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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities

The Big Plan to Help Developing Nations Go Green Is Foundering

This article for Bloomberg may be of interest to subscribers. Here is a section:

Climate finance is likely to be a focus of December’s COP28 meeting in the United Arab Emirates, with the oil-exporting host saying it will address ways to fund the energy transition in poorer countries that simultaneously need to expand access to electricity. That adds pressure on industrialized nations and oil producers to step up. 

While Vietnam’s $15.5 billion and Indonesia’s $20 billion planned JETP agreements are at an earlier stage, they’re also much bigger and potentially more complex. A smaller deal envisaged with Senegal is complicated by its plan to start producing gas.

“We could have done an amazing, amazing model right here in South Africa,” said Tasneem Essop, executive director of Climate Action Network International, which represents over 1,900 climate-focused organizations in more than 130 countries. But “we got embroiled in the politics of it all.”



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'The World Changed 12 months ago'

Thanks to a subscriber for this summary of an interview with Zoltan Pozar. Here is a section: 

Rearming, Reshoring, Energy transition.
Taken in combination examples of these would be:
• Building factories for batteries, Chips, subsidizing energy transitions,
• Military expansion in Japan, Europe etc, inventory mgt increases. Onshoring of factories etc
• All of these amounts are government money. It will be matched by company money as well

This will cause Two Outcomes
1. Commodity prices will remain high from constrained supply and increased expenditures
2. We are at the beginning of a domestic infrastructure investment renaissance

Notable: ‘The investment portion will be quite powerful, perhaps to the point of us not even having a recession’
The 3 Gov’t themes will push counter the recessionary forces that undoubtedly accompany rate hike regimes. Consumption will get crushed. But investment will grow.

All these things are being done with a sense of urgency as (economic) national security and sovereignty is a big factor in each.. we need to do it yesterday



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Perseus Maintains 2H Gold Production Forecast

This note from Bloomberg may be of interest. Here is a section: 

Perseus reaffirmed its gold production forecast for the second half-year.

SECOND HALF FORECAST
Still sees gold production 230,000 to 260,000 oz
Still sees all-in sustaining costs/oz $1,000 to $1,200

YEAR FORECAST|
Still sees gold production 498,370 to 528,370 oz
Still sees all-in sustaining costs/oz $1,000 to $1,100

THIRD QUARTER RESULTS
Gold production 130,275 oz, -0.5% q/q
All-in sustaining costs/oz $971, -1.2% q/q
Gold sales volume 135,111 oz, -33% q/q

COMMENTARY AND CONTEXT
Perseus’s strong operating performance is forecast to continue in the June quarter with both gold production and cost guidance for 1H and FY expected to be achieved strong quarterly cashflows further strengthened Perseus’s financial position with available cash and bullion of $471 million, zero debt, net cash and bullion balance increased by $66 million at quarter end
Development activities continued at Meyas Sand Gold Project with confirmatory and sterilisation drilling, Front-End Engineering and Design and site preparation, ahead of a possible FID during 2H 2023
Organic growth activities including Mineral Resource drill outs and feasibility studies for MSGP and Yaouré’s CMA Underground Project progressed on schedule; Results due in Sept. qtr



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EU Hydrogen Quotas Raise Global Demand For Green Molecules

This article from Bloomberg may be of interest. Here is a section: 

European Union (EU) lawmakers have agreed on the world’s first binding quotas for using renewable hydrogen (H2) and derived fuels. The March 30, 2023 rules will create significant demand for renewable H2, mandating existing industrial hydrogen users replace at least 42% of their demand with renewable H2. They also mandate at least 1% of transport energy to be H2-based.

Member states should ensure 42% of existing industrial H2 demand is renewable by 2030, rising to 60% by 2035. The industry quota targets companies such as fertilizer and methanol producers, but excludes refineries, which are covered under the transport mandate. Member states will be legally required to adopt this agreement as national law and the European Court of Justice will determine penalties for states that fail to comply.

In transport, fuel suppliers need to replace 5.5% of final energy demand with H2 or advanced biofuels, with a minimum target of 1% for H2-based fuels by 2030. BNEF expects the hydrogen share to be closer to the minimum goal as meeting the combined target using H2 alone would require extensive use of the molecule in road transport. Advanced biofuels had already reached a 2.1% share in transport by 2021.



