WEBVTT

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You're listening to Strictly Business
Podcast with Lindsay Williams.

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The charisma of commodities has been
evident in recent months with the CRB

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index flirting consistently with

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multi-year highs.

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But some commodities have been more
charismatic than others with gold taking a

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bit of a breather after a glistering
rally, but PGMs,

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that's platinum group metals, taking over
on behalf of precious metals.

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And there's so much more as well.

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With me to discuss these and more.

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is George Cheveley, portfolio manager at
91 in London.

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It's been great fun, hasn't it, George,
watching these commodities, watching the

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dollar pulling and pushing them around.

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It's been great.

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Yeah, I mean, it has in many ways.

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I mean, in some ways, it's life as usual
in commodities.

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You know, you see with various
commodities, nothing happens for a long

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while,

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and then suddenly they appear to move
almost on very little reason, but

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actually...

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When you delve into it, you know,
actually, fundamentally, things have

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changed.

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But yeah, I think with Trump and tariffs,
you know, it's certainly been a very busy

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period.

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I think there's also a huge amount of
noise, which is confusing people, but also

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providing opportunities.

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You said fundamentally things have
changed.

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What do you mean?

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Well, let's talk about platinum and
palladium.

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The interesting thing there is in many
ways we've been looking at deficits in

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these markets now for two or three years
and the

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prices have hardly moved.

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I mean, platinum stuck at around $1,000 an
ounce for a while now and suddenly we've

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seen a sort of 40%

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move in two months or so.

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And everybody says, well, how did that
happen?

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The fact is we were sort of running a
deficit.

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Things were tightening slowly.

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And then, you know, a couple of things
happened and suddenly the price moves.

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And quite often that happens in
commodities.

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You sort of feel they should be moving up.

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Things are getting tighter.

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Nothing happens.

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And then suddenly it all happens very
quickly.

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Yeah, it's interesting, isn't it?

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There's a theory that when a market goes
sideways like that, people get very

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complacent.

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And sophisticated traders will be having
call options and put options.

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above and below the recent range and all
that sort of thing.

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And then suddenly when the market starts
to get a bit of life and break out of the

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recent range, they have to scramble for
cover.

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And then suddenly people start to take
notice.

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But the fundamentals are there.

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I wanted to talk to you about the PGMs
because of the recent move that we've had.

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I think from May when it was hovering
around 900 to going to close to 1500 in

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record

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time, pulling back a bit now to 1250 to
1300.

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But never mind, something seems to have
changed.

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Can we start with the demand side, please?

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Yeah, well, there's two important bits of
information that really have come to light

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this year, which really then,

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they were the catalyst, really, I think,
for this rally.

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And both out of China, always China is
important in these markets.

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The first one was Chinese regulation on
cars.

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So the Chinese, obviously...

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Going to electric vehicles, which has been
seen as very negative for platinum and

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palladium because you don't need them,

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because you don't need a catalytic
converter in an electric vehicle.

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But actually, what we've seen even in
China is people wanting hybrids as well

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for range reasons.

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And in a hybrid, you need just as much
PGMs or you should need just as much as a

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conventional car.

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What has been happening in China, though,
is car companies have been thrifting.

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is probably the euphemistically way of
putting it.

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So they've been putting in less PGMs and
hybrids than maybe they should be.

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And what's happened this year is the
regulator in China has started to crack

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down and say you need to test your
vehicles properly.

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You need to actually meet these
regulations.

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In some ways, it's sort of China's version
of Dieselgate we have with VW, you know,

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making sure they're doing the right tests.

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So that has come through this year.

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So the implication is they will have to
increase the amount of PGM loadings in

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those cars.

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The second thing that's happened is
actually because of gold.

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So gold prices have obviously rocketed
this year.

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We've seen them trading above 3,000.

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What has happened in China is jewelers,
you know, the quote was given,

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if you go back to December, there were
three.

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um wholesale platinum jewelers in shenzhen
which is the center of the jewelry

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industry in china yeah by june there

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were 14 because platinum was the third the
price of gold so jewelers were wanting to

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you know help their margins

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people were finding gold expensive they've
increased the amount of platinum jewelry

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and platinum in their jewelry and

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that's also now having seen platinum's use
in jewelry decline we're starting to see

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that reverse so both of

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those you know, have happened this year
and come to light.

