Thursday, 5 November 2015

Morning Mumble: The Federal Reserve - Shooting Fish + Steel - the bottom is near! Bitcoins to Randgold with Glencore's mass garden leave project.


Good Morning,

For those having been up most of the night playing the "shooting fish in a barrel game" thanks to the Fed (without complacency). It was an opportunity to take the market reaction to Yellen's inferences on a "potential" December rate rise and short base metals. 


Iron Ore was more resilient, finding some form of support circa $47.5-48/t - we note the hefty discounts now being offered for sub 62% FE grades. One has a suspicion there's an "at any price seller in the market", perhaps requiring cashflow.

The U.S. Department of Commerce "cottoning on" (the phrase will be more poignant later in the year) to the subsidies Chinese are companies are getting. Not only were Angang Group Hong Kong Co. and Baoshan Iron & Steel Co. identified but, perhaps somewhat tongue in cheek a Baosteel Group Corp. spokesman said "the company’s operations are based on market forces." We'll cover it with, "of course they are governor!"

The Chinese labour intensity in metals processing has significant implications for central and regional governments. Especially some regions that have an over reliance upon the mills, processors and smelters (or associated services) + coal fired power stations to maintain some the status quo of employment. As such, there's been a repricing or energy discounts (development grants) and where possible a reduction in local business taxes to maintain the levels of employment

Only yesterday there was a discussion and opportunity to be educated on the benefits of bit coin, after some significant price movements. Before we get a telling off, we haven't become "all things knowing about the BitCoin" but today, it was rude not to attempt to short it only to realise the market was well ahead! 

It appears someone has recognised a slight liquidity/ramp potential. The FT explains it so much better than here, Bitcoin surges as Chinese flock to Russian fraudster’s site. (Izzy, Dan and Robin on the title). It won't do the bull case much good when the manipulation appears to be almost pyramid like...only time will tell. 

We had Randgold (RRS) reporting today with differing views on this this morning. Previously EMC has had a target of 4250, albeit the volte face being because of Ghana, where RRS still believe in exploring a JV. Why oh Why!? Returns were on the low side, with net cash, some production issues and the like...the market sold off on the news not helped by the dollar strength and fall of gold. 

Glencore could be the largest single funded garden leave project in Zambia.See: Glencore Can't Fire Workers at Zambian Unit, President Says. The company should be acknowledged for their hard work, but the space they operate should wisely taper back expectations, one near £2.80. 

Atb Fraser

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