Precious Metals Market - (Analytical review)
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
URAL
MINING AND METALLURGICAL
COMPANY
Precious Metals Market
(Analytical review)
Q1 2021 Results
Disclaimer
This analytical review has been prepared using the information available to JSC “UMMC” at the time
of its preparation. Internal and external factors could have influenced the performance of JSC “UMMC”
and the content of this review upon its preparation. The company makes no representations or
warranties with respect to completeness and accuracy of the review content. The information presented
is based on the Company’s data as well as on the data obtained from the public sources that in our
opinion can be considered reliable. This review contains forward-looking statements that reflect beliefs
or current expectations of the Company as of the time of this review preparation. The given forecasts
and assessments contain a number of assumptions which are subject to calculation by various methods
and therefore shall not be used as a basis for business decisions or for any other commercial objectives.
The company will not bear any responsibility for any harm caused by using this document for commercial
purposes.
Copyright
This analytic review is not subject to publication or distribution. It is not allowed to completely copy
the data from this review without prior consent. Small excerpts are permitted, provided that JSC “UMMC”
is specified as the source.
Analytical Department, JSC “UMMC” | 1Analytical Review | Precious Metals Market
Gold Market
In Q1 2021 the average gold price was 13% higher y-o-y and reached USD 1,799 / oz. After the
price rising at the end of 2020 to USD 1,891 / oz, in March 2021 it was down to $ 1,684. Favorable
macroeconomic indicators of the US economy affected gold prices trend, which made traditional
financial instruments more attractive to investors. By the end of Q1, the gold price started to recover
on the back of general weakening of the US dollar. The downward trend in April was fueled by ETF
outflow, which lasted for 11 consecutive weeks in March/April. However, in May the gold price
exceeded USD 1,800.
In the immediate future, the gold price will be propped up due to the decision of the Central Bank
of China to increase quotas on gold imports, which will lead to the purchase of up to 150 tons of the
precious metal by Chinese banks.
Gold price behavior in 2020, $/ oz
2 200
$2 067
2 100
2 000
$1 891
1 900
1 800
1 700
1 600
1 500
$1 474
1 400
2020 2021
Source: LBMA
According to World Gold Council, Q1 gold demand was 23% down to 815.7t compared with
1,059.9t in Q1 2020. The main reason for sluggish gold demand was outflows from gold ETFs.
Jewelry demand of 477.4t was 52% higher y-o-y. Bar and coin investments have been growing for
three quarters in a row and amounted to 339.5t (+36% y-o-y) in Q1 due to building inflationary
pressures. Global banks bought 95.5 tons of gold in Q1 (+20% y-o-y).
According to the results of 2020, gold production in Russia has demonstrated a 0.94% fall,
decreasing to 362.70 tons. Refining of gold decreased by 0.98% in April 2020, and reached 340.17
tons. In January-February 2021 the volume of gold refining by Russian parting plants decreased by
4.08% showing 38.09 tons y-o-y.
According to the Federal Customs Service, exports of Russian gold in Q1 2021 amounted to 51.4
tons in volume terms and $3 billion in monetary terms. Exports grew by 72% y-o-y in volume terms.
The UK market remains the key export destination.
Analytical Department, JSC “UMMC” | 2Analytical Review | Precious Metals Market
In 2021, production and demand for the metal are expected to grow as the global economy
recovers, especially in developing countries, particularly China. Previously, India accounted for a
significant share of the demand for the precious metal, but at the moment there is a resurgent
coronavirus pandemic unleashed a new wave of challenges for recovery of India’s economy.
However, at the end of Q1 2021, India significantly increased its gold imports up to 321 tons,
compared to 124 tons y-o-y.
Gold is forecast to have an average price range of about $1,880 to $1,950 / oz ounce between
2021 and 2022.
Gold price outlook, $/ oz
$2 000
$1 950
$1 904
$1 889
$1 900
$1 850 $1 827
$1 770 $1 772
$1 800
$1 750 $1 719
$1 700
$1 650
$1 600
$1 550
2020 факт.
actual 2021 2022 2023 2024 2025
Source: Consensus forecast, company analysis
Analytical Department, JSC “UMMC” | 3Analytical Review | Precious Metals Market
Silver market
The average price of silver in Q1 2021 was $26.3/ oz, which is 55% higher than the year before,
when the price was $16.9/ oz. Gradual easing of restrictions related to the pandemic was the main
reason for the surge in prices for precious metal. The speed and nature of recovery processes were
largely determined by the current pandemic situation, the severity of current business restrictions,
and the intensity of vaccination of the population against COVID-19. The collapsing dollar at the end
of Q1 provided additional support to the prices of the precious metals.
Silver prices trend in 2020, $/ oz
$31
$29
$27
$25
$23
$21
$19
$17
$15
$13
$11
Source: LBMA
Global silver consumption in 2020 fell 10% to 896.1 million ounces (27,871 tons), while year-end
supply also fell 4% to 976.2 million ounces (30,363 tons).
Silver consumption trends in 2021 are expected to be quite favorable.
The Silver Institute predicts that global silver consumption in 2021 will increase by 15% to 1.033
billion ounces (32,130 tons) due to increased demand in the industrial sector due to the improvement
in the global economy. The automotive industry is likely to assist in demand for this precious metal.
According to Silver Institute, in 2021 global vehicle output will be 85 million units, which will require
about 61 million ounces (1,897 tons). A year before, silver demand in this sector was 50 million
ounces (1,555 tons). Additionally, the demand for silver will be fueled by the renewable energy
sector, in particular the manufacture of PV cells. The World Bank forecasts that by 2050 the
renewable energy technology sector will account for more than 50% of global silver demand.
Global silver supply is expected to increase by 8% to 1.056 billion ounces (32,845 tons) in 2021
It is expected that output from primary silver mines will increase as the mines return to full capacity.
ramp-up of production rates will be driven by new commissioned mines in Mexico and Australia. In
2021 mined silver output is forecast to be 848 Moz (26,375 t).
In 2021, the average silver price is foreseen to be $25.9 / oz. The Silver Institute’s assumptions
see that the average silver price in to rise by a healthy 33% in 2021 and will amount to $27.30/ oz.
Analytical Department, JSC “UMMC” | 4Analytical Review | Precious Metals Market
Silver price outlook, $/ oz
$28
$ 26,4
$ 25,6
$26
$ 24,4
$24
$ 22,4
$22 $ 20,5
$20
$18
$16
$14
2020 факт.
actual 2021 2022 2023 2024 2025
Source: Consensus Forecast, company analysis
Analytical Department, JSC “UMMC” | 5You can also read