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And that's essentially sparked this rally
in platinum prices.

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But one that really was coming because...

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We've been running a deficit for a number
of years and inventories have been slowly

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drawing down.

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So these catalysts, plus the fact
inventories have come back, has really

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sparked this rally.

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It's the perfect storm, isn't it?

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Talking about cars, I saw an ad for a very
smart British car,

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very high end and, you know, the sort of
one that smart people take their children

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to nursery school in North London.

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And it said very proudly, 74 miles.

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pure electric and it was a hybrid and I
thought 74 miles doesn't sound like a lot

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to me so it's good it's a good

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job it's got the hybrid factor as well now
when it comes to the the gold rally

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helping the platinum rally in a way is

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there also a ratio being played by expert
traders and hedge funds well I think I

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mean people talk

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about the gold silver ratio not so much a
gold platinum one I mean,

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ratios are things people trade when
there's nothing else happening, I think,

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to some point.

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You know, they say this is extended.

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It's a technical trade, I would say.

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I think here we've got fundamental moves.

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You've had gold obviously driven by
central bank buying, weakening dollar.

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You know, these things are supporting gold
and even driving it higher.

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And actually, a lot of traders will tell
you when gold moves, platinum and silver

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will follow.

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And again, you go, well, is that true?

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It's been true this year, certainly.

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We saw gold move, you know, early this
year or certainly through the year.

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And then second quarter, platinum and
silver have both moved quite suddenly.

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And it isn't, you know, it's not just an
anecdote.

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It is because that jewellery factor comes
in.

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You know, people say I need to, there's
some substitution happens if they're a lot

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cheaper than gold.

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Fascinating story, that jewellery one,
actually.

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And I wonder if it develops.

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um what about the supply side over the
last couple of years the south african pgm

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mining

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industry has been characterized by
headlines such as you know 1200 people

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offered

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redundancy this

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mine being this shaft rather being
mothballed and all that sort of thing and

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it

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wasn't just an isolated event It was
across the industry.

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And now suddenly, as you said.

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The stockpiles are low and production's
not what it was, which is the case.

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Do you think they'll start to ramp up
production or will they hold back?

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And as the new CEO of Valterra said, we're
not at the point where new production can

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come on stream yet.

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No, it's the simple fact that the industry
has been in decline because demand

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prospects,

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you know, have looked bad.

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If the world is moving to EVs.

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You can debate how fast that happens, but
it's still happening.

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That is clearly poor for platinum and
palladium demand because the major use for

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palladium and a big use for platinum is in

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catalytic converters.

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And if you're sitting there deciding
whether to build a new mine and your long

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term forecast is the world's moving

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TVs.

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That's not going to make a great case for
building a new mine where you've got to

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invest a huge amount of capex.

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And if you're saying, I don't know in five
years time what demand will be or where

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the price will be, it's pretty
off-putting.

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And that's been happening already.

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And today will continue to happen.

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So I think we're in a position where if
you look at supply forecasts, they're

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still declining over the next five years.

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And in a sense, the market is now going,
well, if we don't see demand decline as

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quickly as we thought.

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that leads a very tight market.

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But yeah, it's still, you know, to bring
on a new mine, even reopen an old one,

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you can't do it in one or two months.

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You might say price is high today, but
you've got to be confident that price is

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high in five years time.

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It's still hard to say.

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What it does mean, of course, is in two
years time, prices could be a lot higher.

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Let's move on to other commodities now.

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I don't like the way that certain people
have played fast and loose with the copper

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market.

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One day it's up 20% the futures market in
New York and a couple of weeks later it's

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down 20%

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for various reasons.

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Is it worth talking about copper briefly?

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Yes, no, I mean, copper is fascinating.

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And what's amazing is, yeah, you look at
the COMEX price, and obviously with

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tariffs, we've had this amazing, you know,

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increase and then collapse this week.

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LME price has not moved.

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London Metal Exchange prices almost stayed
at 9,700 and hardly moved.

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I find the reaction yesterday when all the
shares sold off is slightly baffling

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because, you know, Three months ago, two
months ago,

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when Trump said there'd be 50% tariff,
everybody said, well, that's bearish

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copper demand in the States.

