Weekly Watchlist
Few things I'm watching
A few themes & stocks I’m watching this week…
1. Chilean copper supply interruptions
I spoke about one of the major challenges in mining.. Mother Nature.. in my note (“Sink or Stream”) last week. In it I described the issues 29 Metals encountered when receiving 431mm in a 3 day window in March 2023. Well this one pales in comparison with regard to rainfall but may be far larger when it comes to its impact to global copper supply.
The Atacama desert which abuts the Andes in central and northern Chile produces some ~20% of the Worlds copper. And like the name suggests it is a desert with typically less than 5mm of rain per year. Well it received a few years worth of rain/snow in a day or two last week, and its impact is being felt by a number of large mines. Take a look at the release from Lundin Mining below and some added comments about other mine interruptions here.
Some are saying El Nino is only just getting going so perhaps more to come…
2. Crack Spreads
I wrote a note on the oil refining sector at large and taking a small punt on the Aussie refiners a couple of weeks ago (A crack-up boom).
Here is a good tweet that captures the situation…
In recent days refining margins have come back but still remain extremely elevated. Further attacks on refining infrastructure continued over the weekend including one of Aramco’s refineries in Saudi.
Repsol reported fairly muted Q2 numbers last week but the CEO had this to say..
"I'm convinced there are solid reasons to support really good refining margins - not only in 2026, but also in 2027," (Reuters)
Aussie refiner Viva will report Tuesday - however it has already somewhat pre released in late June saying margins were lower than normal due to the April fire at its Geelong refinery which impacted their ability to produce the higher margin products like diesel.
The larger US refiners report later in the week.
I’m also watching to see if Australia removes the fuel tax relief of 16c per litre on August 2 as announced or if they kick that can down the road.
3. Energy Reawakens
More geopolitical uncertainty this week has lifted energy prices (coal the big laggard). Energy storage levels in the Northern Hemisphere are historically low but there’s still plenty of time until winter. A reminder that 90% of the world lives in the Northern Hemisphere… it will be interesting to see if there is an orderly restocking of energy for the upcoming winter or if panic ensues. The CEO of Equinor doesn’t believe Europe will reach its 80% gas storage level target (read here)
4. Energy Stocks still muted
There still seems to be a lot of scepticism on the longevity of current energy prices. Most seem to be choosing to step aside given uncertainty/volatility… and it doesn’t help investor appetite that energy companies all seem to have targets on their backs from government.
5. Twelfth times the charm for Santos?
Speaking of energy stocks - one of the bellwethers in Australia Santos reported late last week. Their results were fairly weak as the nature of their Asian LNG contracts (3mth lag) means prices are yet to flow through to results. They also had to overcome what appear to be the final teething issues commissioning their new Barossa LNG project.
With two major growth projects (Barossa in Australia + Pikka in Alaska) in the final stages of commissioning - can they capture the current buoyant market and finally break free from the A$8/sh mark it has been pinned to for what appears to be an eternity?
My estimates on what impact this added volume and increased prices do to their revenue line is below.
6. Rates
I’m not a macro guy… but with bond yields breaking out and the Fed, BOJ and Bank of England all meeting this week to determine monetary policy… you just know the outcomes will flow through to resources & stocks.
Best of luck out there….