Showing posts with label COMMODITIES. Show all posts
Showing posts with label COMMODITIES. Show all posts

Tuesday, August 2, 2016

This is what a broad-based metals and mining rally looks like

Gold may be grabbing the headlines with its best year-to-date performance in decades and silver's 48% surge in 2016 to above $20 an ounce is a big swing even for such a volatile metal, but this year's rally in commodities is broad-based and becoming more so.
After under performing gold in 2016, platinum has now overtaken the yellow metal with a year to date advance of a shade under 34%. A  chunk of those gains came in July, the metal's best monthly performance since 2012. Sister metal palladium has also enjoyed its best month for nearly a decade, soaring 21.1% in July. With a 52% or $250 an ounce gain from trough to peak in 2016, palladium is now even besting silver.
Thermal coal is probably the biggest upset – seaborne prices are up 22% in 2016 to above $60 a tonne with most of those gains coming in recent weeks
Base metals have also enjoyed a breakout 2016 with across the board gains year-to-date. Measured from recent lows which mostly occurred at the end of 2015 and in January and February this year the recovery in prices this year is even more impressive.
One of the few decliners until recently, lead is still a laggard but now boasts a 2.7% rise in 2016 scaling $1,800 a tonne in July. Bellwether copper has also been lack luster adding only 3.3% in 2016 as it remains stuck below $5,000 a tonne, but elsewhere in the complex prices are in rapid advance.
Aluminum and cobalt, both up 9.4% so far this year haven't enjoyed the spectacular gains of the likes of likes of zinc (+40% to $2,275 a tonne) and tin (+24% just short of $18,000), but like nickel (+24%) which regained the $10,000 a tonne level in May, the metals could play catch up over the remainder of the year as Chinese demand picks up steam.
Steel making raw materials iron ore (+41% to top $60 a tonne on Monday) and coking coal (+29% and back in triple digits) have also come back strongly despite all predictions. Thermal coal is probably the biggest upset – seaborne prices are up 22% in 2016 to above $60 a tonne with most of those gains coming in recent weeks as a domestic clampdown by Beijing opens up opportunities for exporters.
Oil dipped below $40 a barrel today as the 2016 rally comes off the boil, but the commodity is still up more than 50% from its February low. Potash at levels not seen since 2007 and uranium languishing around $25 with few signs of improvement appear to be the exceptions that prove the rule for mined commodities this year.
commodities broad-based metals and mining rally looks like
Source: Steel Index, LME, Comex, Nymex, UX, Infomine. Prices at August 1, 2016

Wednesday, April 6, 2016

Commodity prices set for significant rebound in 2016: Scotiabank

Commodity prices set for significant rebound in 2016: Scotiabank
While commodity prices fell 0.3% in February and 25% year-over-year, the second half of the month saw the beginning of a price rally that is expected to continue throughout 2016, according to Scotiabank’s commodity price index released March 29.
As China’s economy has become less of a concern and the U.S. dollar has grown weaker, the outlook for commodity prices has improved. In March, prices are expected to see a “significant” rally, according to the index, from a decade low.
“Equally important, hedge and investment funds appear to be looking for reasons to bid commodity prices higher, after the rout of recent years,” said Scotiabank’s vice-president of economics and commodity market specialist Patricia Mohr.
“2016 should be a transition year for commodity prices, with the current slowdown in global capital spending in oil and gas and mining setting the stage for a strong rebound going into the next decade.”
Commodity prices set for significant rebound in 2016: Scotiabank
The 0.3% dip was driven by a 7.4% decrease in the oil and gas index, which has fallen almost 50% year-over-year. West Texas Intermediate (WTI) hit a low February 11, reaching US$26.21. This is down from a high of $147.90 in July 2008, which was right before the price plummeted and hit as low as $32 that same year.
As of March 28, WTI was priced at US$39.39 per barrel, an increase of 50% over the price recorded six weeks prior.
The recent rally relates to the increasing likelihood of a production freeze between OPEC and Russia, which will be the subject of an April 17 meeting in Doha.
“While cuts are not in the cards and Iran will not participate, a ‘freezing’ of production—particularly by Saudi Arabia and Iraq—will contribute to a gradual rebalancing of world supply with demand by late 2016 or early 2017,” Scotiabank said in its report.
“Pipeline sabotage and outages in northern Iraq and Nigeria contributed to firmer prices in February.”
The metal and mineral index grew 1.4% in February, and March is expected to see another increase. One reason for the rally is the rebound in prices for some metals, as demand is increasing above supply. Zinc prices are expected to strengthen as demand grows 3.6% this year due to increasing auto sales and production, construction in Europe and infrastructure spending in China and India. Iron prices have also jumped in advance of China’s peak construction period in April and May.

