Consider the Humble Shipping Container
Malcolm McLean may be the most important person you’ve never heard of. His claim to fame? Inventing a box.
But not just any box. McLean—a high school-educated truck driver from North Carolina—came up with the idea of creating a series of standardized, intermodal steel containers that could neatly be stacked on ships as well as trains and trucks.
That was in 1937. It would be another two decades before the first container ship voyage occurred, from Newark to Houston. Ten years after that, in 1966, container shipping expanded to international routes.
Everything changed, though, with the Vietnam War, which created the sudden need for mass volumes of supplies to be transported quickly and efficiently. The shipping container’s time had come. By the end of the 1960s, McLean sold his empire for a profit of $160 million.
According to one estimate, McLean’s invention reduced the cost of shipping by 25%. I would argue the savings are many times greater than that, perhaps incalculably so.
Just consider labor alone. Before containerization, goods had to be loaded and reloaded by hand at every stop along the supply chain—from ship to port, from port to train, from train to truck. Today, much of this work is seamless and automated.
Below is an excerpt from economist Marc Levinson’s essential history on the container and its impact on our lives, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger:
“An enormous containership can be loaded with a minute fraction of the labor and time required to handle a small conventional ship half a century ago. A few crew members can manage an oceangoing vessel longer than four football fields. A trucker can deposit a trailer at a customer’s loading dock, hook up another trailer, and drive on immediately, rather than watch his expensive rig stand idle while the contents are removed. All of those changes are consequences of the container revolution.”
The Container Helped Create the Modern Economy
Indeed, few inventions of the past 100 years have touched so many lives as the container. Anyone who makes a purchase on Amazon or steps inside a Costco or other big-box retailer is benefiting directly from McLean’s idea. Anyone who participates at all in the global supply chain—whether they be farmers, fabricators, assemblers or craftsmen—owes a huge debt of gratitude to the container and its ability to facilitate global trade with dependability and at relative low cost.
(However, shipping rates, for sea as well as air freight, have soared to new all-time highs since the start of the pandemic. More on that later.)
Between 80% and 90% of global trade is today conducted by sea, with around 60% of that done by maritime container fleets. In 2019, a stunning $14 trillion of all goods worldwide spent some of their time inside the box that was conceived of by a North Carolina truck driver in the 1930s.
The very biggest container ships now can carry approximately 24,000 20-foot containers—compared to only 58 on McLean’s first Newark-to-Houston voyage. (For context, a single 20-footer can carry 18,000 iPads.) The Ever Given, the massive ship that ran aground last year in the Suez Canal, has a carrying capacity of 20,124 20-foot equivalent units (TEUs).
The following interactive map, courtesy of data visualization studio Kiln, makes clear the world’s busiest shipping lanes:
Exercising Capacity Growth Discipline
As you know, shipping rates have surged to all-time highs since the start of the pandemic as households shifted much of their spending from services to goods. Although these sky-high rates have retreated somewhat, shipping companies are well-positioned to maintain high levels of revenue through capacity growth discipline.
Take a look below. Since at least 1996, global shipping companies have grown the size of their fleets each consecutive year to meet demand, but in the past decade, the rate of expansion has been much lower than in previous years.
There are other ways companies rebalance supply and demand in their favor. One of them is idling, which Bank of America describes as “a relief valve for the industry in order to deal with temporary overcapacity.” Then there’s vessel speed. In recent years, container ships have slowed down, due largely to megaships that have been designed for slower, more fuel-efficient sailing.
And finally, there are scrappings and demolitions. According to BofA, aging vessels become more expensive to maintain and generally have less competitive fuel consumption than newer ships. Scrapping typically slows down, though, during boom periods such as before the financial crisis and in the months since the pandemic began.
Maersk Dethroned by MSC as World’s Biggest Container Carrier
Remember I said McLean sold his company in 1969? The name of that company was SeaLand, which, through a series of subsequent sales and acquisitions, ended up as part of the super-massive Danish shipping conglomerate A.P. Moller-Maersk, today one of the largest companies on the planet with a market cap of about $70 billion.
In its fourth-quarter financial results, released today, Maersk said it generated an incredible $18.5 billion in revenue and earnings before interest, tax, depreciation and amortization (EBITDA) of $8 billion, well above the company’s guidance.
