Commodity Wrap - Platinum, Aluminium, Soybean, Sugar

Platinum

• Platinum prices breaks above the $1000/ounce mark for the first time since January 2018

• Precious metal tests limits of the trading range from 2017-2018. $1150-1180 area could be the next target

• Significant pick-up in demand from ETFs as well as demand for the physical commodity in Q2 and Q3 2019

• Minor deficit in 2019. Platinum market is expected to swing back to surplus in 2020, due to lower investments

• Metals from the platinum group are enjoying strong price gains. Palladium trades at around $2500/ounce while rhodium jumped above $7000/ounce

• Production in South Africa dropped due to power shortages. Production of platinum group metals dropped 13.5% YoY in November

• Palladium-to-platinum ratio at the highest level in history

Demand for platinum is expected to decline in 2020, mostly due to the drop in investments. Source: Platinum Investment

ETF demand was strong in the first half of 2019 but has stabilised in the second half. On the other hand, speculative demand is on the rise. Source: Bloomberg

Speculative demand for platinum is picking up. Market seems to be strongly overbought. Source: Bloomberg

Platinum tests peaks from 2017 and 2018. The next resistance can be found at 78.6% Fibo level of the downward move started in 2016. Source: xStation5

Aluminium

• Price is a trading within a 3-month long range with an upper limit at $1800/tonne

• Analysts do not expect significant rebound in aluminium demand after the Chinese New Year

• Production dropped in 2019 but new projects undertaken in China could boost capacity by 1 million tonnes

• Copper pulls back as fears mount that new coronavirus could slow global growth

• Aluminium gained recently as stockpiles dropped significantly

Aluminium stockpiles dropped significantly throughout 2019. However, at the end of 2018 they were at the highest level in a few years. Source: Bloomberg

Aluminium tests key resistance at $1800/tonne. Pullback on the copper market can be seen as a risk for aluminium as it could set the tone for the whole base metals segment. On the other hand, aluminium looks to be strongly correlated with EURUSD therefore USD weakness could pose a chance for aluminium prices. Source: xStation5

Soybean

• Sino-US trade deal does not lift uncertainty off soybean

• China may base level of purchases on demand rather than quantities agreed on in a deal

• Lower global stockpiles at the start of the season are being offset by expected increase in production

• No major positive price reaction is expected on the soybean market in response to increased purchases by China

• Increasing imports of the US soybean would require China to limit imports from Argentina and Brazil. Net effect on global demand is expected to be zero

US soybean exports to China do not look too impressive at the beginning of the year. Source: Bloomberg

Soybean pulls back from the important resistance zone. Source: xStation5

Sugar

• Strong price gains on the sugar market over the past few months can be ascribed to supply issues in India and Thailand

• Sugar mills in Indonesia halted production at the end of the month due to lack of commodity to mill

• Indonesia is expected to increase raw sugar imports as it struggles to meet domestic demand

• The latest drop in oil prices may act as a brake for sugar speculative demand

• On the other hand, net speculative positioning is not sitting at extreme levels

Net speculative position on sugar is still far off extreme levels observed in 2016. Source: Bloomberg

Sugar trades at the highest level since the end of 2017. However, one should also pay attention to the situation on the oil market as lack of rebound there could trigger a pullback on the sugar market. Source: xStation5