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.

Friday, January 22, 2016

INFOGRAPHIC: The periodic table of commodity returns

INFOGRAPHIC: The periodic table of commodity returns
Courtesy of: Visual Capitalist

At the beginning of each year, U.S. Global Investors puts out a fantastic visualization called the Periodic Table of Commodity Returns. This year’s version has an interactive design that allows users to sort returns by various categories including returns, volatility, and other groupings.
For those keeping score, 2015 was a historically bad year for commodities in almost every regard.
Base Metals: The fact that lead was the best performing commodity with -3.5% returns throughout 2015 is not a good sign. However, compared to its fellow base metals such as copper (-26.1%), zinc (-26.5%), aluminum (-17.8%), and nickel (-41.8%), lead did wonderfully in comparison.
Precious Metals: Gold held in there as a relative top-performer with only a -10.4% dip. That said, it’s started off 2016 with a nice rally so far. Silver, platinum, and palladium did worse in 2015, all returning -11.8%, -26.1%, and -29.4% respectively.
Energy: The worst performing commodity of 2014 was the second-worst performing commodity of 2015. Oil was been routed in the last two years, with -45.6% and -30.5% returns respectively. Other fossil fuels have followed, with natural gas (-19.1%) and coal (-10.8%) both losing ground in 2015 as well.
Food: Corn was among the “best” performers, returning -9.6%. Wheat struggled more throughout 2015, returning -20.3%.
Deflating commodity prices also compounded with a strengthening dollar to hit currency markets hard, allowing Bitcoin to become the best performing currency of 2015 by far. Countries heavily reliant on commodity exports such as Canada, Brazil, Russia, Mexico, Australia, Norway, and South Africa had their currencies hammered in relation to the U.S. dollar.

Saturday, January 9, 2016

Market Massacre: Worst Ever First Week Of Trading

This was the worst first week of the year for US equities... ever!
Dow... (even worse than 2008)
Market Massacre: Worst Ever First Week Of Trading

Market Massacre: Worst Ever First Week Of Trading

Europe was a disaster...
Market Massacre: Worst Ever First Week Of Trading

And epic for China...
Market Massacre: Worst Ever First Week Of Trading

And while only Trannies are in a bear market (down 20%) in the US, these 7 developed world markets are already there...(h/t SocGen's Andrew Laphthorne)
Market Massacre: Worst Ever First Week Of Trading
Commodities were very mixed this week...
Market Massacre: Worst Ever First Week Of Trading

Gold rallied 4% this week - its best 'first week of the year' since 2008... (best week in 5 months) - breaking 2 key technical levels...
Market Massacre: Worst Ever First Week Of Trading

Crude down 5 days in a row touching a $32 handle at the lows... biggest weekly drop since Nov 2014
Market Massacre: Worst Ever First Week Of Trading

Wednesday, January 6, 2016

What Comes After The Commodities Bust?

