LME, Rusal spar at appeal hearing over warehouse reform

* Ruling could come as early as Wednesday after hearing ends
* Appeal hearing is over consultation, not warehouse reform
* Rusal says market conditions mean rules to have little impact

The London Metal Exchange (LME) and Russian aluminium giant Rusal (0486.HK) sparred in court on Tuesday as the LME sought to overturn a court ruling and allow it to implement tough warehousing rules to cut backlogs.

The dispute is over whether the LME, the world's oldest and biggest market for industrial metals, should have to launch a fresh consultation after a March court ruling labelled its original process as "unfair and unlawful".

The proposed warehouse rules - designed to speed up deliveries of metal from depots in the LME's global network - were not at issue in the original ruling.

"The LME makes great play of the fact that the judge did not hold that the proposal in itself was irrational," Rusal's legal team led by Monica Carss-Frisk said in written arguments on the first of two days of hearings before a panel of three Appeal Court judges.

"That is not, however, the test. The test is one of fairness."

Rusal argued that the original judge was right to say that the LME was unfair by excluding the option of capping warehouse rents in its consultation. Tuesday's arguments were heavy with legal precedents about the duties of public organisations.

The LME reforms, originally due to take force in April, aimed to make owners of warehouses deliver out at least as much metal as they take in.

Industrial buyers of aluminium, used in transport and to make beverage cans, have to wait up to two years to get delivery of metal from some LME warehouses and the new rules aimed to cut the queues down to a maximum of 50 days.

The exchange, owned by Hong Kong Exchanges and Clearing Ltd (0388.HK), told Tuesday's hearing that Rusal had not brought up the issue of rental caps at warehouses during the consultation process.

Michael Beloff, acting for the LME, said that the Russian company was using that issue to stop the reforms because it was worried that they would depress prices.

Benchmark aluminium prices CMAL3 on the LME have slid 30 percent since touching a peak in May 2011 due to overproduction and surpluses.

Rusal said in a separate briefing document that due to changes in the supply-demand balance, the LME's proposed changes would have scant impact on warehouse queues.

"Such market conditions demonstrate that the rule would have little or no impact at all, rendering the rule largely irrelevant and ineffective in the current circumstances," the Rusal document said.

Rusal says the aluminium market has moved into a substantial deficit due to cutbacks by producers after years of surpluses.

A ruling in the Appeal Court could come as early as the conclusion of the hearing on Wednesday, but the panel could also decide to reserve judgment to take time to consider the arguments, according to the court's website.

(Reuters)

Zinc, Lead buoyed as value hunters tune into global growth story

* Zinc correction looms; upside potential intact near term-Triland

* LME may quickly implement new warehousing rules, if appeal won-sources

* Coming Up: U.S. Consumer confidence for July at 1400 GMT

Zinc prices matched three-year highs hit the session before on Tuesday and lead inched to a new 17-month top as investors ploughed into metals that have lagged this year and appear undervalued on prospects of reviving global growth.

Manufacturing growth in the world's top metals user China expanded at its fastest clip in 18 months in July, an initial survey showed, while in general the U.S. economy has gathered pace, with a brightening picture seen in its labour market.

This week, second quarter growth in the United States, a jobless report, and an official reading of China's factory health are expected to show fresh signs that a global economic revival has taken hold.

"The macro environment is improving, putting base metals on a solid footing going into the second half, but it's not enough to tighten up the complex as a whole so the market is focusing on those with supply side issues. Clearly zinc and lead are some with the biggest," said ANZ strategist Daniel Hynes in Sydney.

Zinc supply in particular would suffer with several top mines drying up, including Century in Australia, while a recovering construction industry would revive demand from galvanisers.

"The direction is right. It's probably gone a lot quicker than I expected which opens it up for some profit-taking (but)...I wouldn't expect to see a significant sell off," he added.

Three-month zinc on the London Metal Exchange matched Monday's three-year peak of $2,416, signalling investors' appetite for the contract that has jumped nearly nine percent in July.

"The theme from the physical trading community is that zinc has risen too far, too fast... and that the market has to correct downwards. We know that it will, the question is just how high it goes first," said broker Triland in a note.

