First Read: Daily Commodities Note "Ongoing conflict in Lebanon threaten..."

Research evidence excerpt

First Read: Daily Commodities Note "Ongoing conflict in Lebanon threaten..."

According to Bloomberg, companies in emerging markets are reporting earnings

stronger than expectations for the first time in 4 years.

US and Iran commenced negotiations in Switzerland on a peace deal to address Iran's

nuclear ambitions and enriched uranium stockpile, even as it was reported that

President Trump threatened fresh US strikes if proxies in Lebanon do not immediately

stop “causing trouble”.

Key UBS Research

Coal - China normalization accelerating with first Changzhi/Qinyuan mine

restarted. China mine restarts moving quicker than prior expectations. The near-

term outlook for met-coal had improved with safety inspections in China after the 22-

May accident resulting in supply disruption & higher domestic met-coal/ coke prices; last

week the China domestic met-coal price lifted above import parity, increasing the

potential for stronger seaborne demand/ prices. However, market sentiment is turning

more bearish, with China futures prices now reverting to pre-accident levels and down

6% on Thursday following the restart of one coal mine (~1.5mt raw coking capacity) in

Qinyuan (where the accident happened); this was the focus area of the inspections with

22-24 mines stopped since the May incident. The market had expected a slower

recovery in Qinyuan with mines restarting in Jul/Aug; this update suggests a faster

normalisation of supply in China. June marks the end of China’s National Work Safety

Month, which has seen a focus on workplace safety and accident management.

Seaborne met coal prices have been stable ~$240/t on limited activity since the accident;

in our opinion, the risk of higher prices near-term from stronger Chinese demand is