The days of E&P companies using external debt financing to fuel growth have most likely come to a close.
The one thing executives should have learned in 2015 is that Wall Street can for long periods of time remain disconnected from fundamentals and can swing to extremes. Another lesson from 2015 is that OPEC can no longer be relied upon to set prices.
Thus, the debt fueled financing boom in the shale space will most likely never return.
As a result, the industry will likely move to self-funding capital expenditures through free cash flow generation in an attempt to significantly reduce its reliance on leverage. Debt levels will initially have to be reduced, significantly fueling a cycle of dramatically lower capital expenditures and consolidation. This process is already underway, but still has a long way to go.
When the internet bubble burst in 2001, only the business models that generated cash vs subscriber growth and cash burn survived and continued to get funded. Furthermore, larger companies survived and thrived as the smaller ones got starved for cash, died or dramatically scaled back subscriber acquisition to achieve a positive cash flow. We are about to experience the same consequences of misguided investments from a Federal Reserve-inspired bubble.
The toxic combination of lower capital expenditures and constrained output will result in another spike in prices, one that few will anticipate. The current Federal Reserve policy, which isn’t conducive to higher commodity prices, will also make the price spike more difficult to see ahead of time.However, in the interim, until policy changes at the Fed or OPEC are enacted, prices will remain below the marginal cost to maintain production.
This is especially true now that there are clear signs that the U.S. economy is weakening while the Fed chose to raise the federal interest rates in December. As we move through 2016, I expect a rash of bankruptcies tied to this transition to lower leverage, and towards the latter half of 2016 there will likely be a steep fall off of production.
Essentially most business models need to reset.
E&P companies that have a current leverage of over 4X Debt/EBITDAX and whose interest burden in some cases is over 30 percent of cash flow will eventually fail. I fully expect the new paradigm to be leverage ratios that are well under 4X Debt/EBITDAX.
Take a look at Pioneer Natural Resources (PXD) as a base case. Even with over 80 percent oil hedged through 2016, a leading cost structure and Debt/EBITDAX leverage of just over 1X, Pioneer will still not be FCF positive in 2016 and beyond according to most sell side models.
True the marginal call on cash is $500 million (25 percent of EBITDA) or more depending on the assumption of realized prices through asset sales. Furthermore it does assume double digit production growth, which will require more capital to achieve and higher cash burn but also comes with a hedge price of over $60 per barrel.
Looking at a smaller producer WPX Energy (WPX) on a flat production outlook and minimal hedges in 2016-17 with assumed WTI prices remaining under $50, they too will be free cash flow negative as leverage will remain over 3X Debt/EBITDAX approaching 4X by 2016 end. Their cash call will range from 15 percent of EBITDA to 35 percent in 2016 and 2017, according to JPM.
The point of this is that the current strip – even with hedges – doesn’t support free cash flow. That indicates that if the industry moves to free cash flow generation as a requirement and lower leverage, something has to give.
Business models are still adapting to the new paradigm. And many producers will go insolvent as debt markets close for them. Production will rationalize as depletion hits output and capital expenditures are cut further. Looking at PXD and WPX, it does not appear that this process of rationalization is over, which is especially true if prices remain under $50 per barrel. Nor has the negative feedback loop on lower capex, which spells trouble for new production to replace declining output later this year and next.
The de-leveraging that is occurring in E&P is a broader theme playing out in the global economy. Take China, for example, where growth was built on plentiful credit. But growth has slowed and credit is no longer as generous, both of which are leading to the need to correct debt levels – further fueling slower growth. I believe the Fed has realized that QE was increasingly having weaker positive outcomes. As a result it alternatively turned to a policy of a strong dollar knowing the impact on commodities. The EU QE only supports that dollar policy further in my view.
Eventually – maybe as soon as 2016 – the world will realize how wrong loose monetary policy has been and will turn back to more traditional means of growth through lower taxation and regulation. When that occurs it will come with altered Fed policy and corrections in equity and the dollar at a time when the commodity sector will not have the means to fuel supply growth.
Thus while the current downturn is not only unsustainable but is sowing the seeds for another commodity boom in prices, it will support supply growth through lower leverage and capital expenditures being primarily paid for by EBITDA or cash flow. This will require much higher commodity prices at some point.
What Comes After The Commodities Bust?
Until then the unsustainable inverse relationship between NASDAQ and commodities will continue. The Fed’s policy has inflated assets while crushing commodities. That cannot continue indefinitely.

Tuesday, January 5, 2016

The Best And Worst Performing Assets Of 2015

Late in 2015, Germany's Handelsblatt reported, erroneously, that Venezuela was the best performing asset class of 2015.
The Best And Worst Performing Assets Of 2015

It wasn't. The reason this was in error is because if one adjusts the returns into the real currency exchange rate, one which reflects the true implosion of the economy, instead of the government "mandated" one, the result is very different, one which shows that contrary to popular wisdom, during hyperinflation stocks are not a good store of value.
The Best And Worst Performing Assets Of 2015