LME lead rose to $2,305, a new top since late February 2013. Prices moved into positive territory for the year in July and are now up almost four percent for the year.

Lead on the Shanghai Futures Exchange (ShFE) climbed as much as 2 percent, adding to 5 percent gains a day earlier, before trimming gains to 1 percent at 15,320 yuan ($2,500) a tonne by 0228 GMT.

LME copper edged up 0.1 percent to $7,124.50 after small losses in the previous session.

U.S. economic growth likely rebounded in the second-quarter from a winter-induced slump at the start of the year and will probably continue to gather momentum through the rest of 2014. The reading is due on Wednesday.

Elsewhere, the London Metal Exchange (LME) is likely to move quickly to implement its tough warehousing rules to cut backlogs if it is successful at an appeal hearing this week, metals market sources said.

MCX fails to get new chief; FMC deadline lapses

Multi Commodity Exchange has breached the 60-day deadline set by the commodity market regulator Forward Markets Commission for appointing a head to lead the exchange.

The Commission elevated Parveen Kumar Singhal, Executive Vice-President of MCX, as interim CEO on May 23 and gave two months’ time for the board to appoint a new Managing Director. Last Friday, MCX cancelled the interview call given to 15 candidates.

The interview for shortlisted candidates was called off abruptly after Kotak Bank acquired significant minority stake of 15 per cent in the exchange for ₹450 crore. The Kotak Group, which already has a commodity exchange under its belt, has made it clear that it will not claim a board seat in MCX.

The Managing Director and CEO’s post at the exchange has been vacant for over two months since Manoj Vaish put in his papers, just three months after assuming office.

It is reliably learnt that the next meeting of the Board is slated for August 13 to consider the financial results of the company.

Time ticking

The exchange is also fast running out of time to get its promoter Financial Technologies reduce its stake to two per cent. After the stake sale to Kotak Bank, Financial Technologies is left with five per cent stake which needs to be offloaded by August end.

Since the exchange trades contracts three to four months in advance, the promoters have to offload their stake by August end in order to get the FMC’s approval for launching next calendar year contracts. MCX has to come up with the January contracts in September.

The commodity market regulator had declared Financial Technologies and its promoter Jignesh Shah as not ‘fit and proper’ to own stake in commodity exchange after one of its group companies National Spot Exchange defaulted on ₹5,600 crore trade settlement.

Financial Technologies was directed to reduce its stake to two per cent.

Zambia's Q1 Copper Output Strikes at 400,000 t

 Zambia’s copper output in the first quarter of 2014 increased by more than 100,000 metric tonnes. During the first quarter of 2013, the production was about 300,000 tonnes.

During the period January to March, the exact copper output stood at 473,249 metric tonnes, rose from 399,515 tonnes of the same period previous year. Michael Gondwe, the Bank of Zambia Governor while announcing the copper production figures, said about the current developments taking place in the mining sector all over the nation.

He added that the copper output was increasing by 18 pct on YoY basis. Dr. Gondwe added in a statement that the first five months earnings from copper export rose by 7.4 pct to about US$3,209.1 million due to the hike in export volumes. And this figure during the same of last year was about US$2,987.5 million. 

The export volume has increased by 19.4 pct to about 477,485.3 metric tonnes from 399,919.8 metric tonnes of same period of 2013. But, the average realized copper price has declined by 10 pct to about US$6,720.86 per tonne from US$7,471.77 reported during the same period last year.

Dr Gondwe mentioned in the statement that copper price decline by 9.2 pct to about US$6,691.00 a tonne as at June 11 2014 from US$7,360 a tonne at December 2013 end, impacted on market sentiment. He added that the government was focusing to implement diversified export base by right interventions in economic sectors and significant activities for encouraging potential exports.

Gold falls on stronger US dollar

The price of gold inched lower Monday on a stronger US dollar but remained above $1,300 an ounce as mounting tensions over Ukraine and Gaza sustained safe-haven demand for the precious metal.

Spot gold changed hands at $1,303.30 an ounce around 1:30 p.m. EST, down $5.00 from Friday’s close of $1,308.30.

Gold futures for August delivery traded at $1,307.00 per ounce in the afternoon on New York’s Comex, up $1.70, or 0.13%, from $1,305.30 seen Friday.

