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06 January 2021
Video commentary for January 5th 2021
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: commodities continue to outperform, Dollar weak but Chinese renminbi overbought, Wall Street continues to pause. oil rebounds and copper steady, commodity currencies resurgent.
China-EU investment deal: who’s the real winner after seven years of negotiations?
This article from the South China Morning Post may be of interest to subscribers. Here is a section:
Some said the deal was premature and could come at the cost of a reboot of the transatlantic alliance Biden has set as a priority in his multilateral approach to countering China.
George Magnus, a research associate at Oxford University’s China Centre, said the EU appeared to have conceded leverage for seemingly very little in return.
The agreement was unlikely to become a platform for the deepening of EU-China relations or even pave the way to a free-trade agreement, but it was a good move for China “without having to make major concessions commercially or any on labour standards and rights, which the EU is normally very robust about”, he said.
According to Gal Luft, co-director of Institute for the Analysis of Global Security, a think tank in Washington, the EU’s move was a deliberate attempt to take advantage of the power vacuum in the US.
“Concluding it in the interregnum period ensures that the outgoing administration will have no time to penalise Brussels while the new one will have no chance to weigh in,” he said.
“This shows that the EU, despite its misgivings about China’s behaviour and policies, wants to remain an independent player and is unwilling to be dragged into the US-China power struggle.”
Eoin Treacy’s view
The last couple of months of 2020 ushered in three significant trade deals. That gives those of us who think globalisation is under threat something to contemplate. If we consider exactly what these agreements mean, it supports rather than negates the view we are entering a multipolar world.
Saudis Surprise Oil Market With Big Unilateral Output Cut
This article from Bloomberg may be of interest to subscribers. Here is a section:
The de-facto leaders of the group have different priorities, with Saudi Arabia preferring to sacrifice volume in exchange for higher prices, while Russia wants to boost production before rival suppliers can fill the gap.
Russian Deputy Prime Minister Alexander Novak welcomed Saudi Arabia’s move, telling reporters that “it’s a great New Year present for the whole oil industry.” It’s an especially sweet gift for U.S. shale drillers, said RBC analyst Helima Croft.
The agreement means the global market will get far less supply than traders had been expecting prior to this week. The OPEC+ meeting opened on Monday with a proposal from Russia for a 500,000 barrel a day output hike next month, which was opposed by most other members. The alliance had been scheduled to discuss similar-sized increases in March and April, but that plan has been superseded by the latest accord.
Eoin Treacy’s view
This agreement is the necessary catalyst to inject a sense of urgency into the oil markets. Many shares have been priced as if demand for oil is going to evaporate in the short term. The reality is that even if the most bullish EV estimates are realised oil will remain the primary transportation fuel for at least another decade.
China’s Steel Plan Puts Challenge to Australian Iron Ore Miners
This article from Bloomberg may be of interest to subscribers. Here is a section:
China has already been moving steadily to secure iron ore resources. Some of its overseas mines include Sinosteel Corp.’s Channar mine joint venture in Australia and Shougang Group Co.’s Marcona project in Peru. But the focus is on Guinea, where some of China’s biggest state-owned firms are close to getting the go-ahead to develop Simandou, the world’s largest untapped iron ore deposit.
“It’s entirely feasible that China could raise its self-sufficiency in virgin and secondary iron units to 45% from its current level of just over 30% if it successfully develops the Simandou project,” said Navigate Commodities co-founder Atilla Widnell.
To reach 45%, Simandou has to produce 200 million tons a year to displace imports from other countries, said Widnell. Still, “it may be a stretch” to achieve that level by 2025 given geographical challenges in the area, and he estimates that with the current pace of development, the goals will be reached by 2030.
Eoin Treacy’s view
Ownership of Simandou has been a point of contention for much of the last decade. Payments to politicians by Rio Tinto eventually resulted in the company selling all of its interest to Chinalco in 2017. That provided China with full ownership of the asset bloc and it has no issue with making payments to politicians to ease the development of the mine.
Eoin’s personal portfolio: stock market trading position opened December 18th
Eoin Treacy’s view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.
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