Showing posts with label BASE METALS. Show all posts
Showing posts with label BASE METALS. Show all posts

Wednesday, March 16, 2016

Industrial Metals: Bull Market or Dead Cat Bounce?

After a disastrous year in 2015, industrial metals started off on the right foot in 2016. Indeed, every single base metal is up in price on the year-to-date.
But, is this price rally just another dead cat bounce or the start of new bull market? and, what factors do we need to watch for more clues?

Sharp Rallies Are Usual in Bear Markets

Industrial Metals: Bull Market or Dead Cat Bounce?
Since the commodity bear market started in the spring of 2011, we’ve had several price rallies in industrial metals (see the graph above), that made some people think that a new bull market was underway. It wasn’t. Sharp price rallies are not unusual in bear markets and, although base metals are showing strength, we need more evidence before confirming that this won’t be another bounce followed by further declines like we’ve seen before.

Crude Oil and Base Metals Move Simultaneously

The main driver causing metal prices to rally this quarter is the oil price recovery that’s been happening since February. Lower fuel prices have compounded the longest commodity slump in a generation as oil is also key input in the cost of producing industrial commodities.
Oil prices rally since February
Moreover, oil is an asset closely followed by commodity investors. Falling oil prices make investors move away from commodities and, of course, industrial metals. Finally, the latest recovery in oil prices has caused oil-exporting countries such as Russia and Canada to strengthen their currencies against the US dollar. Therefore, higher oil prices contributed to a weaker dollar these past few weeks as we’ll explain soon.

As we just reported in our latest MMI, Saudi Arabia and other powerful OPEC members are reportedly discussing how to boost oil prices to $50 per barrel. Despite reports of a Russia and Saudi Arabia-approved production freeze, however, other non-OPEC nations such as Iraq still have not committed to cutting their own oil production. New production from Iran has entered the market at a much lower pace than most expected, but there is also good reason to believe Iran will ramp up production gradually as it deals with the nuances of re-entering global oil trading.
Similarly to what we see in base metals, it’s not possible to know if this oil price rally is sustainable or not. What is true is that we’ve seen oil prices bouncing in previous years, only to then see them slump so we need more evidence to believe oil prices will continue to rise. What oil prices do from now will have a huge impacts on metal prices.

Did the US Dollar Bull Market Just End?

US dollar index moving sideways for over a year

Base metals as commodities move in opposite directions to the dollar. In Q4 of 2015, a rising US dollar contributed to the slump in base metals. However, some factors have made the dollar weaken this quarter, helping push metal prices up.
As explained above, a recovery in oil prices contributed to a weaker dollar this quarter. Also, the Euro is gaining against the dollar after the European Central Bank recently announced that it probably won’t lower interest rates more.
The dollar index (shows the performance of the dollar against a basket of currencies) has traded within main support and resistance levels (red lines in chart above) for over a year. The dollar might be topping, but it’s to early to say that. We would to see if the index breaks below support levels to call for the end of the dollar’s bull market. If that happened, we would be more inclined to call a sustainable rebound in metal prices.

China: No Signs of Rebound

Shanghai stock market composite index

Another big factor that affects the price performance of industrial metals is China. For a sustainable rally in industrial metals we’d like to see a recovery in China, but we haven’t seen that yet. That could change but, so far, it makes the rally in base metal prices a bit suspicious. Investors’ sentiment on China hasn’t become bullish yet, at least we see that reflected in the performance of China’s stock market, which is hovering near the lows recorded in January.
Chinese February imports hit a new 6 year low

Fundamentally we don’t see signs of a turnaround, either. Indeed, if anything fundamentals are signaling more choppiness ahead. Recently, China reported a large drop in exports since the beginning of the financial crisis, with February exports down 25% year over year, confirming weak global demand which will likely be a drag on China’s economic growth in 2016. Even more worrisome for commodities might be the slump in imports. China’s imports in February fell to the lowest levels in six years, confirming weak demand in China.

Is it Now a Good Time to Buy Forward?

Well, that depends on what type of buyer you are. If you are a bottom picker then you are probably tempted to buy large quantities at these low prices. However, picking bottoms is easier said than done and it’s hardly ever a good strategy.

Wednesday, October 14, 2015

Zinc price rally has further to go

Zinc price rally has further to go
The mood at the metals world's number one annual gathering – LME Week – appears to be one of cautious optimism.
A survey of 400 metals and mining investors polled by Macquarie at the London summit returned a moderately bullish view of the next 12 months for base metals.
Platts quotes Macquarie's head of commodity research Colin Hamilton as saying "despite the ongoing and conspicuous issues for fundamentals across base metals markets, the overall mood was not as bearish as we might have expected":
"While concern over Chinese economic growth and metals demand was clear, the consensus for growth, albeit slower, persisted," he added.
Zinc was the top pick among the delegates with the consensus view that the metal would be trading at $2,000 a tonne in a year's time, up by double digits from today's ruling price.
Glencore may also ride to the rescue of nickel with speculation rife that the Swiss mining and trading giant is on the brink of announcing supply cuts
Glencore said last week it would slash its zinc output by over a third or 500,000 tonnes, most of it in Australia, after the price of the industrial metal fell to a five-year low leading to a 10% jump in the price on Friday.

