Gold falls to seven-week low as analysts weigh BASF/Evonik merger

Glencore readies October 14 Australian listing

Precious metals sold off sharply Monday as gold dropped 3.1% to $4,188 an ounce, its lowest level in seven weeks, while silver fell 4.2% to around $62 an ounce. The pullback reflected concerns that higher fuel costs could prompt another U.S. Federal Reserve rate hike to contain inflation, driving down the price of precious metals while crude prices rose, according to Dow Jones Newswires.

Canadian gold producers were the main drag on Canadian markets, with both senior and intermediate miners selling off. Among the biggest decliners of the session were Agnico Eagle, Lundin Gold and Eldorado Gold, alongside smaller players AbraSilver Resources, Aris Mining and K92 Mining.

In the European chemicals sector, analysts delivered mixed assessments of a potential merger between BASF and Evonik after the German chemicals giant confirmed last week it had approached its smaller rival. Citi analysts said the combination “has the potential to create meaningful value given Evonik’s complementary portfolio and relatively undemanding valuation,” while cautioning that investor concerns about integration risk and greater exposure to Germany were valid.

JPMorgan’s Chetan Udeshi struck a more cautious note. “Consolidation is one of the few credible routes for players in the chemicals industry to boost their competitiveness and returns,” Udeshi said, but added that “there are likely better fits for BASF than Evonik” given product-portfolio overlap. A cash deal could lift BASF’s earnings but “would risk stretching the company’s balance sheet,” he said.

Analysts at Bernstein went further. “There is a price / synergy level where the logic for this transaction could be compelling,” Bernstein said, but a takeover of Evonik would skew BASF’s assets further toward Europe and a combined group would likely trade at a lower multiple than BASF alone, the brokerage estimated. “We have our reservations about a combined BASF-Evonik equity story, as we believe BASF can extract substantial value from their existing assets and there is no guarantee a transaction goes ahead,” Bernstein said.

AlphaValue’s Akash Nandy took a more positive view, citing portfolio synergies and management’s execution record. “A broader portfolio, overlapping customers and a single corporate cost base should sharpen BASF’s position against global competition,” Nandy said, while cautioning that “any upside would hinge on execution.” Nandy added: “On balance, we take a positive view, helped by management’s delivery record in recent years.”

In Australia, RBC Capital Markets analyst Ben Davis said Glencore’s planned listing on the Australian stock exchange on October 14 is intended to improve the miner’s profile with Australian investors, broaden its shareholder base, improve trading liquidity and enhance corporate financial flexibility. The move could also be a precursor to another merger attempt with Rio Tinto following the failed February tie-up, Davis added. RBC has an outperform rating on Glencore with a 660 pence price target; shares were down 1.4% at 553.20 pence.

Australian gold miner Northern Star Resources saw its shares jump 8.1% to A$23.91 after the company rejected a takeover bid from Gold Fields. Macquarie said the rejected bid “puts somewhat of a floor under” Northern Star’s share price because it demonstrated corporate appetite for the company as a whole, possibly from an African gold company “happy to look-through the short-term risks of NST (management/board changes, and KCGM ramp-up risk) and is keen to diversify away from higher-jurisdiction risk countries for increased Australian gold exposure.” Macquarie has a neutral rating and A$22.50/share target on Northern Star, noting the stock trades at roughly a 6% discount to Gold Fields based on valuation.

In other basic-materials news, Resonac’s petrochemical unit Crasus Chemical is set to list Tuesday in Tokyo, with the spin-off becoming effective Thursday. Jefferies analysts highlighted Crasus’s operational reliability — the company has experienced no equipment-related production stoppages since 2014 at its Oita petrochemical complex, which includes the second-largest ethylene facility in Japan. At a reference price of 200 yen a share, the stock offers a 6% dividend yield given the company’s dividend-on-equity policy of 5%.

RBC Capital Markets called the finalization of Orica’s North American ammonium nitrate supply arrangements for fiscal 2027 “a slight positive,” but said the one-year-only nature of the deal would have a negligible margin impact. RBC also characterized the delay in the sale of the Deer Park land as “a slight negative,” maintaining an outperform rating and an A$27.00/share price target on Orica. Shares were up 2.3% at A$23.37.

In Asia, Malaysian palm oil ended lower, with the Bursa Malaysia Derivatives contract for December delivery closing 9 ringgit lower at 4,663 ringgit a ton. Malaysia’s palm oil exports during the September 1-25 period are estimated to be down 24% month-on-month, according to Kenanga Futures analysts, who cited sluggish export data and expectations of higher tropical oil output. Public Investment Bank analyst Chong Hoe Leong said Malaysian palm oil stocks could see an attractive entry opportunity following their recent pullback, citing a strong second-half earnings outlook and firmer crude palm oil prices during the high-production season, and maintained an overweight rating on the sector with Sarawak Plantation and TA Ann as top picks.

In Malaysian utilities, Maybank IB analyst Tan Chi Wei said Tenaga Nasional’s second-quarter gas cost could potentially surpass the fourth-quarter peak, suggesting concerns about higher fuel costs could persist into 2027. Tenaga is expected to absorb a one-off 120 million ringgit to 150 million ringgit cost in September-December from waived fuel surcharges for selected households. Maybank maintained a buy rating with a 15.70 ringgit target price; Tenaga shares were up 0.2% at 13.16 ringgit.