So what were the real best and worst performing assets of 2015? Here, with the full breakdown in both local currency and USD-redenominated terms, is DB's Jim Reid.
* * *
With markets wrapped up for 2015 now, reviewing the performance of asset classes last year shows that it was one where negative asset class returns were aplenty, while those finishing in positive territory were few and far between.
Indeed, of the 42 assets we monitor in Figure 5, just 9 finished with a positive return in Dollar-adjusted terms over the full year. Of these, the big winner was the Nikkei (+10.4%) - boosted by the accommodative BoJ and relatively stable Yen. In the periphery we saw both Portuguese (+6.5%) and Italian (+3.9%) equity markets also close higher, while in China the Shanghai Comp (+6.2%) finished up for the year but not without some huge volatility over the 12-months and of course ending well off the highs it posted back in June.
The S&P 500 (+1.4%) also closed just about in positive territory for the year on a total return basis although that performance was the worst for the index since 2008 as energy stocks clearly weighed for much of the year, while there was a similar return for US Treasuries (+0.8%).
At the other end of the scale there were some notable losers for us to pick out. In particular it was Oil which stole the limelight with huge falls for both Brent (-44.1%) and WTI (-30.5%) while Copper (-24.4%), Wheat (-20.3%), Silver (-11.7%) and Gold (-10.4%) were also hard hit. Both political and economic fragility saw Brazil (-42.0%) and Greece (-30.3%) fall the most in the equity space while EM equity markets finished with a broad -14.8% decline.
US Dollar strength was a big theme for 2015 as evidenced by the lack of winners above with the Dollar index returning a hefty +9.3% for the full year. This meant there were decent falls for the Euro (-10.3%), Aussie Dollar (-10.7%) and Canadian Dollar (-16.1%).
In local currency terms Russian equities (+32.3%) came out on top along with some of the peripheral markets. In the credit space it was the divergence between European and US credit which was most notable. Reflecting the higher exposure to energy credits, US HY closed with a -5.0% loss for the full year, while US IG was down a more modest -0.4%. In Europe we saw EUR HY finish +0.5% and EUR Sub Fins +1.4%, although EUR IG Corp was down -0.7%. Again converting this into US Dollar terms results in any gains for European credit being wiped out and in turn underperforming US credit for the full year.
The Best And Worst Performing Assets Of 2015

Sunday, December 27, 2015

Mining in 2016: Six reasons to be cheerful

Mining in 2016: Six reasons to be cheerful
In our look back at 2015 we called it mining's annus horribilis.
In stead of the hoped for rebound in metals and minerals prices, just about everything from copper to crude and coal to diamonds lost more ground. Those that were calling a bottom on the commodities market in 2015 where sorely disappointed and anyone making a bullish casewere shouted down.
Capital Economics, a research firm frequently quoted in these pages, in a new note outlines its outlook for commodities in 2016.
Some metals prices already appear to have found a floor following the announcement of large cutbacks in production and new investment
Julian Jessop, Head of Commodities Research at the London-based firm, with admirable understatement says it has been "a difficult year for those, ourselves included, who have had anything positive to say about commodities."

Nevertheless, Jessop found six key drivers and themes that should help prices to recover over the course of the next year:
  1. China gears up: "The bulk of the slowdown that many still fear lies ahead has, in fact, already happened; we estimate that actual growth was only 4.5% or so this year, and expect economic activity to pick up pace again during 2016."
  2. Dollar damage done: The strengthening greenback "has both lowered the dollar price that (non-US) consumers are able to pay and allowed commodity producers with revenues in dollars and costs in local currencies to maintain supply at a high level," but the "bulk of this move should now be over too".
  3. Inflation returns: "Underlying price pressures are finally starting to pick up – notably in the US – and headline inflation rates should rebound in the coming months as the biggest declines in the cost of oil drop out of the annual comparisons. This, in turn, could revive demand for inflation hedges including commodities, with gold in particular likely to benefit."
  4. More easy money While the Fed will continue to raise rates in 2016, it would be because of a stronger economy and higher inflation, keeping real interest rates low. Europe and Japan will continue or  accelerate its quantitative easing programs while the People's Bank of China also "has plenty of room to ease further, via cuts in interest rates and reserve requirements, without the need to resort to a big fall in the renminbi."
  5. The flipside is that there is plenty of room for money to return to the sector
  6. Supply cuts: On top of better news on the demand side, "a recovery in the prices of many industrial commodities will probably require further evidence that supply is being tamed by the previous sharp falls. Some metals prices already appear to have found a floor following the announcement of large cutbacks in production and new investment."
  7. Investor interest: While investor sentiment towards commodities are still at record lows "the flipside is that there is plenty of room for money to return to the sector. Indeed, commodity prices may look increasingly attractive relative to the high valuations of equities and (especially) bonds. We would not expect investor demand to trigger a rebound in prices on its own. But speculative flows could support any recovery driven by the underlying fundamentals of supply and demand, just as highly negative sentiment has compounded the recent weakness."
Click here for more analysis from Capital Economics on the commodity sector.