Copper was also expected to strengthen adding $500 to todays's price around $5,300 over the next year, while tin should continue its good run holding onto its gains around $15,000 a tonne.
Aluminum was considered the worst bet with predictions of a fall to $1,450 a tonne by this time next year.
Last year's favourite, nickel also found no love with forecasts of further losses to $9,650 a tonne compared to today's LME ask of $10,460 a tonne.
But here Glencore may also ride to the rescue with speculation rife that the Swiss mining and trading giant is on the brink of announcing cuts at its operations in Canada, Australia, New Caledonia and elsewhere. Glencore is the world's fifth largest producers of the steelmaking raw material.
During the boom years copper was the top pick among summit attendees for five years in a row before switching to lead and tin in 2013.

Thursday, June 11, 2015

Peru's metal output rises in April, silver production lags

Peru's metal output rises in April, silver production lags
The production of almost all major metals by Peru reported robust growth in Peru during the month of April this year. While the output of copper, gold and zinc reported significant increase during the month, silver production declined, in accordance with the official government data released yesterday.
According to data released by the Energy and Mines Ministry, copper production rose 18.5% from 103,410 mt in April last year to 122,506 mt in Apr ’15. The decline in copper output from Freeport-McMoRan's Cerro Verde was offset by increased mine output from Antamina, Southern Copper, Toromocho and Antapaccay mines.
The increased output from Newmont and Barrick gold mines contributed to the 15% growth in gold production during April this year. The gold production totaled 379,504 Oz in Apr ’15, in comparison with the output of 330,273 Oz during the same month a year before.
Silver production dropped marginally by 0.4% over the year from 9.57 MOz to 9.53 MOz in April. The output from Antamina mines dropped significantly, whereas Buenaventura and Volcan reported rise in silver production during the month.
Zinc production rose 17.7% from 97,128 mt a year before to 114,323 mt in Apr ’15. Lead output too rose 27% from 97,128 mt to 114,323 mt over the previous year. Lead output witnessed sharp increase in Antamina, Volcan and Milpo. Molybdenum output too jumped 45% to 1,632 mt in April 2015.
Meantime, tin production by Minsur- the country’s only tin producer, rebounded sharply in April this year, rising nearly 15% from 1,438 mt in April 2014 to 1,654 mt in April this year.

Sunday, May 17, 2015

Peru reports robust metals production data for Mar ‘15

Peru reports robust metals production data for Mar ‘15
The production of almost all major metals by Peru reported strong growth in Peru during the month of March this year. While the output of copper, gold, silver and zinc reported significant increase during the month, tin production declined, in accordance with the official government data released yesterday.
According to data released by the Energy and Mines Ministry, copper production rose 9.3% from 118,036 mt in March last year to 129,051 mt in Mar ’15. The decline in copper output from Antamina and Cerro Verde mines was offset by increased mine output from Southern Copper, Toromocho and Antapaccay mines.
The increased output from Newmont and Barrick gold mines contributed to the 10.4% growth in gold production during March this year. The gold production totaled 393,059 Oz in Mar ’15, in comparison with the output of 356,097 Oz during the same month a year before.
Silver production increased 15% over the year from 9.4 MOz to 10.8 MOz in March. The Buenaventura, Volcan and Antamina mines reported higher silver production during the month.
Zinc production rose 24% from 94,978 mt a year before to 117,485 mt in Mar ’15. Lead output too rose 27% from 21,745 mt to 27,597 mt over the previous year. Lead output witnessed sharp increase in Volcan and Milpo. Molybdenum output too jumped 31% to 1,826 mt in March 2015.
Meantime, tin production by Minsur- the country’s only tin producer, declined sharply by nearly 15% from 1,945 mt in March 2014 to 1,665 mt in March this year.

Monday, April 13, 2015

How will El Niño effect Base Metals Market this year ?

How will El Niño effect Base Metals Market this year ?
El Niño has arrived, according to a report released by the National Oceanic and Atmospheric Administration (NOAA) in early March.

What is El Niño?
El Niño is the warm phase of the El Niño Southern Oscillation (commonly called ENSO) and is associated with a band of warm ocean water that develops in the central and east-central equatorial Pacific (between approximately the International Date Line and 120°W), including off the Pacific coast of South America.

