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Welcome! We want to introduce you to the MetalMiner Gen-Z team that works behind the scenes conducting TA (technical analysis) and trading on behalf of MetalMiner (yes, we created our own internal trading desk to trade off our own metal price forecasts). We continue to be wowed by these kids! They can code, innovate, generate fabulous ideas, and constantly push us to “up” our game! It all helps with market outlook. So we couldn’t resist giving them a crack at critiquing a recent mid-year market contrarian analysis published by JP Morgan. – ed. note

According to Marko Kolanovic, Chief Markets Strategist & Co-Head of Global Research of JP Morgan: 

If there is no recession – which is our view – then risky asset prices are too cheap. Many equity market segments are down 60-80%. Positioning and sentiment of investors is at multi-decade lows. So, it is not that we think that the world and economies are in great shape, but just that an average investor expects an economic disaster. If that does not materialize, risky asset classes could recover most of their losses from the first half. Our bullish and out-of-consensus view is hence a forecast of a lost year – a recovery of H1 losses in risky assets.

We put this analysis in front of the team and asked each member to comment on which points they agreed with, what they thought about JP Morgan’s market outlook and where they felt JPMorgan got it wrong. Here is what the team had to say:

Here are the points where the MetalMiner analysts agreed with the JPMorgan’s take and market outlook:

Daniel Julius:

  • I agree with J.P. Morgan’s projection that the Fed will raise the federal funds rate less than most people expect. Many retail and institutional investors anticipate extremely aggressive rate hikes, and Federal Reserve Chair Powell has also indicated substantial increases alongside quantitative tightening measures. I believe such aggressive rate hikes will not materialize because, as equities fall and unemployment rises, the Fed will face significant pressure from the executive branch, Congress, and the general public to stop raising rates and instead support the economy. People prefer price instability to a depressed economy, forcing the Fed to halt or reduce rate hikes and quantitative tightening.

Jimmy Chiguil:

  • “Positioning and sentiment of investors is at multi-decade lows. So, it is not that we think that the world and economies are in great shape, but just that an average investor expects an economic disaster. If that does not materialize, risky asset classes could recover most of their losses from the first half.”  I agree because I believe that if we don’t get the proverbial “second shoe dropped” and recover as we did during COVID, risky assets will soar once again. This will leave behind those who didn’t wait for a conservative approach to jump into the market. Retail investors are indeed participating at an all-time low this year, considering the market sentiment for the next year is looking bearish, along with everyone’s expectations that a market correction will continue.

Atticus Bartoli:

  • “One thing that I agree with is the recent actions of the Federal Reserve and the harsh increase of rates. Their prediction for the top is about 3.5% by the first quarter of 2023, but I’m aiming slightly higher, as we have already touched that point.” We’ve been breaking down recently – most likely in anticipation of the next CPI data release. From what I understand, the next CPI data should be lower than the previous one. If so, we may see some relief in the high-risk asset markets. From a big picture standpoint, if inflation does not move down sharply and is able to continue to rise, I see 3.7% and 4.5% as possible points to touch next.

Isaac Busch:

  • “Commodities are on-pace to deliver a third consecutive year of significant positive returns, up 30% year-to-date. Despite this strong performance, the case for commodities going forward remains strong. This is because conditions of acute scarcity continue to persist across commodities. Summertime is the traditional peak of demand season, but current inventories are 19% below historical norms. Meanwhile, the lack of an inventory buffer is leaving the market vulnerable to unplanned supply outages.” Due to supply chain issues (mainly energy costs) commodity prices can slowly start to slip. Yes most commodities performed well this year but if supply chain problems continue with low unemployment, and interest rates are not controlled effectively, we can see a big shift lower.

Market Outlook

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The TA team also had strong disagreements with the JPMorgan analysis. Here are some of those reasons:

Daniel Julius:

  • I disagree with J.P. Morgan’s assessment that emerging markets are in acceptable condition. EMs today face significant and enfeebling headwinds. It’s my opinion that economic shocks (such as price instability and energy disruptions) hit emerging markets harder than developed markets, which can sustain more turbulence. Additionally, the primary metric that the article uses to claim that EMs are in acceptable condition – savings rates – seems rather arbitrary to me. After all, there are so many metrics to judge the health of an economy. The savings rate shows only a fraction of the overall macroeconomic picture.

Jimmy Chiguil/Isaac Busch:

  • “In our view, almost the entire complex remains a buy,” said Natasha Kaneva, Head of the Global Commodities Strategy team at J.P. Morgan.”  I don’t agree with this because this comes off a bit as “this is the bottom for commodities.” My beliefs are contrary to that. I simply don’t believe the case for commodities is strong going into 2023. – Jimmy
  • My reason for disagreeing with this is because of the increase in interest rates. If rates continue to rise, market fears will only continue. The supply chain remains in bad shape while electricity rates continue to rise. To me, commodities can still go lower. –Isaac

Atticus Bartoli:

  • One thing I disagree with is the quick recovery of assets anticipated by Mark Kolanovic in the leading quote. I don’t think this will be a quick process. In fact, I think we will be drawn out into a longer period of market pressure due to the record-breaking levels of inflation. The article points out that “the case for commodities going forward remains strong, as conditions of acute scarcity continue to persist across commodities.” This, in general, is very bearish for the economy. After all, something would have to be done to counter the rise of commodities. Currently, commodities have been somewhat correcting from their highs. Still, if shortages affect the market as anticipated, and new highs are broken for commodities, it will be hard for the high-risk assets to stay bullish. I think we will be in a battle of buyers and sellers for a while , with a sideways price trading of assets.