Back in October, Bloomberg analysts estimated that Maersk’s 2021 profits would total $16.2 billion, which would be a record not just for Maersk but any Danish company. We’ll see how accurate this estimate was next month when the company releases its annual report.
In any case, my reason for bringing this up is because Maersk has for decades been the largest shipping company by carrying capacity—until recently. Switzerland-based company MSC finally dethroned Maersk last week after it took delivery of several second-hand ships, according to S&P Global. MSC now operates 4.284 million TEUs, compared to Maersk’s 4.282 TEUs.
Delta Beats Expectations
Speaking of earnings, Delta Air Lines reported for the fourth quarter and for 2021 this week, and results, while certainly not at pre-pandemic levels, were nevertheless much better than expected. Shares of the Atlanta-based company, which is also involved in the air cargo business as Delta Cargo, finished Thursday’s session up 2.12%.
Delta reported sales of $9.47 billion during the quarter, beating expectations for $9.21 billion. For the full year, it reported $280 million in profit, compared to a loss of $12.4 billion for the previous year.
Furthermore, the carrier believes it has a strong 2022 ahead of it. CEO Bastian says that even though omicron continues to disrupt commercial air travel, he is “confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel.” Wheels up!
- The major market indices finished down this week. The Dow Jones Industrial Average lost 0.88%. The S&P 500 Stock Index fell 0.30%, while the Nasdaq Composite fell 0.28%. The Russell 2000 small capitalization index lost 0.82% this week.
- The Hang Seng Composite rose 3.83% this week; while Taiwan was up 1.01% and the KOSPI fell 1.87%.
- The 10-year Treasury bond yield rose 2 basis points to 1.79%.
- The best performing airline stock for the week was El Al, up 13.6%. Allegiant Air announced the purchase of 20 173-seat 737-7s and 30 200-seat 737-8-200s for delivery from 2023 to 2025. Along with an assumed purchase of 22 used 186-seat A320s and the retirement of 24 aircraft by 2025, total seats should increase to 163% of those in 2019.
- Morgan Stanley is bullish on the U.S. airlines space. After the COVID resurgence impacted the airline industry recovery in the second half of last year, the group expects “normal service” to resume in the second half of 2022. They favor legacy airlines, as a reflection of pent-up demand expected from corporate/international travel and also note the operating leverage that legacy carriers should see when traffic comes back.
- According to Bank of America, American, Delta and Southwest Airlines all reported fourth-quarter revenues ahead of their original outlooks, led by strong holiday demand and recovering corporate demand. Domestic leisure volumes were positive for much of the fourth quarter before deceleration at year-end. The bank does not expect the recent operational headwinds to meaningfully impact fourth-quarter results, as total cancellations over the holidays represented less than 1% of total fourth-quarter domestic flights.
- The worst performing airline for the week was American Airlines, down 3.8%. In the latest week, domestic booked traffic for January fell to -45% versus 2019, (from -23%), while February went to -50% versus -25%. On the international side, demand slipped as well but not by as much with the latest week for January going to -58% from -46%, while February was -69% versus -60%.
- Delta Air Lines is seeing some demand weakness due to the Omicron variant. The airline expects Omicron to weigh on demand in January and early February, but to rebound around President’s Day holiday based on current bookings, which also point to a strong spring/summer travel period.
- System net sales took a sizable step back to -65.5% versus 2019 for the week, versus last week at -42.7%. After seeing strong corporate data last week, corporate bookings through large travel agencies took a significant step back to -69.5% versus 2019, and versus -18.0% last week. Return to office delays and many companies telling their employees to start the year working from home is causing near-term softness. On a similar note, TSA trailing seven-day throughput for the week slowed to -22% versus 2019 levels, after averaging down -16% in December. This is expected given rising coronavirus case counts along with flight cancellations.
- According to Bank of America, investor interest in airline stocks is the lowest in recent memory as virus headlines are impossible to predict and consensus estimates already factor in a healthy recovery. Times of poor sentiment could be good times to buy airline stocks, however, and the bank says it can see the group outperforming as omicron fades, corporate travel returns, and a healthy consumer drives a strong spring/summer travel season. Airline stocks have traded in line or outperformed the S&P in three of the prior six rising rate cycles.