Signs that the US economic recovery is strengthening boosted the dollar and lessened demand for gold as an alternative asset.

According to Reuters, the dollar floated near six-month highs against a basket of major currencies Monday, with speculation about an early US interest rate hike due to an improving jobs situation putting downward pressure on gold.

But fighting in Ukraine on Sunday between pro-Russian rebels and troops loyal to Kiev, along with Washington organizing to impose sanctions on Moscow, kept the yellow metal from falling below the $1,300 level.

Traders said gold is likely to remain around that level until Comex gold options for August expire later in the day, according to the news agency.

No end in sight

Continued conflict in Gaza has provided gold with additional support.

Although clashes there abated Sunday, no comprehensive deal to end the fighting between Hamas militants and Israel is in sight, the news agency said.

Investors tend to buy gold as a kind of insurance during times of political or financial turmoil.

Gold has experienced double-digit gains this year, hitting a 3.5 month high on July 10.

Bulls Fleeing Natural Gas as Goldman Sees Further Decline

Speculators are fleeing natural gas after prices dropped below $4 for the first time since December and power plant production fell to a 13-year seasonal low.

Hedge funds reduced net-long positions, or bets on rising prices, by 11 percent in the week ended July 22, the U.S. Commodity Futures Trading Commission said. Bullish wagers have fallen 51 percent since February.

Futures slid as the output from electricity generators, the biggest consumers of the fuel, fell 11 percent in the week ended July 19 from a year earlier to the least for the period since 2001, according to the Edison Electric Institute. Mild weather and a record pace of inventory gains may push prices lower in the next three months, Goldman Sachs Group Inc. said.

“The move down in prices this early in the summer is surprising,” Breanne Dougherty, a natural gas analyst for Societe General SA in New York, said in a July 25 telephone interview. “The power generation load makes and breaks summers and it’s extremely sensitive to weather.”

Natural gas dropped 7.9 percent to $3.772 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. Prices closed at $3.781 on July 25, capping a sixth weekly decline, the longest string of losses since the first quarter of 2010.

Gas Supply

Gas inventories, which declined to an 11-year low in late March, have rebounded at the fastest pace since 2001, U.S. Energy Information Administration data show.

Stockpiles rose 90 billion cubic feet to 2.219 trillion in the week ended July 18, a gain bigger than the five-year average for the 14th straight week, according to the EIA.

“While we previously believed that risks to 2014 prices were skewed to the upside, we now see downside risks to U.S. gas prices in the next three months,” Daniel Quigley, an analyst at Goldman Sachs in London, said in a July 22 note to clients.

Power generation in the lower 48 states totaled 82,614 gigawatt-hours in the seven days ended July 19, the least since the week ended June 13, Edison Electric data show.

This month has been the coolest July since 2009, Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland, said in a July 25 e-mail. “We are expecting the cool pattern to continue into August.”

Power Plants

Gas deliveries to power plants dropped 13 percent this month to average 25.9 billion cubic feet a day as of July 25, the lowest for the period since 2009, according to LCI Energy Insight in El Paso, Texas.

Futures may find support between $3.50 and $3.75 for the rest of the stockpiling season, with those prices prompting power plants to switch from coal, Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said by phone on July 24.

“The problem with the emergence of this cool fall-like weather is that we don’t expect to see a slowdown in those inventory injections until the reemergence of heating demand,” she said.

In other markets, the downing of a civilian airplane in Ukraine and stockpiles at Cushing,Oklahoma, at a six-year low enticed speculators back to the oil market, boosting bullish bets from a six-month low.

Money managers raised net-long positions in benchmark West Texas Intermediate futures by 7.3 percent to 278,116 futures and options combined in the week ended July 22, CFTC data show. Long positions rose 1.1 percent 307,739 while shorts dropped 35 percent to 29,623.

WTI Jump

WTI futures advanced 4.5 percent to $104.42 a barrel on the Nymex in the period covered by the report. The contract closed at $102.09 on July 25.

Net long gasoline bets fell 22 percent to 34,115. Futures slipped 0.6 percent to $2.8807 a gallon on the Nymex in the week covered by the report and settled at $2.8653 on July 25.

