Copper Contango Report Shows Weakness to Come
We thought that the contango was going back to backwardation, but lately we see a reversal again.
This is a not so positive development for commodities and stocks.
Sibanye-Stillwater
Platinum, palladium and rhodium have all been moving higher and I expect them to go higher as China is loading more palladium and rhodium in their vehicles. China vehicle sales have rebounded as well. Both palladium and rhodium are in deficit. Platinum is going to be used in 3-way catalysts , which will boost platinum prices. Sibanye-Stillwater expects platinum to reach $2000 per ounce in 2025. Sibanye-Stillwater has exposure to all of these metals. SBSW's production numbers were very good. SBSW's EBITDA was $922 million in Q3 2020. This translates to $3.7 billion EBITDA per year. With a 5 multiple, SBSW should be valued at $18 billion market cap. So there is 50% upside. The company has no net debt. Net earnings were $1 billion per year in 2020, but is expected to rise 66% on higher rhodium/platinum prices and higher production numbers. Earnings per share are expected to be at $3.52 per share, which gives Sibanye-Stillwater a P/E of 4.8 which is very cheap. On top of thi...
The strengthening of the copper contango seems to be supported by Technical Analysis from Paul Kavanaugh at FuturePath Trading LLC, according to this report on Bloomberg.
ReplyDeleteCopper dropped to $7,065 per tonne ($3.025/lb)on June 11th, after China's posted its lowest annual export growth rate in almost a year in May at 1 percent, according to Reuters.