El Niño Southern Oscillation refers to the cycle of warm and cold temperatures, as measured by sea surface temperature, SST, of the tropical central and eastern Pacific Ocean.

How will El Niño effect Metals Market this year?
“Extreme weather related to El Niño, such as floods or droughts, will be a big threat to production in world’s major metal producing countries, including Chile, Peru, Indonesia. Supply disruption resulting from this will boost the market,” said an analyst from COFCO Futures in SMM interview.

Another analyst from Guosen, however, expects the impact on metals market to be indirect, saying the disruption on production in major producing countries remains to be seen. But, he adds that copper price will likely stage a rally in 2Q.

Foreign investors generally expect a boost on the market from El Niño, especially copper and nickel prices.

Tuesday, March 3, 2015

London Metal Exchange aims to double cuts to warehouse logjams

London Metal Exchange aims to double cuts to warehouse logjams
* To launch new aluminium premium, ferrous contracts in Oct
* New proposals could cut queues twice as fast
* Opens door to capping, banning rents in warehouse queues
(Reuters) - The London Metal Exchange (LME) announced new rules and proposals on Monday aimed at slashing delivery backlogs at its global network of warehouses twice as quickly as under current reforms.
The move is part of a wide-ranging reform drive sparked by consumer complaints about long delays to obtain aluminium from storage and lawsuits accusing banks and commodity companies of conspiring to restrict supply through the warehouse network.
The LME, the world's oldest and biggest market for industrial metals, also said in a statement it planned to launch new contracts for aluminium premiums and ferrous products on Oct. 26.
The LME launched consultations last November on a second layer of rules governing physical delivery and on Monday it requested even more feedback on further measures.
The exchange asked members for their opinion on proposals that would force warehouses to reduce queues faster.
The 137-year old LME won a major court battle in October, giving it the green light to implement its initial set of regulations on Feb. 1 aimed at cutting delivery queues to a maximum of 50 days from up to two years at some depots. 
On Monday it said was now responding to complaints that under the current reform it may take as long as four years to cut backlogs at the worst affected site -- the Dutch port of Vlissingen.
Under the new tougher rules, it would take a maximum of 2.3 years to reduce queues to 50 days, Matt Chamberlain, LME head of business development, told a news conference.
"So in this example, the rate at which queues will fall would double -- the queues would last half as long."

The exchange, owned by Hong Kong Exchanges and Clearing Ltd , also set a firm October date for the launch of three new contracts: aluminium premiums, steel scrap and steel rebar.
The aluminium premium contract, which allows people to hedge additional surcharges for buying metal for immediate delivery, has been delayed from a second quarter launch.
This was because the LME first wanted to conclude any further warehouse reforms, which could have had an impact on premiums, Chamberlain said.
The exchange also released a discussion paper on the possibility of capping or banning rents in queues.
Buyers of metals have complained about having to pay high rent during the months that metals were stuck in backlogs waiting to be delivered from warehouses.
Previously the LME has rejected the idea of setting rent levels at warehouses, saying it had legal advice that it might fall foul of competition law.
The exchange published a detailed set of new rules on Monday to take effect on June 1, one of which will require warehouse firms to report anonymously incentives paid to metal owners so it can determine whether those payments were market distorting.

Thursday, November 27, 2014

Copper drops to three-week low on demand worries, aluminium up

Copper drops to three-week low on demand worries, aluminium up
* Weak U.S. home sales, consumer spending data
* Chinese speculators hit copper on Shanghai exchange
* London volumes retreat as Thanksgiving, year-end loom
* Nickel stocks rise to fresh record
(Reuters) - Copper fell to a three-week low on Wednesday after soft U.S. economic data and as Chinese speculators hit the market amid worries about weak demand.
Aluminium, however, gained on concern about shortages.
Three-month copper on the London Metal Exchange
(LME) fell to its lowest since Nov. 5 at $6,558 a tonne in intraday trade before paring losses to close 0.6 percent weaker at $6,570.
Volumes on the LME shrank ahead of the U.S. Thanksgiving Day holiday on Thursday.
"It has been a difficult year for speculators to make money and I don't think they are going to risk making bigger losses or eroding some of their gains in the final few weeks of the year, particularly when there aren't really any big stand out stories," said Gayle Berry, metals strategist at Jefferies.
On the Shanghai Futures Exchange, however, turnover climbed four-fold and open interest surged 11 percent as speculators sold copper, said analyst Leon Westgate at Standard Bank.
"With general sentiment at last week’s Asian Copper Week remaining negative... it appeared to be only a matter of time before the more bearish elements of the Chinese speculative community again had another go at shorting the metal."
The metal used in power and construction has been trading in a range between roughly $6,500 and $6,800 a tonne since mid-September and is down more than 10 percent this year.
It hit a three-week high of $6,772.50 a tonne last week following China's surprise interest rate cut. That cut may boost liquidity to businesses after about six months, said Colin Hamilton, head of commodity research at Macquarie.
"This is not an aggressive stimulus ... but it certainly underpins what we're looking at in terms of low single-digit growth rates for steel demand and mid single-digit growth rates for base metals demand into next year," he told a presentation.
Weak U.S. data on consumer and business spending added to jitters about global growth. 
Aluminium rose 0.6 percent to close at $2,061 a tonne as a key spread remained at the highest levels in nearly two years, indicating lack of spot material.
Nickel ended down 1.1 percent at $16,350 a tonne after LME stocks rose to a fresh all-time high.
Zinc finished up 0.1 percent at $2,273 a tonne, lead added 0.5 percent to $2,062.50 and tin rose 0.4 percent to close at $20,275.