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It's, you know, it's going to be difficult
for copper.

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They then come out and say it isn't a 50%
tariff on copper, it's only on products.

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And people say, well, that's bearish for
copper.

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You know, it can't be both ways.

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And I think actually the fact that, you
know,

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the US can import copper without a tariff
is actually means there'll be less demand

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destruction.

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The fact is a lot of copper was moved
ahead of the tariff.

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I don't think it's coming back out because
there might be a tariff in a year and a

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half.

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They've said that.

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And in any case, it costs a lot to move.

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So I think that copper remains there.

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They've actually said they're going to
limit scrap exports, which will take

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copper out of the world market.

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And today, China and Europe have no copper
stocks because it all went to the States.

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So I'm pretty positive on copper.

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I think unless demand collapses, and I
don't see a reason for that at this stage,

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I mean, China needs to continue.

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I think it should be okay.

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I'm actually pretty positive on copper
prices.

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And I think in a way, now the tariffs
certainty is there, at least on copper,

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and increasingly on the country tariffs.

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I think businesses will make decisions and
do things and activity could actually pick

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up because certainly there's been a lull
this year,

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people saying I don't know what to do so
actually I I think we can see a strong end

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to the year.

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And copper stocks are not great, except in
the States.

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Everywhere else, there's nothing.

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Where else should we go?

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Maybe oil, because oil has gone from 60 to
the high 70s, floating around 71,

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72 at the moment.

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It's been bombarded with stimuli, hasn't
it?

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Yeah, I mean, look, I mean, oil has, in
some ways, you know, with OPEC bringing

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back...

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production and cutting their capacity cuts
in a way.

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And obviously that in August, we get the
next increase in production from OPEC.

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I mean, it's difficult to be super
positive oil.

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It's clearly been supported by
geopolitical risks, Israel, Iran,

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things like that have obviously had an
impact on prices.

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And obviously seasonally, we've got
driving season in the States, refined

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products have been strong, gasoline in the
States.

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If you look forward into the shoulder
month, September, October, with OPEC

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increasing,

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it's difficult to be very bullish oil in
the short term.

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But if you look forward into 26, you know,
shale feels like it's peaking now in the

238
00:12:32.742 --> 00:12:34.742
States at these prices.

239
00:12:34.742 --> 00:12:36.742
It doesn't make sense to bring on more.

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00:12:36.742 --> 00:12:38.547
The producers there are saying, you know,
they're cutting development.

241
00:12:38.687 --> 00:12:41.656
So I think we can see a plateauing,

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00:12:41.765 --> 00:12:46.781
even a fall in shale oil and with OPEC
capacity now not being held off.

243
00:12:47.262 --> 00:12:52.686
I think actually it sets up for quite a
constructive 26 in the oil markets, but

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it's not today.

245
00:12:54.686 --> 00:12:56.686
It's still six months away, I would say.

246
00:12:56.686 --> 00:12:58.413
Any other commodities that have caught
your eye over the last few months, George?

247
00:12:58.733 --> 00:13:03.921
I think, I mean, there's been an
interesting and slightly counter-seasonal

248
00:13:03.921 --> 00:13:05.921
rally in iron ore,

249
00:13:05.921 --> 00:13:07.296
which really was a sort of slight
surprise.

250
00:13:07.858 --> 00:13:12.171
I think it was really because of China's
moves on infrastructure,

251
00:13:12.186 --> 00:13:15.905
the announcement of the new dam and also
their anti-involution.

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00:13:16.978 --> 00:13:20.802
where they said we're going to hold back
capacity, which increased steel prices in

253
00:13:20.802 --> 00:13:21.041
iron ore.

254
00:13:21.205 --> 00:13:26.165
It feels actually that's a bit of
speculation and probably we expect iron

255
00:13:26.165 --> 00:13:28.165
ore to settle down,

256
00:13:28.165 --> 00:13:31.134
though we still believe it should trade
around $100 longer term.

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00:13:31.611 --> 00:13:34.915
But I think it probably could be, you
know, softer going forward.

258
00:13:35.337 --> 00:13:40.525
And the other place where we've seen, you
know, quite strong turnaround off the

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00:13:40.525 --> 00:13:42.525
bottom is in fertilizers.