- Travel restrictions have started to ease in several European countries in a major boost for airlines. The U.K. removed mandatory pre-departure tests and no longer requires travelers to quarantine before receiving a two-day test result. All arrival passengers are now able to take a lateral flow test instead of a PCR test upon arrival. U.K. holiday bookings surged after the announcement with Jet2 seeing demand return to near pre-COVID levels.
- According to Raymond James, American Airlines updated fourth-quarter pretax margin guide of (12)-(13) % is tracking ahead of its (16) % estimate. The group estimates the mid-point of guidance implies a $(1.42) earnings per share, which is ahead of the $(1.75) forecast.
- According to Bank of America, fundamentals remain tough as order books for U.S. airlines imply narrowbody seat growth will be 7.1% ahead of 2019 by the end of 2023. The bank continues to expect this growth will make it difficult to drive pricing in the recovery. The conundrum for airlines is they need to rebuild capacity to drive down unit costs, which also pressures yields, resulting in margins not reaching pre-pandemic levels for some time.
- Flight cancellations persisted through the week as airlines continue to face a flurry of operational challenges driven by inclement weather and COVID-19. In fact, 8,038 of 95,087 flights from nine of the major U.S. carriers were cancelled. This represents 8.5% of scheduled flights (versus 4.6% of scheduled flights two weeks ago). United Airline’s cancellations remained flat at ~8%, while Delta’s cancellations moderated to 3% from 6%. Notably, Southwest saw the largest increase in cancelled flights, jumping to 15% of its scheduled flights.
- U.S. airlines’ trailing seven-day website visits improved to 9% for the week compared to an improvement of 14% last week. There were minimal changes this week for most carriers.
- The best performing country in emerging Europe for the week was Romania, gaining 4.0%. The best performing country in Asia this week was Hong Kong, gaining 4.01%.
- The Turkish lira was the best performing currency in emerging Europe this week, gaining 3.0%. The Thailand baht was the best performing currency in Asia this week, gaining 1.27%.
- This week China released stronger economic data. December inflation declined to 1.5% from 2.3% in November, and below the expected 1.7%. Money supply increased 7.7% in December above the expected increase of 7.4%. In addition, exports increased while imports declined, bringing China trade surplus to a record high $94.5 billion in December versus the expected $74 billion, and November’s $71 billion.
- The worst performing country in emerging Europe for the week was Russia, losing 4.6%. The worst performing country in Asia this week was China (via A Shares), losing 1.24%.
- The Russian ruble was the worst performing currency in emerging Europe this week, losing 0.71%. The Philippine peso was the worst performing currency in Asia this week, losing 0.7%.
- China’s zero tolerance for COVID cases is leading to production and transportation disruptions in the country. Volkswagen Group’s China unit said on Thursday it has shut a plant it jointly runs with FAW Group in the city of Tianjin, as well as a component factory, due to recent COVID-19 outbreaks there. The Chinese industrial city of Ningbo has been shut down due to COVID-19 and the lockdown has caused its port to continue to be backed up.
- The People’s Bank of China (PBOC) will likely put more cash into the banking system. Rates may be cut, but it seems the PBOC will prefer to inject more cash than aggressively cut rates. Reuters expects the reserve requirement ratio to be cut by 50 basis points in the first quarter and lower the 1-year prime rate. The group sees the benchmark lending rate lowered by five basis points in the first quarter and another five basis points in the second quarter. China may cut the 1-year prime rate next week. The rate decision is due January 19.
- Countries have been implementing anti-inflationary measures. The Polish government announced no taxes on selected food items for six months, as well as lower tax on fuels, gas, and fertilizers. Hungary announced price caps on six basic food items as of February 1: sugar, flour, cooking oil, pork legs, chicken breasts, and milk.
- Asia’s richest man, Mukesh Ambani, who controls Reliance Industries Ltd., plans to invest $76 billion toward clean energy projects. Another billionaire, Gautam Adani, has committed to invest a total of $70 billion by 2030 across its green energy value chain. India has pledged to achieve its target of making the country net carbon zero by 2070.
- Inflation in central emerging Europe continues to spike despite central banks taking measures to bring it back. In December, CPI in Poland was 8.6%, in Russia at 8.4%, in the Czech Republic at 6.6%, and in Hungary at 7.4%. Faster rate hikes may be needed to help control rising prices.
