ASX 200 index declines, while Goldman Sachs downgrades rare earths

The stock market index dropped to a low point for the week due to weakness in various sectors. Surprisingly, Australia’s trade surplus was higher than anticipated. St. Barbara’s share prices experienced a significant drop as it returned the proceeds from asset sales to its shareholders. According to Goldman Sachs, the rare earth market is expected to have ample supply in the medium term.

During Thursday’s trading, the Australian share market experienced a decline, reaching its lowest point in over a week.

Mining stocks were hit particularly hard. This downturn was likely due to the recent release of the U.S. Federal Reserve’s meeting minutes from last month, which confirmed that interest rates would remain high for a longer time.

The key takeaway from the June meeting was that the central bank was unanimous in its decision to keep interest rates unchanged.

According to the meeting minutes, there were varying opinions on whether the Fed should continue with its rate hiking cycle due to concerns about slow inflation.

However, the majority of participants believed it was appropriate to maintain the rate between 5-5.25%. Many participants felt that keeping the target range unchanged would provide more time to evaluate the economy’s progress.

The majority of participants also acknowledged the ambiguity of the economic outlook and the need for further data to decide on the best course for monetary policy.

The minutes reiterated the Fed’s stance that interest rates in the U.S. would remain high for an extended period and predicted a “mild recession” later this year, although there is still a possibility of avoiding it.

Goldman Sachs has reported that the NdPr market is currently well supplied in the medium term due to an increase in China’s mine supply.

China announced, in March, a production quota of 120/115kt for 1H23, which has led to a surplus in the market for mined/refined light rare earth (HRE remained unchanged).

Despite this surplus, there is a positive outlook on NdPr demand growth from the electric vehicle and wind industries. It is expected that RE wind and EV demand will increase from 25% of the market in 2022 to approximately 50% of the estimated 2030 consumption, resulting in a 7% demand CAGR until 2030. However, global demand is expected to surpass supply from 2028 onwards.

Based on new market balance forecasts, Goldman Sachs has reduced its NdPr price forecasts for 2024-2026 to US$80/85/90/kg (from US$90/95/95/kg).

ASX 200 Short (Sell)
Enter At: 7062.2
T.P_1: 6957.2
T.P_2: 6858.4
T.P_3: 6775.6
T.P_4: 6662.2
T.P_5: 6592.1
T.P_6: 6515.6
T.P_7: 6431.5
S.L: 7392.3

ASX 200
ASX 200

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