Saturday, October 25, 2014

Demand concerns put pressure on base metals

Demand concerns put pressure on base metals
The global base metals market is currently facing strong headwinds that impact price performance.

In 2012 and 2013, a combination of expanding liquidity, weakening dollar, China’s voracious appetite for consumption and slowly improving growth prospects helped a strong uptick in demand. 

Although selective, investor interest in base metals was healthy.
Things are different now. This year has not been a great one for metals market.

In recent months, some of the important drivers have reversed direction while new challenges have emerged. Shrinking liquidity following the US Fed’s tapering programme, a steadily firming dollar, slowing industrial production in some of the major economies and lower inflation expectations have combined to cap the upside and force market prices down.

Currently, macroeconomic risks are casting a shadow – concerns over growth being the most important.
There is apprehension of demand slowdown. As the mover and shaker of the world commodity market, China’s import and consumption of metals exert a profound impact.

With construction activity in the Asian major slowing, there are fresh concerns over metals’ demand growth.

Another reason is the high level of corporate debt in China.

Although inflation is under control and employment healthy, the Chinese government seems to be worried about corporate debt and has, therefore, asked State-owned enterprises to fund purchases through cash flow rather than on credit.

According to experts, the metals and mining sector in China is not in a good shape. Declining investment growth and falling property prices have generated fears that the 2015 GDP growth target may be lowered. 

There are demand concerns is other regions too. Although US recovery is back on track, global growth is still uneven. Demand in Europe and Japan is still fragile.

Of course, many emerging markets show signs of stabilising with activities being adjusted to global realities. The US Fed’s monetary policy normalisation is seen as another uncertainty as expectations differ about the timeframe. Geopolitical tensions may have somewhat receded, but the Russia-Ukraine stand-off and insurgency in Syria and Iraq can potentially create a turmoil.

Simply put, the global environment is full of strong pulls and pressures.

As a result, many commodities are trading close to their cost curve.

Some of the less-efficient producers have shut down. It has also prompted a cut in capacity expansion.

Collapsing metal prices deter fresh investment while investor risk appetite wanes.

Supply demand fundamentals have begun to assert themselves.

An exception to the general trend of falling base metals prices is nickel whose price surge has been triggered by Indonesian ban on export of unprocessed raw material. Zinc is another exception because of tightening supplies.

Despite all the uncertainties surrounding the base metals market, on current reckoning, nickel will turn out to be a winner next year followed at a distance by zinc.