- The U.S. is debating imposing additional sanctions on Russia over the Ukraine crisis. The new sanctions may prevent the U.S. from buying Russian sovereign debt on the secondary market. In addition, sanctions could be imposed on some banks and financial institutions, as well as tightening restrictions on Nord Stream 2. Individual sanctions and entities in the extraction sector are possible as well. Russia warned that this would severely damage ties with the U.S.
- Saudi Aramco has agreed to supply almost half of Poland’s oil, and will have a stronger dominance in the region, competing against Russia for a share of market value in central emerging Europe. Aramco will buy 30% of a refinery on the Baltic coast, as well as a wholesale fuel unit. The company also signed a long-term delivery deal with Polish refiner PKN Orlen SA.
Energy & Natural Resources
- The best performing commodity for the week was natural gas, up 8.22% amid forecasts for colder weather. Aluminum is on course to reach $3,000 a ton for the first time since October as the European energy crisis cuts production in the region. Ballooning energy costs have forced smelters including Aluminum Dunkerque Industries France and Alcoa Corp.’s Spanish plants to reduce output, further tightening a market where inventories are already near the smallest since 2007.
- Record high fertilizer prices may head even higher as Yara International ASA started winding down purchases of Belarusian potash after the U.S. tightened sanctions on the East European nation last month. Belarus controls about a fifth of the global potash market, with other key producers being Russia and Canada. The market is already extremely tight, with fertilizer prices soaring as Europe’s energy crunch boosted production costs and curbed output.
- Western lumber trading continued to make gains with winter weather and logistical problems slowing U.S. shipments from Western Canada, while fundamentals continued to favor mills. Lumber ended the week up 7% at $1,120. It ended up 57% relative to the fourth quarter, up 21% year-to-year, and up 29% year-to-date.
- The worst performing commodity for the week was Bloomberg Powder River Basin 8800 Btu spot coal, down 6.81%. U.S. coal prices have fallen from a 12-year high as natural gas prices tumbled. Central Appalachia, the U.S. region with the most expensive coal, posted its first price decline since July, falling 6.4% to $86.55 a short ton for the week, according to data from S&P Global Market Intelligence.
- European natural gas continues to fall as a wave of fuel delivered by tankers eases winter supply concerns. Flows from liquefied natural gas import terminals in northwest Europe are at the highest level since December 2019, according to data from operators compiled by Bloomberg. The supply is helping offset capped Russian shipments, even though geopolitical tensions continue to mount between the country and the West over Ukraine.
- Corn prices are declining as the U.S. sees bigger corn stockpiles and China reduced its demand estimate for corn. Prices have been declining after their recent high on December 27.
- Commodity prices may stay high for decades as mining companies struggle to keep up with demand from the energy transition, according to BlackRock’s Evy Hambro, reports Bloomberg. Raw materials, and shares of some companies that produce them, hit record highs last year. At the same time, the switch toward a greener world is creating fresh demand for metals such as copper, lithium, and nickel. This trend is unlikely to change anytime soon, Hambro, BlackRock’s global head of thematic and sector-based investing, told Bloomberg TV on Wednesday.
- Europe is seeking to expand its lithium mining and refining capacity and wean itself off imports as the “white gold” becomes a vital resource in the fight against climate change. A domestic supply chain for Europe, not dependent upon China, much like the U.S. desires for its battery metals needs. However, Europe principally depends on external sources for the strategically important and increasingly coveted metals. France also announced its plans to raise 1 billion euros ($1.1 billion) to help secure enough supply of metals for industries like battery manufacturing as prices of raw materials skyrocket.
- According to Morgan Stanley, the oil market could see simultaneously low inventories, low spare capacity and low investment levels by the second half of the year. The group reiterates its $90 per barrel Brent forecast for the third quarter. In 2021, the number of exploration wells completed dropped 27%, and global discoveries fell to a 20+ year low. Oil companies approved new investments for just 12.6 billion barrels of future production, a 15-year low. OPEC+ spare capacity has already fallen to 3.4 million barrels per day.
- Nickel prices rallied to the highest in more than seven years as surging sales of electric vehicles have left carmakers racing to lock in supplies of the critical battery metal. Prices of the metal jumped as much as 3.4% to $21,500 a ton, the highest since May 2014, as Tesla Inc. moved to secure future supplies from Talon Metals Corp.
