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.

London Metal Exchange hikes 2015 trading fees by 34 percent

* LME owner HKEx seeks to boost profits after 2012 takeover

* Fees to be simplified, "all-in" transaction fee in dollars

* Significant discounts on LME open-outcry trading

* Makes progress on opening warehouses in China

 

The London Metal Exchange (LME) hiked trading fees for 2015 by 34 percent on Monday as its owner moved to boost profit from the world's biggest industrial metals market after a costly takeover.

 

The 137-year-old LME had warned of hefty increases after years of operating as a member-owned market that kept a lid on trading fees, but the average rise turned out to be significantly less than some members had feared.

 

The LME also said in a statement it would provide an

 

"all-in" transaction fee in a single currency, the U.S. dollar.

 

The hikes are another major step by the LME's owner, Hong Kong Exchanges and Clearing Ltd, to increase revenue after splashing out $2.2 billion to buy the exchange, a price that analysts said was very expensive.

 

"The new LME tariff is competitive and ensures we can continue focusing on innovation and offering users the highest levels of service," said Garry Jones, LME chief executive and HKEx co-head of global markets.

 

HKEx has invested hundreds of millions of pounds into the LME to modernise it, make it more competitive and due to increased regulation, Jones told a news conference. "The LME as was, just three years ago, would not survive in today's environment."

 

The new tariff structure includes a significant discount on

 

"ring" trading after the LME said in June it would keep open-outcry trading, bucking a trend by most other markets to shift to all-electronic operations. 

 

The LME said clearing fees will remain unchanged, a week after the exchange launched it own clearing house, LME Clear. 

 

"Members understand that we will have a much better exchange providing much higher quality of services, product capability, regional expansion, currency flexibility, and much greater Asian and China participation," HKEx Chief Executive Charles Li told a news briefing in Hong Kong.

 

 

PROGRESS ON CHINESE WAREHOUSES

 

Jones said the LME has moved forward in its long-standing goal of opening warehouses in top metals consumer China.

 

The LME has sought for many years to set up delivery networks in China to grow its business, but Chinese regulators have not approved the LME opening metals depots there.

 

"There's considerable progress and discussions going on all the time, we had some in fact the last few weeks," Jones said.

 

The LME would like to work with the Shanghai Exchange, which also trades base metals such as copper and aluminium, and already has a warehouse network, he added.

 

The LME, in setting its new fees, likely kept a close eye on remaining competitive with the CME Group .

 

Although the LME still controls the vast majority of industrial metals futures trading, its U.S. rival has been carving out a growing share of the global copper market with its Comex contract and in May launched a new aluminium contract in a big push to grab some of London's $51 billion market for the metal. 

 

A fund manager had told Reuters that the fees he was charged for trading on the CME were about 73 percent higher than the old LME fees.

 

"It's only logical now that you have to increase fees to be more in line with other exchanges that are for profit. It's still very competitive," said Robin Bhar, analyst at Societe Generale in London.

 

Before the LME's sale in December 2012, it was owned by the banks and brokers that used it and therefore trading fees were kept very low for members.

 

HKEx promised when it was bidding for the LME that it would freeze the low fees during an initial period, but the moratorium expires in January.

London Metal Exchange, eyeing CME, seeks big jump in trade fees

* LME to publish 2015 fee schedule on Monday
* Owner HKEx to boost fees to make takeover profitable
* LME fees 73 pct lower than rival CME - fund manager

The London Metal Exchange (LME), looking to boost profits, has scope for a significant hike to its trading fees whilst remaining competitive with arch U.S. rival CME Group .

The LME had warned of hefty increases when it publishes its new fees schedule for 2015 on Monday, but has kept the details under wraps.

The move will be another key step by the LME's owner, Hong Kong Exchanges and Clearing Ltd., to wring profits from its pricey $2.2 billion takeover of the world's biggest industrial metals market.

Before the LME's sale in December 2012, it was owned by the banks and brokers that used it and therefore trading fees were kept very low for members.

HKEx promised when it was bidding for the LME that it would freeze the low fees during an initial period, but the moratorium will expire in January.

Executives have been preparing the ground for a hefty increase, including HKEx Chief Executive Charles Li at a results presentation last month.

"The market knows and I don't think the market is going to be that happy about it," he said. "I can't tell you whether that's going to be a 20 percent increase, 30 percent increase or 50 percent increase..."

RIVAL CME

The LME, in setting the fees, is likely to keep a close eye on remaining competitive with the CME.

Although the LME still controls the vast majority of industrial metals futures trading, its U.S. rival has been carving out a growing share of the global copper market with its Comex contract and in May launched a new aluminium contract in a big push to grab some of London's $51 billion market for the metal. 

But due to the legacy of low fees, the LME has broad scope to boost revenue from that area and still remain competitive.

Exchange fee schedules are complicated, but one fund manager said the gap was huge between the fees he is charged for trading metals on the two rival markets.

Comex trading fees come in at an equivalent 73 percent higher than the LME, not including clearing fees, he said.

That would mean that the LME could increase fees by 50 percent and remain cheaper than its U.S. rival.

The LME declined to comment on how its fees compare with the CME.

Brokers say any fee hike will be difficult since the cost of trading has already soared due to additional costs from new regulations.

"This is a tough business to remain in," said an executive at a major LME broker, who said a rise in margin requirements and clearing costs was already hurting profits.

An executive at a major bank that trades commodities said he reckoned that total costs for trading on the LME could triple.

Initial grumbling would be expected, but users would have to accept the hikes, said analyst Robin Bhar at Societe Generale.