Thursday, October 23, 2014

Macquarie’s LME Week Base Metals Summit Survey

Macquarie’s Base Metals Summit, a linchpin of LME Week for the past decade, was held today where an audience of over 400 market participants were polled on their views on the outlook for base metals over the next 12 months.
Providing a strong indication of market sentiment in the metals industry at the start of the annual LME Week gathering in London, the 2014 Macquarie LME Week Summit Survey indicates that market fundamentals will continue to drive differentiation across base metals, though macro headwinds are increasingly a concern.
The results also show a large swing in participant preference towards nickel , despite weak recent performance. In contrast, copper is now the favourite short for the first time since the global financial crisis on strong supply growth.
Commenting on the results, Macquarie’s Head of Commodity Research, Colin Hamilton said “The results reflected confidence in the 2015 story for nickel, while the market seems well aware of the supply headwinds facing copper”.
Further highlights from the survey include:
• 46% of the audience expected the global economy to be moderately weaker over the next 12 months, while 35% expected it to be much the same. Only 7% predicted a growth shock.
• Global metals demand is expected to grow modestly in 2014 by 47% of the audience, while 24% think it will contract – a figure much higher than the 2013 summit.
• 77% of the audience expects Chinese GDP growth to drop below the 7% mark in 2015.
• 36% of participants believe the impact of global deflation will be the key theme being discussed by the market in mid-2015.
• 40% consider the volume of ‘invisible’ metal stored off-market as the biggest problem in current base metals markets.
• When asked in which metal they would most like to hold a short position on a 12-month view, copper was the favourite for the first time in 6 years, while zinc was the least preferred short.
• When asked in which metal they would most like to hold a long position on a 12-month view, nickel took 47% of the poll (up from 10% in 2013). In contrast, only 7% voted for copper.
• Delegates think that another co-ordinated global easing is the biggest risk to the upside over the next 12 months, while a China collapse presented greatest downside risk.
In terms of the individual metals:
• The audience's weighted average price expectation for cash copper was $6,663/t a year from now, compared with Monday's LME official price of $6,615/t. This is 9% lower than 2013 Summit expectations.
• 53% expected the copper market to take until 2017 or beyond to move back to deficit.
• The audience's weighted average price expectation for cash aluminium was $1,997/t a year from now, compared with Monday's LME official price of $1,955/t. This is 5% higher than 2013 Summit expectations.
• A flood of Chinese supply is viewed as having greatest potential to cause aluminium inventory unwind.
• The audience's weighted average price expectation for cash nickel was $19,859/t a year from now, compared with Monday's LME official price of $15,315/t. This is 12% higher than 2013 Summit expectations.
• The majority of the audience expected the Indonesian nickel ore ban to stay in place over the coming year.
• The audience's weighted average price expectation for cash zinc was $2,325/t a year from now, compared with Monday's LME official price of $2,223/t. This is 9% higher than 2013 Summit expectations.
• The majority of participants expect some Chinese mine supply growth in 2015, but only when incentivised by price.
• The audience's weighted average price expectation for cash lead was $2,137/t a year from now, compared with Monday's LME official price of $2,012/t. This is 6% lower than 2013 Summit expectations.
• The audience's weighted average price expectation for cash tin was $19,809/t a year from now, compared with Monday's LME official price of $19,400/t. This is 25% lower than 2013 Summit expectations.

Tuesday, October 21, 2014

China metals demand seen up in 2015, copper at least 6 pct

China metals demand seen up in 2015, copper at least 6 pct
* Power, rail sectors seen solid, property slows
* Aluminium seen up 7-9 pct in 2015 vs 10 pct in 2014
* Tin demand at below 160,000 T vs just above 150,000

China's consumption of refined copper is expected to rise at least 6 percent in 2015, roughly in line with this year, supported by new investment in power networks and demand from rail projects, analysts and industry executives said.
An expected slowdown in new residential and commercial building projects, however, could see an easing in consumption growth for aluminium and nickel in the world's top metals consumer.
Lead demand growth may also be trimmed by lower production of electric bicycles, while tin demand should be supported by chemicals and tin-coated steel plates makers.
China is expected to complete power network orders from its 2014 power plan next year, as well begin a new investment plan for 2015, said a senior executive at a state-owned copper producer.
The power sector is the country's top copper user. Investment in new power networks had been expected to rise more than 10 percent in 2014 fell 0.6 percent in the first half from a year earlier, raising expectations that more orders would be placed between the fourth quarter and early next year.
"In China, big (infrastructure) projects usually are started in the third year of a government. Next year is the third year to the current government," said the executive, who declined to be named because he was not authorised to talk to media.
Rail project orders for power cables and wires have risen since August and could stay strong next year, said a manager at a large end-user of refined copper, who put consumption growth at more than 7 percent next year.
This was above a forecast from state-back research firm Antaike, which put consumption growth at about 6 percent in 2015, compared to an expected 6.7 percent-rise to 8.75 million tonnes this year.
Growth could be capped by a fall in demand from air-conditioners makers next year after they raised the output in 2014, said Yang Changhua, senior analyst at state-backed research firm Antaike.
China's still healthy demand rise could help copper prices on the London Metal Exchange , three industry sources said. A trader at a Chinese hedge fund expected the average LME copper price to rise 5 percent next year from 2014.

New property projects, which typically consume copper, aluminium, zinc and nickel, are likely to slow next year, even though banks have relaxed lending to some house buyers in the past month, cutting existing stocks, metal industry sources said.
For aluminium, demand from transport and power transmission may rise next year, said an executive at a state-owned smelter said, who asked not to be named.
Overall consumption of primary aluminium is likely to rise 7-9 percent next year from about 10 percent expected in 2014, said the smelter executive and Wang Chunhui, analyst at information provider SMM, who put consumption at 27 million tonnes in 2014.
Production of primary aluminium may rise about 10 percent to 30-31 million tonnes next year due to new capacity. High output and lukewarm demand may boost exports of semi-finished products.
A drop-off in new property projects could also affect demand for zinc and nickel, which are used to coat some steel products for the building sector. Zinc is also widely used in infrastructure projects such as power networks and transport.
Antaike expects China's refined tin demand to be flat this year, at just above 150,000 tonnes, and to rise slightly next year due to steady demand from chemicals and tin plated steel products used for packaging.
It expects China's refined lead consumption to rise 4 percent to about 5.1 million tonnes in 2015 from the year before, compared with a 5-percent rise for 2014 as production of electric bicycles starts to drop after a rapid rise in the past few years.