- Heavy rainfall is shutting down southeastern Brazil’s giant iron ore industry, with the world’s No. 2 producer Vale SA among companies to halt operations and regulators dispatched to monitor any impact on tailings dams. This region represents about 40% of Vale’s iron ore production.
- China’s urea plants are getting caught up in Beijing’s drive to ensure blue skies for the Winter Olympics, which includes ordering factory shutdowns to curb air pollution. Three plants in northern Shanxi province were asked to begin operating at 50% capacity due to pollution, reports Bloomberg, driving up domestic prices for the nitrogen fertilizer, said Scotiabank analyst Ben Isaacson. As Beijing ramps up pollution controls in the lead up to the winter games in February, more urea factories could be asked to suspend or cut output. China, a key supplier of urea, sulfate, and phosphate to the global market, has curbed fertilizer exports since late last year to protect domestic supplies, a move that worsened a global price shock and risked stoking food inflation further.
Domestic Economy & Equities
- The NFIB Small Business Optimism Index in the United States increased to a three-month high of 98.9 in December 2021 from 98.4 in November, beating market forecasts of 98.6. There was also a slight recovery to expectations of business conditions over the next six months
- This week the U.S. recorded a big drop in continuous claims, which printed at 1,559,000 against 1,760,000 consensus and the prior week’s downwardly revised 1,753,000.
- Las Vegas Sands Corporation, an owner/operator of casino resorts, was the best performing S&P 500 stock for the week, increasing 13.43%. Macao’s casino stocks jumped on Friday after officials in Macao move closer to finalizing concession rules for 2022 and beyond that may not be as harmful for casino operators as previously thought.
- Initial jobless claims rose to the highest since mid-November. They were reported at 230,000, above consensus for 205,000 and last week’s 207,000. California, New York, Texas, and Kentucky recorded the highest weekly increases in jobless claims.
- December retail sales were down 1.9% month-over-month, well below consensus for a flat reading and November’s downwardly revised 0.2% monthly rise. It was the worst monthly reading since February, but still up 16.9% year-over-year.
- Etsy Inc, which provides e-commerce services, was the worst performing S&P 500 stock for the week, losing 11.60%. Shares declined after retail sales in the U.S. were reported weaker than expected. Stifel cut the stock’s price target from $265 to $230.
- Earnings season for banks kicked off on Friday with JPMorgan, Citi and Wells Fargo reporting first. Shares of JPMorgan and Citi declined on Friday after both banks reported weaker results, but Wells Fargo gained. Based on earnings previews, banks should report a strong fourth quarter. The KBW Bank Index has gained 10.2% year-to-date. Morgan Stanley’s clients expect banks and other financial stocks to be big winners this year.
- Senate and House negotiators say they are getting closer to a deal on a spending plan. The 2021 fiscal year ended at the end of September and the deal needs to be reached by February 18 in order to avoid a shutdown.
- BlackRock became the first public asset manager to hit $10 trillion in assets, propelled by a surge in fourth-quarter flows into its ETFs. Investors poured a net $104 billion into ETFs in the three months ended December 31, the highest since the first quarter of 2015, according to data compiled by Bloomberg.
- Federal Reserve nominee Lael Brainard said inflation is too high and the most important task is for the Fed to get it back to 2% while sustaining a broad recovery. The Fed has projected several rate hikes this year and balance-sheet reduction starting sometime thereafter.
- Mortgage rates have hit their highest level since March 2020, the month the coronavirus pandemic took hold in the U.S. The average rate for a 30-year fixed-rate loan was 3.45% for the week ended Thursday.
- Goldman Sachs delayed return-to-office for its U.S. workers as cases of the highly contagious Omicron coronavirus variant spike. The return-to-office date was pushed forward to February 1 from January 18. The bank has also mandated vaccines and booster shots for eligible employees, effective February 1.
Blockchain and Digital Currencies
- Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Shiba Hunter, rising 3,044.14%.
- The most U.S. inflation in four decades is reviving talk of Bitcoin being a hedge against rising prices, reports Bloomberg, and is lifting the popular digital currency to its highest price.
- Rio de Janeiro wants to become the nation’s cryptocurrency capital, writes Bloomberg, and plans to dedicate part of its reserves to digital money. Mayor Eduardo Paes announced the creation of a working group to study ways to incentivize the use of crypto and boost the city’s economy.
- Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Degenerator, down 100%.
- As seen in the chart below, Bitcoin dipped below $40,000 for the first time since September of 2021 this week.
- Bitcoin is off to its worst annual start since the dawn of crypto, writes Bloomberg. The coin fell for the fifth time in six days, putting it on pace for its worst start to a year since the earliest days of the digital alternative to money.
- Man Group Plc, the world’s largest publicly traded hedge fund firm, is exploring offering cryptocurrencies to its clients’ portfolios. According to Bloomberg, if Man Group were to go through with this option of service, it would not be the first, joining peers such as Brevan Howard Asset Management.
- Strategists at Bank of America say Solana could become the “Visa of crypto,” according to Bloomberg. Solana’s low transaction fees, ease of use and scalability could help it take market share away from Ethereum.
- Cryptocurrency exchange Gemini has acquired digital asset management start-up Bitria to expand its offering for financial advisers after raising $400 million in a funding round. The integration will give asset managers access to the broader crypto ecosystem and the ability to manage their clients’ portfolios, writes Bloomberg.
- Virtu Financial issued a warning this week regarding fraudulent cryptocurrency scams. The company announced to the public to be alert for cryptocurrency scams, fraudulent offers, and fraudulent communications by individuals purporting to be affiliated with Virtu, reports Bloomberg.
- Investments tied to cryptocurrencies and digital assets are by far the biggest threats facing individual investors in 2022, according to an annual survey of securities regulators by the North American Securities Administrators Association.
- El Salvador’s Bitcoin-trading President Nayib Bukele could possibly be the only head of state in the world who uses public funds to trade Bitcoin with his phone, writes Bloomberg. So far, it appears he has lost money. The purchase Bukele says he’s made would have cost the Central American country around $71 million based on an average acquisition price of $51,056 per token, the article continues.
This week spot gold closed at $1,817.94, up $21.39 per ounce, or 1.19%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 3.48%. The S&P/TSX Venture Index came in off 0.95%. The U.S. Trade-Weighted Dollar fell 0.60%.
|Jan-13||PPI Final Demand YoY||9.8%||9.7%||9.8%|
|Jan-13||Initial Jobless Claims||200k||230k||207k|
|Jan-16||China Retail Sales YoY||3.8%||—||3.9%|
|Jan-18||Germany ZEW Survey Expectations||32.0||—||29.9|
|Jan-18||Germany ZEW Survey Current Situation||-9.0||—||-7.4|
|Jan-19||Germany CPI YoY||5.3%||—||5.3%|
|Jan-20||Eurozone CPI Core YoY||2.6%||—||2.6%|
|Jan-20||Initial Jobless Claims||205k||—||230k|
- The best performing precious metal for the week was silver, up 2.66% on positive physical demand noted traders. Gold is heading for its best weekly performance since mid-November amid a rout in the dollar as money managers pared back bullish bets. The dollar is on course for its worst week since May after dropping in the aftermath of the highest U.S. consumer inflation print in 40 years. On Friday, the currency extended its decline, providing further support to gold even as real yields ticked higher. “The positioning pain trade for long U.S. dollar has been a key contributor to gold’s ability to outperform versus rates,” said Marcus Garvey, head of metals strategy at Macquarie Group Ltd.
- K92 Mining Inc. said that its Kainantu Gold Mine in Papua New Guinea experienced record production levels in the fourth quarter. On gold, copper, and silver: “K92 Mining Inc. announces production results for the fourth quarter of 2021 at its Kainantu Gold Mine in Papua New Guinea, of 36,145 ounces silver and 33,220 ounces gold.”
- Yamana Gold reported fourth quarter production results above expectations. Fourth quarter production of 281,000 ounces was exceeded consensus of 274,000 ounces. This should lead to strong free cash flow in the fourth quarter. Yamana ended 2021 slightly beating guidance with 1.01 million ounces produced.
- The worst performing precious metal for the week was palladium, down 2.77%, likely on talk of more substitution from platinum. Mali’s President Assimi Goita opened for dialog with the West African regional bloc after Mali shut its borders with member states in response to sanctions on the gold- producing country for refusing to hold elections next month. Mali remains open to talks with the Economic Community of West African States to try and reach a consensus, Goita said in a statement on the state broadcaster Monday.
