This is probably one of the most important charts I’ve seen in the last weeks.
Commodities are the most underweight relative to bonds since March 2009.
https://twitter.com/TaviCosta/status/17 ... 3186475295
The anticipated retreat in the US dollar and interest rates in 2024 will be key positive drivers for gold, while concerns on overall adherence to the production cuts will likely lead to higher crude oil prices (CPO).
Maintained a negative outlook for London Metal Exchange copper following weak construction demand from China and the risk of increasing surplus in refined balance.
BASE metals are in for a subdued 2024 with weak demand damping any bullish supply pressures.
Only copper and aluminium are expected to see average higher prices this year and expected gains relative to 2023 are highly modest at 2.8% and 2.1% respectively.
Zinc, lead and tin are all expected to decline in price, albeit to an equally modest degree.
Nickel is the stand-out. It probably boasts the strongest demand profile thanks to its use in electric vehicle batteries, but is being swamped by a wave of new production from Indonesia.
High interest rates, manufacturing recession in many Western economies and a stuttering Chinese growth engine are outweighing any bullish supply narrative.
Major supplier of iron ore, coal and copper.
Steady first-half result of US$6.6bil profits, the same as the year-earlier period.
US$5.7bil in impairments and charges booked, relating to writing down the value of nickel business in Western Australia state and charges against the Samarco iron ore operations in Brazil to cover for the dam collapse in 2015.
China is transitioning from being the main driver of growth in demand for commodities, to being a steady source of demand.
China had record iron ore consumption in 2023 and steel output was above one billion tonnes for a fifth straight year, numbers that allowed BHP to record a 6% rise in revenue growth.
Iron ore is BHP’s biggest product, accounting for 68% of the group’s underlying profits.
Long-held view that China’s steel production would sit at a plateau in the one to 1.1 billion tonnes per annum range in the first half of the 2020s.
India and South-East Asia are also expected to increase steel output in coming years, which may offset any decline in China.
Copper demand growth in China to continue, albeit at a somewhat slower pace than the 6% year-on-year rate seen in calendar year 2023.
Overall, BHP’s outlook for its major commodities remains tied to the fortunes of China, with a side-helping of India.
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