Friday, October 17, 2014

Bank of America Merril Lynch bullish on base metals in 2015

Do you know which is the best among Base Metals?Bank of America Merril Lynch in a research note published Wednesday forecasts bullish 2015 for base metals, backed by structural improvement of market fundamentals. The report also states that macro-economic pressures led to substantial retracement in prices of some base metals during summer this year.
According to the report, cyclical headwinds continue to exist for the time being. However, early signs of structural improvement in fundamentals are already visible in individual base metals. Aluminum market fundamentals are looking strong with the metal expected to shift to deficit in 2014. Bofa ML forecasts aluminum price to reach $2,010 per mt in 2015.
As for Nickel, the supply-demand situation may turn out to be extremely bullish through 2015. Higher Chinese refined and ferronickel imports and declining LME stocks may trigger further strengthening of market fundamentals for the metal. Nickel is expected to end in a deficit of nearly 50,000 mt in 2015, BofA notes. The Nickel prices may average at $23,836 per mt in 2015.
According to BofA Merril Lynch, copper still has the weakest fundamentals among base metals. China has de-stocked huge inventories of copper during summer, resulting in lower imports. But with copper inventories at substantially lower levels, the bank forecasts rebound in copper prices during 2015. The LME copper prices are likely to average at $6,939 per mt in 2015.

Friday, October 10, 2014

BNP Paribas sees Copper to avg $6,500 a ton in 2015; Aluminum to avg $2,060

BNP Paribas sees Copper to avg $6,500 a ton in 2015; Aluminum to avg $2,060
Copper is expected to average $6,500 a ton during next year while aluminum to average $2,060 a ton, said BNP Paribas.
Except for copper , all of these forecasts are above current prices for three-month metal on the London Metal Exchange. 
The French bank’s 2015 average price forecasts for the other base metals are lead at $2,365 a ton; nickel at $22,100a ton; tin at $24,000 a ton and zinc at $2,560 a ton. 
Mounting supply constraints and respectable demand growth should provide increasing support for most base metals in 2015.
“The constraints remain greatest among the smaller metals. In particular, the bank says, supply constraints in lead, tin and zinc will become more pressing in 2015,” BNP Paribas added.
Nickel’s outlook remains entirely in the hands of Indonesian policy and still looks positive as things stand, BNP Paribas said, referring to a ban on ore exports. 
Aluminum continues to face a large structural surplus, but non-Chinese producers are addressing this and China could start to experience raw material shortages. 
In contrast, BNP Paribas still expects firm supply growth to keep the copper price under pressure until deep into 2015.
BNP Paribas maintains its recommendation of a short copper trade versus a basket of other base metals.

Thursday, October 9, 2014

Do you know which is the best among Base Metals?

Do you know which is the best among Base Metals?
Societe Generale sees a mixed outlook for base metals as a Chinese economic slowdown impacts metals differently, listing itself as most constructive on nickel. 

Base metals have been on the defensive since summer, hurt by slowing growth in China, the eurozone and US, perceptions of a more hawkish Federal Reserve and other factors. 

SocGen is sticking to their view that increasing copper mining output, which is now well under way, will over time ease the current tightness in the refined market. 

While global copper consumption growth is expected to strengthen this year helped by moderately higher global economic growth, serious structural oversupply in China's housing sector and tightened credit conditions are likely to cap both Chinese and global copper consumption growth. 

There is scope for the other metals to rally to varying degrees on tightening markets coincident with seasonal demand strength typically associated with Q4. However, as ever, much will depend upon China. 

SocGen is most bullish towards nickel. While the refined nickel market remains well supplied at present, this is likely to change from next year. The nickel market has changed dramatically as a result of Indonesia's ban on nickel ore exports, which SocGen expects to be enforced. 

This one factor alone is likely to shift the nickel market from structural oversupply to a balanced outcome this year, with sizeable deficits probable over the coming years.

Tuesday, September 30, 2014

What to expect from Base Metals market in October ?

What to expect from Base Metals market in October ?
It is a traditionally peak demand period for base metal market in September and October. However, market conditions did not get improved over the past September.

Will base metal market improve in October after high consumption failed to materialize in September?
“At the macro front, the Chinese story is not a great one for base metal market”, said an analyst from COFCO Futures, citing the sluggish property market and the lack of fresh stimulus measures.

A strengthening dollar will also put a downward pressure on base metal market, he added in SMM’s latest interview.

“Market fundamentals, however, will paint different pictures for different products”, he added.

