Japan aluminium stocks climb for 11th month, hit record

* Stocks at 3 key ports grow about 1 pct -Marubeni

* Breaks record set in January

 

(Reuters) - Aluminium stocks held at three major Japanese ports climbed for an eleventh month to hit a record high at the end of February due to robust imports.

 

Aluminium stocks held at Yokohama, Nagoya and Osaka grew 0.8 percent in February from a month earlier to 453,400 tonnes, Marubeni Corp <8002.T> said on Thursday. The trading house collects data from those key ports. 

 

That broke the previous record set in January, the highest level in data going back nearly 15 years. 

 

Behind the higher imports are slack demand elsewhere in Asia and China's increased exports of cheaper aluminium products.

 

"We heard that the inflows (to these ports) were still higher than the outflows in February, reflecting high level of imports," said a Tokyo-based trader, who declined to be named. 

 

"But an expansion pace of the inventories got slower than the previous month," he said.

 

Aluminium stocks at three major ports rose about 9 percent each in December and January, but they increased less than 1 percent in February.

 

"We expect those stocks will head lower toward the end of March as some Japanese buyers have reduced purchase volume of January-March deliveries and some firms are trying to cut their inventories ahead of the end of 2014 business year," the trader said.

 

For many Japanese companies, the business year ends on March 31.

 

Chinese exports of aluminium products grew about 19 percent last year, a trend analysts expect to continue in 2015 given lower local prices compared with international markets. 

 

Meanwhile, Japanese imports of aluminium ingots for 2014 soared 16 percent from a year earlier to 1.698 million tonnes, the highest since 2010 and imports of aluminium alloys rose 11 percent to 1.125 million tonnes, the highest since 2008.

 

As regional supply climbs, Japanese aluminium buyers are asking global producers to lower premiums for primary metal shipments for April-June deliveries in the quarterly pricing negotiations that have begun last month.

 

A major Japanese aluminium buyer has agreed to pay a producer premium of $380 per tonne for metal to be shipped in the April-June period, said a buyer source involved in the pricing talks last week.

 

The deal marked a 11 percent drop from a record high of $425 per tonne for the previous quarter and was the first fall in six quarters.

Japan is Asia's biggest importer of aluminium and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange cash price set the benchmark for the region.

BNP: Gold price will average in triple digits next year

On Thursday gold for delivery in April managed to eke out a slight gain to close at $1,151.90, up $1.30 from a four-month low hit yesterday.

That gold has managed to stay above the crucial $1,150 an ounce support level is a relief to gold bulls. The metal closed below this level early November, but soon bounced back.

For a sustained period of sub-$1,150 gold you have to go back to April 8, 2010.

Gold's resilience is the all the more remarkable since it came into the teeth of a rabid dollar. Gold historically has inverse relationship to the value of the USD.

Overnight the greenback surged above the 100-mark against the world major currencies for the first time since April 2003, before retreating just below triple digits during normal trading in New York.

The last time gold was beaten back for such a stretch of time was January 1998

That compares to a record low of 71.6 in April of 2008 and a record high of 164.72 in February 1985 when the price of gold bottomed at $284.25 an ounce.

The strong dollar coupled with rising interest rates in the US which raises the opportunity costs of holding gold as the metal produces no income, are high on the list of reasons analysts are calling for further weakness in gold.

France-based bullion bank BNP Paribas released forecasts for average prices this year and next that sees gold sliding back into triple digit territory for the first time since September 2009.

Platts News reports BNP sees a 2015 average of $1,160/oz and $975/oz in 2016 according to a research note on Thursday:

"Future policy action by the US Federal Reserve remains high on gold's agenda. It will continue to dictate the pace at which the dollar appreciates (and official sector demand for gold declines) and accordingly how much downward pressure will be exerted on gold," BNP analysts Harry Tchilinguirian and Stephen Briggs said.

The only near-term positive the pair predicted is that any hike in interest rates in the US could be put on hold for the time being, or postponed until later in 2015.

