"Copper's Long-Term Bear Trend Is Resuming" BofAML Warns

"Copper is breaking down," warns MacNeil Curry as BofA's technical strategist ignores the hyped hopes of newsletter-peddlers who see Dr. Copper's recent rise as indicative of a Chinese renaissance.

As Mike Tyson so philosophically noted, "everyone has a plan until they get punched in the mouth," and that 1-2 punch just hit Copper square in the jaw as macro data disappoints and the reality of a vicious circle of unwinding a rehypothecated commodity financing ponzi comes to bear. How much of copper's rise was artificially-created by CCFDs is unknown but as Curry notes, "the downtrend is resuming" and we will soon find out.

Get ready to sell Copper

Copper is breaking down. The completed 3wk Head-and-Shoulders Top and break of 2.5m trendline support (now 6801) says that the larger downtrend is resuming. A closing break of trendline support confirms, targeting 6321 (Mar-19 low and below).

LME Aluminum prices may rise by 30% to as high as $2,300 a ton in 2015

The recent rise in aluminum prices would prove unsustainable due to limited room for speculation and oversupply pressures, said Yang Xiaowu, General Manager at the Futures Department of China Aluminum International Trading in a statement made on May 29. 

LME aluminum prices rose from $1,754 per ton on May 21 to $ 1,848 per ton on May 28. Some market players attributed the sharp gain to market speculation that the Indonesian ban on exports would continue, with speculators now believing prices would rise by 30% in 2015 to as high as $2,300 per ton.

Yang, however, held a different view, believing the rise in aluminum prices would be unsustainable.  
 
Thanks to plentiful resources around the globe, Chinese aluminum smelters can increase bauxite imports from Australia, Guinea, and other countries to make up for the shortfall from Indonesia’s ban on bauxite exports, Yang said.  
 
If the ban did depress bauxite imports from Indonesia, Chinese smelters, which integrate bauxite, alumina and aluminum fabrication, mainly in Shandong, should purchase alumina directly from overseas suppliers, especially from Australia which has abundant alumina supply. Alumina inventories in China are also considered sufficient for the time being, he added. 
 
In addition, Chinese companies had already planned to build alumina plants in Indonesia long before the country’s export ban came into force. Since it takes less time to build alumina plants than to build aluminum smelters, Chinese companies will be able to ship alumina from Indonesia to China in the future, Mr. Yang said. 
 
Yang noted that rising aluminum prices may prompt smelters to expand capacity or bring idled capacity back online, which would also increase supply and weigh on aluminum prices.  

Tight supply likely to push aluminum premiums to record highs

 Rusal-world’s largest aluminum company foresees sharp jump in aluminum premiums during the coming quarters of the year. The company forecasts supply deficit for aluminum market owing to large scale production cuts by Chinese producers. The tight supply situation may push the aluminum premiums to new record highs during 2014, Rusal noted.

According to Oleg Mukhamedshin, Deputy CEO, Rusal, Chinese aluminium makers are likely to cut 3.5 million tonnes of aluminum smelter capacity this year, which can possibly lead to shortage of the metal in international market. The premiums that are currently around $400 may spike by 50% to $600 towards third quarter of the year.

The Indonesian ban on export of unprocessed ore may weigh on Chinese mills. The domestic bauxite prices have surged higher by $20 to reach $70-$85 since the start of the year. The higher raw material costs may force many aluminum producers to idle capacities. The country has already cut 2.1 million tonnes of production capacities so far this year. Rusal expects further cut of 1.3 million tonnes before year end.

Sources indicate that millions of tonnes of aluminum inventories are tied as backlogs with LME warehouses. Rusal had won a court order against cutting queues to 50 days. Mr. Mukhamedshin declined to comment on LME moves to appeal against the court ruling.

Nifty 7504 or 7261

Indonesian minister spearheads drive to restart copper exports

Indonesia's chief economics minister is spearheading a series of high-level government and industry meetings on Wednesday, aiming to broker a deal with foreign miners to restart copper concentrate exports that were halted nearly five months ago over a controversial tax.