The copper market will see supply pressures growing in response to capacity expansion and high TCs, and this will send copper prices lower, while possible supply disruptions in aluminum and zinc market will help support the two markets, the zinc market in particular.

Wednesday, August 6, 2014

Bigger Losses May Happen in Base Metal Market if Price Breaks Key Support Levels

Bigger Losses May Happen in Base Metal Market if Price Breaks Key Support Levels
The geopolitical risks are escalating now, sending the US dollar index up to a 10-month high. Concerns over global credit risks also combine to shadow the market. As a result, the global commodity market fell across the board. Base metal prices, however, succeeded to find support at key levels.
“If prices fall below those key support levels ( copper 7,030-7050; aluminum 1,980-1990; zinc 2,340-2350; lead 2,230-2240), cash will fly away from the market, and this will trigger bigger losses”, one analyst said. He added that prices will fall back from initial highs as the second half of 2014 goes on. 

What to expect from Base Metals this week ?

What to expect from Base Metals this week ?Shanghai Metals Market expects base metals to follow divergent trends this week, but optimistic expectations surrounding upcoming economic releases should favor some prices trending up.

China Impact
China’s State Council issued guidance on reform of the household registration (“hukou”) system July 30. The proffered guidance indicates that household registration restrictions will be abolished in towns and smaller cities first. The government also indicated that it would loosen residence registration requirements in mid-sized cities “in an orderly manner”, while a points system will be established to control the number of migrants moving to cities with populations over 5 million.

Reform of the household registration system is expected to boost infrastructure construction, as well as consumption of medical care, education, cars, home appliances, and housing in general. That, plus increased investment opportunities, should bolster demand for metals. Analysts estimate reform of the household registration system to contribute 5% to GDP growth over the next six years.

US Impact
The US Federal Reserve agreed to cut bond purchases another USD 10 billion/month after its two-day policy meeting for July, but offered no clearer indication as to when it might raise rates. Although the Fed acted calmly after US Q2 growth proved brighter than expected, it did express greater optimism over the labor market and inflation. This upbeat assessment may help bolster the market.

Source: Shanghai Metals Market

Friday, July 25, 2014

China Surprisingly Strong PMI to Push Up Shanghai Metal Prices

 Shanghai metals price is expected to lurch higher today following the surprisingly high HSBC PMI reading for July, Shanghai Metals Market foresees. 
The HSBC flash China manufacturing PMI rose to 52 in July, an 18-month high, well above market expectations. The result helped copper , being refrained from rising, lead the gain among base metals. The bullish sentiment in zinc and aluminum market should remain unchanged.  
The followings are SMM price estimations for base metals on July 25. (unit: yuan per tonne)
Copper: 50,500 -51,000 
Aluminum: 14,030 -14,130   
Zinc: 17050-17150
Lead: 14,300-14,400  
Nickel: 130,000-132,000 (spot)
Tin: 139,500-140,500 (spot)   

