** Quarterly Overview**

Q3 Overview 2022 – Q4 Outlook 2022 PDF

Q3-2022 Quarterly Commodity Spreadsheet

Base Metals & Industrial Commodities

Base Metals and Industrial Commodities Weekly Component Report PDF-11.30.2022

Base Metals and Industrial Commodities Weekly Component Report Spreadsheet-11.30.2022

Comments:

Lumber and LME aluminum prices moved lower, while uranium was unchanged since November 23. The Baltic Dry Index, iron ore and other base metals prices sans nickel moved to the upside over the past week.

LME copper, nickel, lead, zinc, and tin prices rose as of November 30, with nickel leading the way on the upside after last week’s double-digit percentage loss. LME nickel moved 3.22% higher, while three-month tin forwards rallied 2.68%. LME zinc edged 0.69% higher. COMEX copper futures and LME copper forwards were 3.30% and 0.31% higher respectively since the previous report because of the one-day lag in settlement prices. LME lead gained 1.96%, whilealuminum fell 2.04%. January random-length lumber futures fell 2.99% to the $419.10 level. Iron ore for January delivery rose 6.36%. The Baltic Dry Index moved 15.49% higher as the market perceived COVID-19 demonstrations in China as a sign the country would ease lockdowns, improving economic growth.

LME and COMEX copper inventories moved in opposite directions since the previous report. The combined copper inventories moved only 527 metric tons lower since November 22. Aluminum inventories fell 2.69% since last week. Tin stocks fell 3.90%, while nickel stocks dropped 4.76% lower. LME zinc stocks moved 1.55% lower, while lead inventories plunged 15.60% since last week. The dollar index moved higher, while bonds were lower. Base metals moved mostly higher as buying emerged after last week’s losses.  

Trends:

Short-term trends in the metals have turned slightly higher. Copper is the sector’s leader, and its long and medium-term trend remained bullish, while the short-term trend has been choppy along with the other base metals.

Interest rates and the dollar should continue to influence short-term trends over the coming weeks and months. The next significant event will be the December FOMC meeting. A 50-basis point hike may cause some buying to return to the industrial commodities, while a 75-basis point increase will likely be bearish.  Meanwhile, the industrial metal-related stocks and ETF products continue to attract buying.

Recommendations:

  • We are long FCX at $11.37. At $39.78, I rate the position a hold.
  • We are long the PICK ETF product at $23.38 per share. I rate PICK a hold at $43.21.
  • We bought CCJ at $22.60 level adding to long positions below the $20 level and rate the uranium producer a hold at $24.38.
  • We bought the DBB ETF product at the $22.38 level. DBB holds long copper, aluminum, and zinc positions. I rate DBB a hold at $20.13.
  • We are long GLNCY at $9.42 per share. I rate this company a hold at $13.50 on November 30.
  • We are long BHP at $48.01 per share. I rate this company a hold at $62.80 on November 30.
  • We are long RIO at $55.07 per share. I rate this company a hold at $68.64 on November 30.

A Final Note

As we head into the final month of 2022, the OPEC and Fed meetings will determine the path of least resistance of markets across all asset classes. Meanwhile, demonstrations in China could set the stage for an economic comeback in the world’s second-leading economy if the government eases the COVID-19 protocols. In a year where the leading stock market indices have posted significant losses, end-of-the-year tax loss selling could impact markets over the coming weeks.

Commodity prices have come down from the 2022 highs, but the potential for future rallies is high. The geopolitical landscape remains tense as the war in Ukraine continues to threaten peace in Europe and causes the divide between the US/NATO and Russia to widen. China could hold the key to the global economy over the coming weeks if the government does not react harshly to the current demonstrations. Meanwhile, the dust has yet to settle in the crypto arena as the saga of the FTX bankruptcy continues to grip the asset class.

I expect another volatile year in the commodities asset class in 2023. I am a buyer of dips in December and will maintain core long positions into 2023.

Thank you for your continued support!

Warm regards,

Andy Hecht

 

 

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.