Billionaire businessman Chairul Tanjung, who was appointed to the role last month, has made restarting copper exports a top priority amid a widening trade deficit, a slowdown in first-quarter economic growth and the prospect of job layoffs at mines.

Tanjung was due to attend a cabinet meeting on Wednesday morning to thrash out a new tax deal that could potentially be put before miners, including Freeport-McMoran Copper & Gold Inc and Newmont Mining Corp.

"After the cabinet meeting I will receive a report from the negotiating team at the coordinating economic ministry," Tanjung said on Wednesday, speaking ahead of the cabinet meeting in the capital Jakarta.

"Let's see the result. If the results are finalized, I will officially receive the Freeport and Vale CEOs," he said.

Indonesia on Jan. 12 introduced a ban on ore exports and levied an escalating tax on concentrate exports as part of efforts to force miners to build smelters and processing plants in Southeast Asia's largest economy.

The new tax halted about $500 million worth of monthly mineral ore and concentrate exports and led Freeport and Newmont Mining, who account for 97 percent of the country's copper output, to slash output as both say the rules conflict with their contracts.

Freeport chief executive Richard Adkerson was due in Jakarta this week for talks. Adkerson had been scheduled to meet Tanjung on Tuesday, but the meeting did not take place, Freeport spokeswoman Daisy Primayanti said, without giving details.

The two miners argue they should be exempt from the new export tax, which kicks in at 25 percent and rises to 60 percent in the second half of 2016, before a total concentrate export ban in 2017. They say their current contracts prohibit any extra taxes.

With the mining export stoppage about to enter its sixth month and the country's current account deficit still at a dangerous level, the credibility of Indonesian President Susilo Bambang Yudhoyono's outgoing government is also at stake. A fresh administration is widely expected to take government after July elections.

Details on what changes may be made to the export tax are not known, but late on Tuesday Tanjung reiterated that the government would look to draft a new regulation with separate incentives for miners making progress in the construction of smelters.

Both companies have questioned the economic viability of building new copper smelters in Indonesia, but have agreed to study the possibility of building a copper smelter with state-owned miner Aneka Tambang.

In addition to a breakthrough on the export tax, Tanjung, who is ranked as Indonesia's fifth richest man by Forbes with a net wealth of $4 billion, is looking to resolve long-running contract renegotiations for both Freeport and Newmont, whose current contracts are due to expire in the next few years.

Nickel producer PT Vale Indonesia is also up for a contract renegotiation.

Dr.Copper Pumped-And-Dumped On China's Schizophrenic Economic Data

Copper fell by its most in 5 weeks today on the heels of China's HSBC PMI miss overnight. This follows the 'economist' commodity's biggest rise in a month yesterday following China's official PMI beating expectations. It seems the farce of Chinese data has now made a farce of the commodity market as anything but an headline-induced algo trade... even though so many 'renowned' investors still view it as omniscient... 

Copper is right back to unchanged from before the Chinese data on the weekend... so Dr. Copper is none the wiser...

Alcoa said mulling shift in gear toward Nasaac

"We do not comment on market rumors," an Alcoa spokeswoman told AMM. However, the Pittsburgh-based company previously sold material into the contract and has registered brands deliverable against Nasaac, including large sows, ingots and T-bars, according to the LME's website. 

The Nasaac cash contract closed the official session at $2,300 per tonne on June 3, up 29.2 percent from $1,780 per tonne on February 10.   The Nasaac spike has sent offer prices from secondary aluminium alloy makers to as high as $1.16 per lb for A380.1, giving many market participants the option to sell metal directly into LME warehouses, which offer instant cash payments and at least 4 cents per lb in incentives, according to traders. 

The NASAAC (North American Special Aluminium Alloy Contract) is an aluminium alloy contract that reflects the production and consumption of aluminium in North America.