Wednesday, July 23, 2014

2 Companies Begin Shipping Concentrate from Indonesia; Export Regulations Still in Place

2 Companies Begin Shipping Concentrate from Indonesia; Export Regulations Still in Place
Companies have struggled to export minerals from Indonesia since harsh regulations were put in place in January, creating a supply squeeze for nickel . However, two companies have now opted to start paying newly required export taxes in order to ship mineral concentrate.
Reuters reported Friday that Sebuku Iron Lateritic Ores (SILO) and Lumbung Mineral Sentosa have secured permits to ship iron ore , zinc and lead subject to a 20-percent export tax. Currently, that tax is slated to increase incrementally to 60 percent in the latter half of 2016. Indonesia implemented new rules banning the export of mineral concentrates in order to pressure miners to refine metals domestically.
SILO has now shipped 100,000 tonnes of iron ore concentrate, while Lumbung has sent 8,000 tonnes of lead and zinc concentrate out of the country, according to the news outlet. R Sukhyar, Indonesia’s coal10 and mineral director-general, stated, ”they finally wanted to pay it,” in reference to the tax.
Indonesia’s new mineral export regulations have also been making waves in the copper space as major miners Newmont Mining (NYSE:NEM) and Freeport-McMoRan Copper & Gold (NYSE:FCX) have so far been unable to come to an agreement about the rules with the Indonesian government. Reuters said in another Friday article that Newmont may even risk losing its mining license to a state-run miner as Indonesia is prepared to defend its case in international court.
To be sure, the news is important for resource investors to note. As well as being a leading supplier of iron ore and bauxite before the ban, Indonesia was the world’s number one nickel-exporting country, and a restart of shipments from the island nation would certainly affect the market. Since January, when Indonesia implemented its new laws, nickel prices have risen16 above $18,000 per metric ton, with China going so far as to get around the ban by purchasing ore with lower nickel and higher iron content labeled as “iron ore.”
In terms of whether the ban will actually be lifted, a Bloomberg article from July 9 suggests18 that Joko Widodo, Indonesia’s new, more market-friendly leader, may ease the harsh export rules. Mike Dragosits, senior commodity strategist at TD Securities in Toronto, told the publication, “that signals to us that he’ll probably relax the country’s ore export ban. His hand will basically be forced by the fact that the Indonesian economy has been suffering under this ore export ban regime.”
However, as Nickel Investing News has previously explored, the Indonesian ban is not the only factor at play for the metal. Russia’s Norilsk Nickel (MCX:GMKN) is the world’s single largest nickel producer, and it also influences the market. Kitco News reported last week that although increasing sanctions on Russia have yet to affect the metals producer, another increase in sanctions last week renewed supply fears on worries that Norilsk will eventually be affected.
For now, of course, ban has yet to be lifted, and any exports from Indonesia will remain subject to hefty tariffs. In that light, nickel investors may want to keep an eye on the situation in the island nation, as well as nickel-focused companies operating outside of Indonesia and Russia.
North American Nickel (TSXV:NAN) currently has two exploration projects: a nickel-copper-cobalt-PGMs project in Greenland and a copper-nickel-PGMs project in Ontario, while PolyMet Mining (TSX:POM,NYSEMKT:PLM) and Duluth Metals (TSX:DM) are both exploring for polymetallic deposits in Minnesota’s Duluth Complex. Polymet is advancing its wholly owned, advanced-stage NorthMet nickel-copper- precious metals project, while Duluth is focused on its Twin Metals copper-nickel-cobalt-platinum-palladium- gold - silver project.
Additionally, Balmoral Resources (TSX:BAR30) is assessing the base metal potential of its Grasset gold discovery in the Abitibi greenstone belt. Follow-up drill testing intersected a previously unknown occurrence of nickel-copper-PGMs mineralization grading 0.5-percent nickel, 0.1-percent copper, 0.33 grams per tonne palladium and 0.15 grams per tonne platinum.

Indonesia Ends the Six Month Metal Ore Export Ban

Indonesia Ends the Six Month Metal Ore Export Ban
Indonesia has ended the six month ore export ban and has restarted the exports by taking new policy to improve the returns on the shipped out resources from the largest economy of Southeast Asia, said a mining ministry official.
Indonesia has imposed a ban on unprocessed metal ore exports in January and as a part of the policy to force the miners to construct domestic smelters for processing the minerals, they have levied an escalating tax on the mineral concentrate exports.
Disputes followed by the export ban stopped the monthly export of about $500 million minerals and concentrates. Before the imposition of the ban, Indonesia was the major exporter of nickel ore, iron ore and aluminium ore.
Coal and Minerals Director General, Sukhyar told that last week ships with iron ore, zinc, and lead concentrate left the nations amid the disputes, after two companies agreed to pay a 20 percent export tax. The two firms are Sebuku Iron Lateritic Ores (SILO) and Lumbung Mineral Sentosa.
SILO has shipped about 100,000 tonnes of iron ore concentrate where as Lumbung has shipped about 8,000 tonnes of lead and zinc concentrate. Sukhyar added by referring to the escalating tax that finally the companies wanted to pay it. The export tax has even made a legal dispute with the U.S miner Newmont Mining Corp.
SILO anticipated to ship about 8 million tonnes of iron ore concentrates per year where as Lumbung would export about 29,000 tonnes annually. The two companies are exporting the ores to China.

What are the factors to drive base metals this week?

What are the factors to drive base metals this week?
A series of economic data will be due this week, and with strong speculative activities, base metals prices will each continue down recent trendlines, as per major Chinese analysts.

Analysis of Major Macro News in China
The National Bureau of Statistics (NBS) shows that China’s GDP grew at an annualized 7.4% in 1H, as Q2 growth accelerated to 7.5% (annualized), said Shanghai Metals Market.

China has undertaken small stimulus measures – including infrastructure investments and adjustments to bank lending ratios – leading to June’s rise in fixed-asset investment.

Investment contributed less than 3.6 percentage points to H1 growth, below the 4.1 percentage points from consumption. But, current growth remains heavily dependent on government-driven consumption, which has served to counter slides in manufacturing and real estate, but at the price of a spike in lending. New lending in June outpaced the previous three months.

China will maintain a pro-growth posture into 2H. A series of measures are expected to expand the money supply – including tax cuts and increased capital lending – to counter a steep drop in forex receipts. 

The PBOC is also likely to cut deposit reserve ratios for all financial institutions after a recent targeted cut. Nevertheless, China’s economy continues to face pressure from the lack of domestic demand and a sluggish real estate sector.