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Rains Seen Hurting Start of Coffee Harvest

This article from Bloomberg may be of interest. Here is a section: 

Heavy rains are expected in both arabica and robusta producing areas this week, Climatempo meteorologist Nadiara Pereira says in a Tuesday report.

Increased rainfall and lower temperatures over robusta areas in Espirito Santo and southern Bahia may delay the final maturation phase of crops.

Heavy rains are expected for arabica areas in Sao Paulo and Triangulo Mineiro through Wednesday

Temperatures will fall in arabica region of southern Minas Gerais by the end of the week, though the risk of frost is low.

Rains could knock fruits off trees and in extreme cases cause them to ferment on the ground, HedgePoint analyst Natália Gandolphi says in report.

That would reduce uniformity of the beans and decrease quality of the crop for both varieties.



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Gold Climbs Toward a Record as Producer Prices Drop Unexpectedly

This article from Bloomberg may be of interest. Here is a section: 

“While the strong labour market trends and sticky core services inflation suggest a 25bp hike at the May FOMC, markets are increasingly looking toward the end of the hiking cycle, with cut timing also top of mind,” said Ryan McKay, a commodity strategist at TD Securities. 



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Pioneer Natural Resources stock jumps after WSJ report of merger talks with Exxon Mobil

This article from MarketWatch may be of interest. Here it is in full:

Shares of Pioneer Natural Resources Co. powered up 6.4% toward an eight-week high, to pace the S&P 500's premarket gainers, after the Wall Street Journal reported that the fracking company has held preliminary talks with Exxon Mobil Corp. over a possible acquisition. Exxon's stock fell 0.9% while futures for the S&P 500 shed 0.5%. ahead of Monday's open. Citing people familiar with the matter, the WSJ report published Friday said the discussions have been informal, but with Exxon flush with cash after recording record profits in 2022, the oil giant has been exploring options. Pioneer Natural's stock has lost 8.9% year to date through Thursday, while Exxon shares have tacked on 4.3% and the S&P 500 has gained 6.9%.



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India May Not Allow More Sugar Exports This Year: Food Secretary

This note from Bloomberg may be of interest. Here it is in full 

India may not approve additional sugar exports in the year ending September, Food Secretary Sanjeev Chopra said at a briefing Thursday.

Country’s sugar production is likely to be 200,000 to 400,000 tons lower than target this year

NOTE: India has already permitted 6m tons of exports this year, with potential for another 1m tons if production meets govt estimate

That looks unlikely now; an industry group said Wednesday that India’s October-March sugar output fell 3.3% y/y

Chopra said impact of unseasonable rains on wheat harvest will be marginal

Govt will likely meet its target of procuring 34.15m tons of wheat from the new crop



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Treasuries Reach Day's Highs After JOLTS Job Openings Slumps

This article from Bloomberg may be of interest. 

Treasury 10-year note futures spike to fresh session highs after February JOLTS job openings declined more than estimated with January revised lower. At the same time February factory orders missed estimates for headline and ex-transport readings. 

US 10-year yields flip to richer on the day into the move as 10-year futures top at 115-28, with around 60k 10-year note contracts changing hands over 3-minute period

Belly- and front-end-led gains steepen 2s10s, 5s30s spreads onto session wides, higher by 7bp and 4bp on the day

Fed-dated OIS for May meeting drops to around 15bp of additional hikes priced, giving up around 5bp of hike premium in the aftermath of the data



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Biden Has Limited Options to Respond to OPEC+'s Oil Cut

This article from Bloomberg may be of interest to subscribers. Here is a section: 

4: Export Curbs
Other levers the Biden administration has at its disposal include limiting the export of gasoline and diesel. The White House considered that option last year as a potential means to tame pump prices, which reached an all-time high in June, but it never pulled the trigger. Analysts said moving ahead with the curbs could backfire and actually lead to higher prices in some parts of the US.

“If we go into the summer with gasoline at $4 a gallon, I would think they would also revive consideration of product export restrictions,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official. “If this leads to an overtightening of the oil markets — as they say in the Navy, stand by for heavy rolls.”

Requiring oil companies to store more fuel in inside the US — mandatory stockpile requirements that were considered last year in response to previously low fuel inventories — is an option that could return to the table as well if gasoline prices remain high, McNally said.



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