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00:13:42.525 --> 00:13:45.119
And that's been, you know, potash prices,
et cetera, have started to move up.

261
00:13:45.882 --> 00:13:47.224
continue to perform quite well.

262
00:13:47.404 --> 00:13:52.588
I mean, certainly coming out of a cyclical
low, but that's also been an interesting

263
00:13:52.588 --> 00:13:54.588
area this year for us.

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00:13:54.588 --> 00:13:55.314
I'm just looking at something that's just
popped up on my screen.

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00:13:55.330 --> 00:13:59.955
It says Baltic Dry for the month up
37.38%.

266
00:14:00.080 --> 00:14:04.377
That's a shipping index, of course, and
for the year up 20%.

267
00:14:04.378 --> 00:14:08.518
Is that indicative of a bullish aura
around commodities at the moment?

268
00:14:09.717 --> 00:14:10.417
Yeah, potentially.

269
00:14:10.417 --> 00:14:13.881
I mean, I think we're, you know, clearly
tariffs,

270
00:14:14.502 --> 00:14:18.467
what's been happening at the States is
changing supply chains quite radically.

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00:14:19.069 --> 00:14:24.592
And in a way, we have to remember that
whatever you think it does for demand

272
00:14:24.592 --> 00:14:26.592
inflation,

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00:14:26.592 --> 00:14:32.225
this complete change in trade and supply
chains is going to lead to more

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00:14:32.225 --> 00:14:34.225
inventories being held around the world.

275
00:14:34.225 --> 00:14:34.725
So we've suddenly got more copper
inventories in the States.

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00:14:34.756 --> 00:14:36.663
I don't think they disappear overnight.

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00:14:37.178 --> 00:14:43.935
and that That need to rebuild inventories
from a world where everything was just in

278
00:14:43.935 --> 00:14:45.935
time is actually underlying quite positive
for a number of

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00:14:45.935 --> 00:14:49.162
commodities, because clearly that means
you need more supply just to fill those

280
00:14:49.162 --> 00:14:51.162
inventories.

281
00:14:51.162 --> 00:14:56.185
Let's have a look at a couple of the
commodities that we've spoken about and

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00:14:56.185 --> 00:14:58.185
see how to take advantage of any perceived
moves.

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00:14:58.185 --> 00:15:01.420
We started with the PGMs, and I can't help
but think when I see

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00:15:02.295 --> 00:15:07.076
Impala Platinum on the JSC Securities
Exchange in Johannesburg being up.

285
00:15:07.261 --> 00:15:14.106
100 and something percent that it's it's
difficult for an investor to look at it

286
00:15:14.106 --> 00:15:16.106
and say I must buy that now I should have

287
00:15:16.106 --> 00:15:21.075
bought it a month ago but let's not talk
about particularly the South African

288
00:15:21.075 --> 00:15:23.075
miners

289
00:15:23.075 --> 00:15:27.598
but generally speaking would you be
bullish of the white metals and if so how

290
00:15:27.598 --> 00:15:29.598
would you take advantage of that
bullishness

291
00:15:29.598 --> 00:15:33.130
well no I mean you know particularly in
the smaller markets you see a lot of

292
00:15:33.130 --> 00:15:35.130
volatility.

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00:15:35.130 --> 00:15:37.130
And I think...

294
00:15:37.130 --> 00:15:39.130
You know, I think, though, you have to be
careful.

295
00:15:39.130 --> 00:15:40.722
We see platinum palladium prices move, you
know, very sharply in the last two months.

296
00:15:41.401 --> 00:15:44.202
And as I say, the reaction is, oh, that's
a bit overdone.

297
00:15:44.241 --> 00:15:46.187
And, you know, how do you justify that?

298
00:15:46.265 --> 00:15:48.421
You know, how can they suddenly be 40%
higher?

299
00:15:48.921 --> 00:15:53.077
My point about fundamentals is that's been
three years in the making.

300
00:15:53.171 --> 00:15:56.546
The fact it moved in two months shouldn't
put you off.

301
00:15:56.812 --> 00:16:00.171
And I remain fundamentally quite positive
those metals.

302
00:16:00.233 --> 00:16:01.624
Now we've had a pullback here.

303
00:16:02.149 --> 00:16:02.890
That's trading.