Wednesday, December 9, 2015

Chinese commodity demand: Crisis. What crisis?

Chinese commodity demand: Crisis. What crisis?
Tuesday was another bleak day on commodity markets.
The price of crude oil ($37.65) and iron ore ($38.80) dropped again and the globe's two most traded raw materials are now at levels prior to the word supercycle even entering the popular lexicon.
Similarly precious metals and industrial continued to drift lower with bellwether copper exchanging hands barely above seven-year lows ($2.04) and coal (thermal $51, coking $72) continuing its inexorably decline.
The world's major mining companies were trading even weaker than their products would suggest with stock valuations reaching decade or more lows.
On Tuesday billions more wiped off the market value of BHP Billiton (–3.7%), Rio Tinto (–8.6%), Vale (–6.3%), Freeport McMoRan (–5%), Glencore (–6.9%) and Anglo-American (–12.7%) in New York.
The fact that the mining and metals are being overwhelmed by negative sentiment and that sector investors are willing to shrug any positive developments were very much on display on Tuesday.
Commodity import volumes will increase further in 2016 due to an expected improvement in economic activity, a further lift from government policy support and an appreciation in the renminbi
Data released by Chinese customs early in the day showed the country's total import bill falling by 8.7% year on year in November. That was better than the 18.8% plunge in October but the weakness in the headline numbers gave bears an excuse to start selling again.

But the US dollar figure masks a significant underlying recovery in demand.
In volume terms, overall imports of commodities accelerated by 17% compared to the same month last year. It was the greatest jump for almost two years.
Chinese iron ore imports surged 22% in November year on year and 8.8% compared to October. Imports for the first eleven months were up just 1.3% compared to 2014, but last year was a record breaking year.
Copper shipments was just as strong with inbound shipments of refined metal rising 9.5% to 460 000 tonnes from a month earlier and racking up double digit gains compared to last year.
While year to date copper imports are down slightly, ore and concentrate imports rocketed  37% to a record 1.44 million tonnes compared to October and for 2015 imports of copper mine output  is growing by double digits.
As this chart from Capital Economics shows crude oil imports are picking up again and even the decline in coal seems to be arrested.
John Kovacs, senior commodities economist at the independent research firm expects that overall commodity import volumes will increase further in 2016 due to an expected improvement in economic activity, a further lift from government policy support and an appreciation in the renminbi."
"This increase in Chinese commodity imports in turn supports our forecasts for a recovery in prices next year," says the research note.

Friday, October 2, 2015

Commodities terrible quarter in just one chart

Commodities terrible quarter in just one chart
Unless you were hiding out in rough rice or lean hogs, commodities were not your friend in the third quarter of 2015.
GoldCore compiled three-month relative performance of commodities with data from
Worries out of Asia hurt commodities. China is rebalancing, emphasising consumption over investment. It's stock market gyrations also dragged down metals. The Shanghai Composite Index falling from the peak of 5,166 in mid-June to 3,038 at the end of September.