"At the end of the day people have to trade, consumers and producers have to hedge, so they will probably have to swallow those charges," he said.

"If the LME is still seen as competitive against other exchanges, then one could argue that they've been too low in the past."

Positive Zinc Outlook Not Necessarily a Sure Thing

Zinc market participants have likely grown used to hearing positive predictions about the metal, but in a recent article Mineweb's Kip Keen takes a look at the flip side of the coin.

As quoted in the market news:

"For a zinc refresher I called up Jessica Fung, a BMO mining analyst with a head for base metals, to talk about her more conservative view of the zinc sector.

Let's dig into some of her research.

First zinc consumption. It will come as no surprise that China consumes a lot of the world's zinc. Of total consumption last year China gobbled up about 46 percent, or 6,063 kt.

But, and this is one of the key considerations, China, unlike in the case of say copper , produces a huge amount of its own zinc. Zinc mine supply in China back in 2000 accounted for about 20% of global mine supply. Now it accounts for about 37%, which underscores massive mine supply growth over the past decade and near-half in which it demand also soared.

Fung is of the mind that this will continue, with potential for consolidation in the zinc mining sector in China and, as she puts it, economies of scale to be realized.

Click here to read the full Mineweb report.

Goldman Sachs Sees Aluminum Deficit to Lift Prices

 Goldman Sachs projects that LME aluminum price will rise from $ 1,869 per tonne in 2014 to $ 2,150 per tonne in 2017, citing that aluminum market will swing into deficit during the 2014-2017 period, news fund 123 reported on September 26. 

China to Import 45 Million wmt of Nickel Ore from the Philippines in 2014

 Inbound shipments of nickel ore to China from the Philippines are expected to reach 45 million wet tonnes (wmt) in 2014, Shanghai Metals Market foresees.    The Philippines has become the leading supplier of laterite nickel ore to China after Indonesia introduced its export ban on unprocessed ore early this year.    Higher profit following strong price gains of nickel ore has encouraged a large number of mines in the Philippines to increase production or restart idled operations.

Lead Outlook: Rising Demand, Shrinking Supply Could Mean Higher Prices in 2014

It's been a good year for lead , and 2014 looks promising for the metal as well.

Rising demand and shrinking supply of lead have analysts optimistic that about what investors can expect in 2014.

2013 market performance 

Over the course of 2013, demand for lead rose significantly worldwide due to the the recovery in the auto industry in the U.S., the world‘s second-biggest market for lead. The U.S. doubled its lead imports over the first six months of 2013, influencing the price of the metal on the London Metal Exchange to rise more than 13 percent between May and June of 2013. Reuters reports the global market for lead tends to be consistent and balanced, meaning this surge is cutting into stockpiles and moving the market toward a deficit.

The World Bureau of Metal Statistics found U.S. imports of refined lead grew to 50,000 tons a month on average between November 2012 and March 2013 – leading those five months to come in at almost double the amount of lead the U.S. typically imports in a year.

"(Consumption) is likely coming from the auto sector because we know that the big three in the U.S. are at full capacity," Joel Crane, an analyst at Morgan Stanley, told Reuters.

However, lead plant closures have forced automakers and other end users of the metal to seek other sources, including looking to Asia for lead. The U.S. imports most of its lead from Australia, according to the World Bureau of Metal Statistics, which has an impact on the supply of the metal in Asia. The exception to this is China, the world‘s biggest producer and consumer of refined lead, which does not tend to export the metal due to export duties.

"Because the market is so finely balanced, it just needs a little bit of stronger demand or a few production problems to actually see a few pockets of shortage emerge," analyst Neil Hawkes of consultancy CRU, told Reuters.

In addition to rising demand in the U.S., lead traders have been seeing an increase in business in India, where demand is high. The middle class uses back-up batteries to weather summer power cuts, and these require lead.

"We have been doing a lot of business into India for the last month and a half," a dealer told Reuters. "To all parts, Chennai, the eastern parts, largely consumed by the battery segment."

India demands near half a million tons of lead a year, representing 5 percent of world reserves. At Malaysian ports, the price for lead was typically $70 to $80 higher than on the L​ondon Metal Exchange in mid-year 2013.

Leading the pack into 2014

According to the International Lead and Zinc Study Group, the global refined lead market experienced a significant deficit in the first half of 2013. The inventories at the LME and the Shanghai Futures Exchange alike are low. Because of low supply and increasing demand, 2014 looks good for lead. The Wall Street Journal predicts lead supply will fall short of demand in 2014.

"The market looks a lot tighter in terms of balance this year and next year," Joseph Murphy, a senior analyst at Hermes Commodities, told the WSJ.

The price of lead tends to rise in the colder months, as low temperatures often cause car batteries to fail. Because of this, manufacturers want to be ready with enough batteries to replace those lost to the cold. For this reason, many commodities traders look to put their capital on lead toward the end of the year and the beginning of the next. The growing demand for cars, and hence for lead, in developing economies is also bolstering the metal‘s price.

Car sales are rising – in China, they rose 21 percent year-over-year in 2013, while they rose 12.7 percent in the U.S. and 5.4 percent in Europe, according to the WSJ. This is good news for lead, which looks to have a promising year ahead.

Business Standard published an article about the future of base metals in 2014 and asserts the tapering of the U.S. Federal Reserve‘s quantitative easing program and the economic growth in China both point to investment capital coming back to base metals in the year ahead. The publication expects higher prices in the coming year on lead and other base metals. It cites lead as the best-positioned of the base metals in 2014 as the forecast calls for global supply deficits throughout the year.