Gasoline at U.S. pumps, averaged nationwide, slid 0.7 cent to $3.543 a gallon on July 24, the lowest since March 28, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring group. Retail prices are down 4.1 percent from a 13-month high on April 26.

Money managers’ bets on ultra-low sulfur diesel flipped to a net short position for the first time since November with 1,520 contracts, the CFTC report showed. Futures fell 0.1 percent to $2.8542 a gallon in the report week and closed at $2.9157 on July 25.

Natural Gas

Net-long positions on four U.S. natural gas contracts declined by 25,772 futures equivalents to 201,090, the least since Dec. 3.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

Long positions fell by 4 percent to 472,613, the least since February 2013. Bearish bets gained 2.3 percent to 271,523, the most since Dec. 10.

“I wouldn’t expect prices to go much lower,” said Societe Generale’s Dougherty. “That said, if we continue to get extremely mild weather as we saw in July through October, we will see a slightly different story.”

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

Weekly Economic Data for the week 26-Jul-14 to 01-Aug-14

You can get the same Economic Calendar at https://www.dynamiclevels.com/report/economic-calendar.

Exp.:	Expected or Anticipated value calculated from the recent survey conducted.
Prior:	Represents the last actual for each indicator. In case there is a revision to the last actual, the prior column reflects the prior figure as revised.
Exp. change today:	Exp. - Prior
Avg. change of last 1 year:	Average Change in Actual data calculated for last 1 year.
Expected impact on price:	This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below: Very Good Good Neutral Bad Very Bad
Actual:	Refers to the actual/latest figures after its release.

Data for the week 26-Jul-14 to 01-Aug-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
28-Jul-2014	09-00 PM	United States	Federal Reserve Board Meeting on Discount Rates					Neutral
29 - 31 Jul-2014	--	United States	Federal Reserve FOMC Meeting					Neutral
29-Jul-2014	07-30 PM	United States	Reuters/Michigan Consumer Sentiment Index	85.5	85.2	0.30	2.48	Neutral
30-Jul-2014	02-30 PM	European Monetary Union	Consumer Confidence	-8.4	-8.4	0.00	1.05	Neutral
30-Jul-2014	06-00 PM	United States	GDP Annualized QoQ	3%	-2.9%	5.90%	0.45	Very Good
30-Jul-2014	08-00 PM	United States	EIA Crude Oil Stocks change	--	-3.969	3.97	3.45	Neutral
30-Jul-2014	11-30 PM	United States	FOMC Rate Decision	0.25%	0.25%	0.00%	0.00	Neutral
31 -Jul-2014	11-30 AM	United Kingdom	Nationwide House PX MoM	0.5%	1%	-0.50		Neutral
31-Jul-2014	02-30 PM	European Monetary Union	Unemployment Rate	11.6%	11.6%	0.00%	0.12	Neutral
31-Jul-2014	08-00 PM	United States	EIA Natural Gas Storage change	--	90	-90.00	33.60	Neutral
01-Aug-2014	06-30 AM	China	Manufacturing PMI	51.3	51	0.30	0.77	Neutral
01-Aug-2014	07-15 AM	China	HSBC China Manufacturing PMI	51.9	52	-0.10	0.97	Neutral
01-Aug-2014	09-00 AM	Japan	BOJ Governor Kuroda Speaks at Research Institute of Japan					Neutral
01-Aug-2014	10-30 AM	India	HSBC India Services PMI	-	51.5	-51.50		Neutral
01-Aug-2014	03-30 PM	European Monetary Union	ECB Announces 3-Year LTRO Repayment					Neutral
01-Aug-2014	06-00 PM	United States	Nonfarm Payrolls	231K	288K	-57.00	43.00	Neutral
01-Aug-2014	06-00 PM	United States	Unemployment Rate	6.10%	6.10%	0.00%	0.13	Neutral
01-Aug-2014	07-25 PM	United States	Reuters/Michigan Consumer Sentiment Index	81.5	81.3	0.20	2.48	Neutral
01-Aug-2014	07-30 PM	United States	ISM Manufacturing PMI	56	55.3	0.70	1.35	Neutral