Thursday, August 6, 2015

Iron ore price rally has legs

Iron ore price rally has legs
The price of iron ore jumped on Wednesday as the market for the steelmaking raw material in top consumer China picks up and traders square positions ahead of a public holiday in the Singapore hub.
The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin advanced $1.40 or 2.5% to $56.40 a tonne, according to data provided by The SteelIndex. That's up just under 28% from record lows hit July 8.
The advance in the Metal Bulletin's benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China was $1.49 to $56.78 while lower grade 58% fines soared $2.91 a tonne to $52.46, a 5.9% gain on the day.
Chinese steel prices have come off one-month highs hit yesterday but at $337 a tonne the most-traded rebar contract on the Shanghai Futures Exchange is up sharply from a record low of $305 hit early July.
Platts News reports that some Chinese steel mills have begun to raise output on the back of the higher rebar and billet prices:
"Many mills near Beijing will be mandated to reduce their steel output so as to ensure a clear blue sky in the capital," the source said. "Mills in the south that not affected by the output cut are producing as much as possible so that they have steel products on hand to sell when steel prices are expected to hike by end of this month."
That blue sky would be courtesy of the Chinese government which has halted all construction inside the capital city and ordered steelmakers in areas surrounding to make drastic cuts in production and ahead of September 3 military parade marking the 70th anniversary of the end of World War II.
Not everyone is convinced that the rally in steel and iron has much further to go. One steel trader told Reuters that "some traders and mills are trying to sell more as buying isn't as strong as the rally in prices and they are worried that prices might have hit the ceiling at the moment."
A slowing economy and rapidly cooling property market have seen the country's steel consumption contract by 4.7% in the first six months of 2015 according to the country's Iron and Steel Association (CISA).
China forges almost as much steel as the rest of the world combined and the country sucks in more than 70% of the world's seaborne iron ore.

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.

Tuesday, April 21, 2015

Will Chinese RRR cuts lift Aluminium, Copper?

Will Chinese RRR cuts lift Aluminium, Copper?
The People’s Bank of China (PBOC) will reserve requirement ratio (RRR) by one percentage point, the central bank announced on Sunday.

The monetary stimulus will boost aluminium market, but any price rally should be limited, given the poor market fundamentals, Guoxin Futures told SMM. Guoxin Futures added that power tariff cuts will weaken cost support for aluminium prices, another factor that will arrest sharp price gains.

The recent rise in aluminium prices was aided by China’s pro-growth policies and hopes for more stimulus measures, rather than an improvement of market fundamentals, Hongyuan Futures told SMM. The chronic overcapacity means that this round of RRR cuts will have limited impact on aluminium prices, Hongyuan Futures added. 

Analyst from Guosen Futures agreed with the opinion and told SMM in an interview that the RRR cut will help ease worries triggered by last week’s poor economic releases. “That plus the slower growth in copper inventories during a high demand season will send copper up to 44,500 yuan per tonne, probably heading towards 46,000 yuan.”

“The monetary easing will definitely benefit copper market, and we now see copper to climb to 45,000 yuan per tonne,” chief analyst from COFCO Futures predicts.

However, analyst from Western Futures warned that the easing measures were also a reflection of fragile economy in China. Besides, it may take some time for these measures to produce results. “Thus, we expect copper to meet resistance at 45,000 yuan per tonne.”

Monday, April 6, 2015

Copper futures surge 3% on hopes of delayed U.S. rate hike

Copper futures surge 3% on hopes of delayed U.S. rate hike
Copper prices surged on Monday, as weaker than expected U.S. employment data forced investors to recalibrate their assumptions about the future course of the Federal Reserve's monetary policy.
On the Comex division of the New York Mercantile Exchange, copper for May delivery rallied 7.6 cents, or 2.79%, to trade at $2.810 a pound during European morning hours. Prices touched an intraday peak of $2.830, the strongest level since March 26.
Futures were likely to find support at $2.709, the low from April 1, and resistance at $2.868, the high from March 26.
There was no settlement in copper futures on Friday as markets were closed for the start of the Easter holiday. Trading activity is expected to remain light on Monday, with markets in Europe, the U.K., China and Australia all closed for holidays.
The Labor Department reported Friday that the U.S. economy added 126,000 new jobs in March, the smallest increase since December 2013. Economists had forecast jobs growth of 245,000 last month.
The surprisingly weak report added to concerns over the outlook for economic growth after other recent economic data pointed to a slowdown at the start of the year.
A slowing labor market could prompt the Federal Reserve to reconsider a planned increase in interest rates. Last month the Fed indicated that the first rate increase could come as soon as June, but added that continued improvement in labor markets would be a key factor it would consider.
Later in the day, the U.S. Institute of Supply Management is to release data on service sector activity as investors look for further indications on the strength of the economy and the future path of monetary policy.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, traded at 96.87, not far from a seven-day trough of 96.55 hit on Friday.
Elsewhere on the Comex, gold futures for June delivery rallied $20.50, or 1.71%, to trade at $1,221.40 a troy ounce, while silver futures for May delivery soared 50.7 cents, or 3.04% to trade at $17.20 an ounce.
A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.