- IAMGOLD said President and Chief Executive Officer Gordon Stothart has stepped down from his role and resigned from the board of directors. The company’s CFO and Executive Vice President Strategy and Corporate Development Daniella Dimitrov has been appointed president and interim CEO effective immediately. IAMGOLD’s 2022 midpoint production guidance of 605,000 ounces is 7% below the 651,000-ounce consensus. 2022 cash cost guidance is $1,125/ounce versus $1,196/ounce consensus. At Essakane, the company expects to produce 360-385,000 ounces in 2022 and 325-375,000 ounces in 2023/24. Rosebel is expected to produce 155-180,000 ounces in 2022 and 180-200,000 ounces in 2023/24.
- Indian gold demand is taking a hit as the second biggest buyer of is scaling down the size of traditional weddings as the Omicron virus is rapidly spreading. They have gone to over 200,000 cases per day from 10,000 cases a month ago. Indian demand has been really subdued over the past 2-years with virus mobility issues but is likely to rebound with the expectation this wave will pass fast.
- UBS sees platinum prices rising to $1,150 per ounce by the end of the year as the global chip shortage leads to a significant restocking of cars, strategists for the bank, including Wayne Gordon, wrote in a note. They expect palladium to rebound to $2,000/ounce as the market returns to balance.
- i-80 Gold announced that its CEO Ewan Downie had raised his ownership to over 5 million shares or just over 2% of the company through open market purchases of 1.4 million shares. i-80 completed a series of transactions in 2021 has the Lone Tree complex in Nevada and which includes adding the Lone Tree project with gives i-80 Gold the ability to even process refractory ores.
- Royal Gold reported fourth quarter stream sales of 62,000 ounces, versus a 61,000-ounce consensus. This was attributable to higher silver sales, where production is contributed by the company’s Pueblo Viejo stream and its Khoemacau ramp-up stream. The reported stream segment results position the company to deliver total corporate GEO production at or slightly above the top end of its guidance range for 180-190,000 ounces in the second half. Royal Gold had approximately 26,000 ounces in inventory at end of 2021.
- With inflation running the hottest since 1982 in the U.S. some less experienced investors are asking why didn’t the price of gold go up? The metal has been stuck around $1,800 an ounce for months traders’ lament. However, as the chart above shows, the market doesn’t serve up free lunches. In 2018, gold was up 18% and another 25% in 2020 as the metal anticipated future inflation. Over the three-year period, just to keep up with inflation, you needed an asset to increase to $1,111, from a $1,000 base. An equivalent investment in gold over that period grew to $1,426, far out matching inflation and perhaps delivering the price pause in 2021. This suggests that if you expect future inflation, you may consider adding gold exposure to your portfolio.
- Mali’s military ruler signals he is open for more talks with West Africa’s economic bloc about returning the nation to civilian rule and asked the group to reconsider sanctions imposed over his refusal to hold elections next month. Mali is Africa’s third-biggest gold producer and companies, including Barrick Gold. B2Gold also has operations in the country. Miners in Mali should prepare for “significant disruptions to their export routes and logistical supply lines” as long as Ecowas maintains its ban on trade and financial exchanges with the country, Verisk-Maplecroft analyst Alexandre Raymakers said in a note. “Considering the importance of the gold mining sector as a source of revenue for Bamako, we do not expect the bloc to provide any exemptions to miners.”
- Barrick Gold, the world’s second-biggest gold miner is confident prices will hold firm this year, if not rise, as investors use the metal rather than cryptocurrencies to hedge against inflation and jewelry demand picks up. “The risk is on the upside,” Barrick Gold Corp. Chief Executive Officer Mark Bristow said in an interview in Riyadh, Saudi Arabia. “I don’t think there’s very much risk on the downside.” Bullion faces growing competition from Bitcoin and other cryptocurrencies that are increasingly pitched to investors as a modern-day gold and an effective hedge against inflation. Goldman Sachs Group Inc. argued that Bitcoin is taking market share from gold as a store-of-value investment. “Look at gold and its precious nature — you can’t print it and you can’t make it,” Bristow said. “You can make cryptocurrencies, and there are many of them. When you’re in a dynamic phase like we’re in now and the world’s uncertain, it’s always good for gold.”
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