m interception grading at nearly 40g/t gold.
Hotcopper Top Watched this Week
- Pilbara Minerals FY24 earnings
- Strike hits raised gas levels in early-stage evidence downhole Erregulla Deep-1
- Spartan Resources posts 27m intercept grading at 39g/t gold
Australian Economy
- Canberra whacks 270K/y cap on foreign student intake
- Aus monthly inflation eases to 3.5% vs 3.8% MoM; housing inflation biggest driver
- Oxford Economics says Oz Q2 GDP growth could be negative; Q1 just +0.1%
International Economies
- China issues warning over iron ore prices hitting US$100/tn; seen as irrational
- Kamala Harris vows not to ban fracking in US if elected
- UK shop prices dip for first time in 3 years
- Zambia wants to start a state-owned firm holding 30% in all crit-min mines
Australian Equities
- Small iron ore miner CuFe ditches iron ore project as low prices bite
- Commonwealth Bank says it will continue funding gas projects despite earlier claims
- Andrew Forrest chucks $22M at small hydrogen player after shuttering FFI
International Equities
- US Dollar General heads for worst day ever as low-income consumers struggle
- Company that owns Temu loses a third of its market value in earnings season
- Temu stock crash indicates a weakening Chinese consumer: Bloomberg
- Alphabet’s Google sued by Yelp weeks after monopoly ruling
- NVIDIA shrugs at sell-off; considers contributing to OpenAI funding round
Commodities
- The word “copper” appeared in BHP’s FY report 78 times – “iron ore” just 14
- BHP still expects copper to remain in surplus through 2025
- BHP also expects China’s property market to recover in next 12mth