304
00:16:03.070 --> 00:16:09.475
But you have to look through this noise to
maybe, you know, if you want to get

305
00:16:09.475 --> 00:16:11.475
involved, you can't look at what it's
done.

306
00:16:11.475 --> 00:16:13.475
You need to look at what it will do.

307
00:16:13.475 --> 00:16:14.803
And maybe you time your purchases, you
spread them out.

308
00:16:14.842 --> 00:16:18.006
So you're not always, you know, you're not
always going to pick the wrong price.

309
00:16:18.491 --> 00:16:20.194
That's always the way you have to play
these.

310
00:16:20.210 --> 00:16:25.116
But you also have to be prepared to sit
with the volatility and you have to be

311
00:16:25.116 --> 00:16:27.116
prepared to look through it.

312
00:16:27.116 --> 00:16:30.100
We've had a huge amount of noise this
year, particularly from Trump and his

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00:16:30.100 --> 00:16:32.100
tariffs.

314
00:16:32.100 --> 00:16:34.766
Actually, the underlying fundamentals
haven't changed as much as some people

315
00:16:34.766 --> 00:16:35.025
think.

316
00:16:35.025 --> 00:16:39.547
And I think, as I say, as we get through
these tariff negotiations and things

317
00:16:39.547 --> 00:16:41.547
settle down,

318
00:16:41.547 --> 00:16:44.665
I think potentially we could see an
increase in activity in various places.

319
00:16:45.391 --> 00:16:46.091
Very good.

320
00:16:46.091 --> 00:16:47.235
You said you were bullish of copper.

321
00:16:48.313 --> 00:16:50.313
How do you take advantage of that?

322
00:16:52.282 --> 00:16:58.094
Well, I mean, we largely do it through
equities and we look for those companies.

323
00:16:58.585 --> 00:17:03.809
where they've got copper production
clearly and people go well what are the

324
00:17:03.809 --> 00:17:05.809
pure copper equities?

325
00:17:05.809 --> 00:17:11.501
My view actually is there is a number of
equities that which are classified as

326
00:17:11.501 --> 00:17:13.501
diversified miners and the two you'd

327
00:17:13.501 --> 00:17:17.579
look at there and they haven't necessarily
done that well recently but if you look at

328
00:17:17.579 --> 00:17:19.579
Anglo-American and tech resources

329
00:17:19.579 --> 00:17:25.938
they have both sold restructured and are
increasingly if you look in another year's

330
00:17:25.938 --> 00:17:27.938
time.

331
00:17:27.938 --> 00:17:33.237
will be very much more focused on copper
and therefore and both have production

332
00:17:33.237 --> 00:17:35.237
coming on and growth in that area so

333
00:17:35.237 --> 00:17:40.565
it's not just going for the pure copper
companies as people call them with just

334
00:17:40.565 --> 00:17:42.565
copper production but also looking at
companies where they have a

335
00:17:42.565 --> 00:17:45.713
significant amount of copper production
and possibly increasing okay

336
00:17:46.245 --> 00:17:52.995
let's have a look at your positioning in
your strategy are you sort of overweight

337
00:17:52.995 --> 00:17:54.995
anything we are overweight

338
00:17:54.995 --> 00:17:57.146
copper as you might have guessed and get
copper equities.

339
00:17:57.405 --> 00:18:00.805
We do think the risks are, there's always
risks to the downside.

340
00:18:01.207 --> 00:18:02.266
But interestingly,

341
00:18:02.406 --> 00:18:09.250
copper trades 9,700 when it hit 9,000 on
Liberation Day was a huge amount of buying

342
00:18:09.250 --> 00:18:11.250
out of Asia

343
00:18:11.250 --> 00:18:12.781
and price fixing, which tells you that's
probably the flaw.

344
00:18:13.594 --> 00:18:19.938
If things tighten up, and I think they
could do, and demand remains a bit

345
00:18:19.938 --> 00:18:21.938
stronger as these tariffs settle down.

346
00:18:21.938 --> 00:18:22.807
There isn't a lot of stock in many parts
of the world.

347
00:18:22.846 --> 00:18:25.671
And if copper breaks out, it could
certainly move sharply higher.