What do you think? Leave a comment and let us know!

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The Rare Earths MMI (Monthly MetalMiner Index) declined more sharply in July than in June. Compared to last month’s drop of 0.64%, July’s Rare Earths index dropped a total of 3.80%. Meanwhile, both the US and Europe are frantically searching for new sources of rare earth elements.

Rare Earth Elements

Online Influence Group Causes Rare Earth Elements Uproar

This past week, news broke that a Chinese influence group created a smear campaign against Western Rare Earth miners. These influencers, speculated to be a pro-Chinese political group, carried out their campaign on social media. Some experts say this was to lower opinions about US mining corporations in favor of Chinese mining sources. How, exactly? The idea was to get environmentalists angry enough to protest en masse.

Experts also speculate that the same group has been responsible for other online campaigns in the past. Still, their efforts were largely in vain. Even so, it managed to shine a light on the feud between China and its Western adversaries over rare earth resources.

US and China

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Understanding the US’ Rare Earth Dependence

Near the end of June, another story surfaced detailing how the US is attempting to shake China’s firm grip on the global rare earth supply. It’s no secret to anyone in the metals industry that the battle between China and the US over metal resources has continued for a long time. However, with global supply squeezed from COVID-19 supply chain shortages and the war in Ukraine, the rivalry between the US and China is more intense than ever.

Though China controls most of the global rare earths supply nowadays, that title used to belong to the United States. Unfortunately, China has managed to stamp out almost all other global rare earth competitors.

US vs China

Over the past 30 years, the US started outsourcing supply more and more. This ultimately created a dependence on China and several other countries for resources that have only gone up in demand. The real question is whether or not this dependence runs deep enough to prevent the US from breaking away from China’s rare earths grip.

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US Finding Alternatives to Chinese Rare Earths

Despite China’s dominance in the global industry, the US has been attempting to find other rare earth sources. In a Reuter’s article posted last week, the US and Europe are collaborating to end their dependence on Chinese and Russian supplies. The article also details how the two world powers are striving to meet demand for rare earths while keeping climate initiatives in mind.

These efforts also strive to bring dependence away from countries of concern like Russia, who’s still invading Ukraine. In short, the US and Europe plan to stick to their guns with Russian sanctions, and this means that new supply sources must be found – and fast. Of course, electric vehicle demand continues to grow worldwide, further complicating supply and demand issues.

Metal Mining

However, a light shines at the end of this particular tunnel. The US Department of Defense recently invested heavily in a brand-new plant. This facility will source rare earth minerals from Australia, then import them to the plant for separation. If the US and Europe continue to find alternatives to Chinese and Russian rare earths, the sourcing problem won’t be as horrible as some are anticipating.

Indiana’s ARC Bumping up Rare Earth Production

The American Resources Corporation, based out of Fishers, IN, recently put out a press release discussing its brand-new rare earths initiative. The raw materials supplier stated that it would invest US $2 Million into its “reELEMENT” project. The initiative aims to bump up the corporation’s stake in the battery metals and rare earths game. American Resources was traditionally a company that provided raw materials to steel manufacturers. However, it recently branched out into the rare earths market.

If successful, this move could give the US some relief from Chinese rare earth dependence. However, the core issue isn’t the separation and purification of rare earths. Instead, it’s that the US, and other countries, need the raw elements themselves. Of course, COVID-19 restrictions have impacted China heavily in terms of raw resources. Russian, on the other hand, is more of a political problem. And while an initiative like American Resource’s will certainly help, it is more of a “band-aid” than a solution.

Rare Earth Elements

New Information Released Regarding Mining Projects in Malawi

Along with China, numerous parts of Africa are known to have abundant rare earth resources. Could this help alleviate the global supply pinch? It’s entirely possible. In fact, Mkangos, a company that scouts out rare earth elements in Africa, recently announced that they made major headway with their Songwe Project. The long-term DFS (definitive feasible study) aims to mine numerous rare earth elements, separate them in Mkangos plants, and nurture Mkangos‘ rare earth magnet recycling interests.

After almost two decades of operation, Mkangos hopes to get the project operational in the very near future. Once the Songwe Project reaches full momentum, it will regularly produce large amounts of neodymium, praseodymium oxides, dysprosium, and terbium oxides. All in all, the project has a rather-optimistic goal of hitting 5,954 tonnes of rare earths per year. Should they realize this, it would go a long way towards alleviating the global rare earths crisis.

Rare Earth Monthly Trends, Facts and Figures

  • Praseodymium oxide took a slight price hit, falling 1.55% to $144,077.16 per metric ton.
  • Dysprosium fell a bit more drastically by 4.85% to $365.62 per kilogram.
  • Chinese neodymium also fell slightly. The price decreased 0.9% to $176,177.25
  • Terbium oxide dropped around the same amount as dysprosium did. There was a 4.14% decrease leaving terbium prices at $2,665.05 per kilogram.

The rare earths market is moving faster than ever! Stay informed with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it completely FREE of charge. If you want a serious competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here

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