348
00:18:25.928 --> 00:18:28.053
A bit like platinum has done in the last
two months.

349
00:18:28.151 --> 00:18:31.014
You'll suddenly get a break and people
will see it as very tight.

350
00:18:31.139 --> 00:18:37.483
So I think, you know, the risk reward
there, I think the reward is definitely

351
00:18:37.483 --> 00:18:39.483
looks more attractive to me.

352
00:18:39.483 --> 00:18:41.546
Nothing certain, but that certainly could
happen when, I don't know.

353
00:18:42.561 --> 00:18:45.186
But I think it could happen in the next
six to 12 months.

354
00:18:45.827 --> 00:18:49.296
If we look elsewhere, as I say, we're
probably cautious on oil.

355
00:18:49.733 --> 00:18:55.060
but we're still pretty positive on gas
volumes in the states we we see You know,

356
00:18:55.100 --> 00:19:01.586
the requirement for gas power from AI,
etc., is really we see gas volumes

357
00:19:01.586 --> 00:19:03.586
growing,

358
00:19:03.586 --> 00:19:06.914
you know, by about 20% over the next few
years in the States at least.

359
00:19:07.711 --> 00:19:13.273
And that we think is, you know, those
companies, pipeline owners, exporters,

360
00:19:13.273 --> 00:19:15.273
processors,

361
00:19:15.273 --> 00:19:15.461
we see them as very attractive.

362
00:19:15.554 --> 00:19:18.476
So they're more exposed to volumes rather
than price.

363
00:19:18.586 --> 00:19:19.617
And we like that.

364
00:19:20.429 --> 00:19:23.132
So that's an area we continue to look at
very closely.

365
00:19:23.980 --> 00:19:29.024
As I say, and then on the fertilizer side,
we remain positive on potash phosphates as

366
00:19:29.024 --> 00:19:29.325
well.

367
00:19:29.446 --> 00:19:35.875
And of course, I have to mention gold,
where, you know, gold prices have

368
00:19:35.875 --> 00:19:37.875
obviously had a very strong run.

369
00:19:37.875 --> 00:19:40.258
And we certainly see them holding above
$3,000.

370
00:19:40.680 --> 00:19:41.571
Could they go higher?

371
00:19:41.572 --> 00:19:42.633
They certainly could.

372
00:19:42.742 --> 00:19:46.930
We've written recently about the fact we
could be entering a dollar down cycle.

373
00:19:47.024 --> 00:19:49.383
That could certainly be very positive for
gold.

374
00:19:49.930 --> 00:19:52.867
and clearly the fiscal situation in the
US.

375
00:19:53.332 --> 00:19:59.438
also makes us positive, as well as the
central bank buying, which continues to be

376
00:19:59.438 --> 00:20:01.438
very strong.

377
00:20:01.438 --> 00:20:03.539
So gold prices, we think, at the minimum
are well supported.

378
00:20:04.039 --> 00:20:08.625
And if you believe that, then we still
believe the equities offer very good

379
00:20:08.625 --> 00:20:08.763
value.

380
00:20:09.125 --> 00:20:12.110
The simple fact is the equities are up
over 50% this year.

381
00:20:12.531 --> 00:20:14.391
As we said, does that mean you've missed
it?

382
00:20:14.766 --> 00:20:19.641
The point I make to people is margins have
more than doubled this year with those

383
00:20:19.641 --> 00:20:21.641
rising prices.

384
00:20:21.641 --> 00:20:22.438
And therefore, I still think there's
plenty of room.

385
00:20:22.868 --> 00:20:28.612
for gold equities to continue to progress
as long as gold prices at least remain

386
00:20:28.612 --> 00:20:30.612
where they are.

387
00:20:30.612 --> 00:20:31.835
George, thanks so much for your extended
time.

388
00:20:31.897 --> 00:20:35.460
George Cheeverly is a portfolio manager at
91 in London.

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00:20:37.022 --> 00:20:43.976
The views and opinions expressed in these
podcasts are those of Lindsay Williams and

390
00:20:43.976 --> 00:20:45.976
various contributors and do not reflect
the policy,

391
00:20:45.976 --> 00:20:47.710
position or opinion of any other agency,
organisation,

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00:20:48.054 --> 00:20:52.444
employer or company associated with
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