"On the physical side … further strength in the dollar stands in the way of import demand in [certain] key consuming countries, such as Turkey and India," the analysts said.

The spot price of gold in New York, which does not trade in nearly the volumes of the most active futures contract, is suffering its worse streak losing streak in 17 years.

According to Bloomberg it was the ninth straight session of losses with gold for immediate delivery falling slightly to settle at $1,153.73 on Thursday. The last time gold was beaten back for such a stretch of time was January 1998.

Shanghai to Launch Nickel Futures on Mar. 27

China’s first nickel futures contract is expected to be launched on Shanghai Futures Exchange (SHFE) on Mar. 27, local media reported.  

So far, no approval has been received from China’s State Council and Securities and Futures Commission. 

SHFE began to solicit public opinion on draft regulations of nickel futures contract earlier this year.  

In accordance with the proposed draft, nickel futures contract will be traded in unit of 1 ton/lot with trading code NI. The daily price limit will be ±4%, with minimum transaction margin 5% of contract value trading.  

Flood of aluminum seen heading for market as financiers eye exit

* Regional premiums down 10-15 pct over past month
* Some analysts, traders see falls of 40-50 pct this yr
* Lower premiums, LME rules make financing deals less profitable

(Reuters) - A deluge of aluminum , held as collateral in financing deals, could be released back onto global markets as surging Chinese exports of the metal cause surcharges for physical material to extend their dramatic slide.

Premiums - which lurched lower for the first time last month after years of hitting record highs - are also facing pressure from market reform aimed at untangling controversial storage practices and the prospect of higher U.S. interest rates.

The surcharges, paid by buyers on top of the London Metal Exchange cash price to obtain immediate delivery of metal, had soared by up to nine-fold since 2009. This was partly due to expensive backlogs at LME-registered warehouses of up to two years to get access to material. 

They have already shed 10-15 percent in Asia, Europe and the United States and some analysts and traders expect them to tumble by another 40-50 percent this year.

An estimated 10-12 million tonnes of aluminium are in storage worldwide, but until recently the bulk has not been available to the market, locked in financing deals or in warehouse backlogs.

"The whole equation has now changed," said Nic Brown, head of commodities research at Natixis in London.

"The risk is you can get a bit of a stampede from people who are holding metal in these financing transactions. That falling premium is now a negative rather than a positive for these financing trades."

Under financing deals, investors have profited handsomely in recent years by selling forward metal at a higher price, then leaving it in storage while also reaping the benefit of sky-high premiums.

Other elements are also making the financing deals less attractive, including a flatter forward curve in aluminium, reducing the forward selling price, and expected hikes in U.S. interest rates, boosting borrowing costs.

Another factor expected to inflate supply and curb premiums is the LME's wide-ranging reform of its warehousing policy, driven by consumer complaints about the long delays to obtain aluminium from storage.

LME REFORMS

More metal is also expected to flow out of LME-certified warehouses, which hold just under 4 million tonnes of aluminium, after the exchange announced plans earlier this month aimed at slashing delivery backlogs twice as quickly as under current reforms. 

Rising exports of Chinese aluminium have been a key factor in adding to supply and pressuring premiums in Asia and Europe, traders and analysts say.

"There's a knock-on from other geographies," said analyst Edward Meir at broker INTL FCStone, who says the U.S. Midwest premium could fall to as low as 12-15 cents a lb by late summer from about 21 cents currently. 

In February, China exported 420,000 tonnes of unwrought aluminium and aluminium products, more than double the 160,000 tonnes shipped in the same month last year. 

A European source at a producer said it appeared that more metal from Russia was flowing into Europe as some of its Asian customers were now buying Chinese metal.

Producers were in a quandary over whether to liquidate material as premiums fall, a trader in Singapore said.

“It’s a staring contest... As a seller, you’re in a lose-lose scenario. Do you lose less, or do you lose a lot. As a buyer you’re laughing,” the trader said.

“Half the team says,‘Don’t be the first one to liquidate.’ The other half says, ‘don’t be the last one out'.”

Almighty dollar is pushing gold price near 5-year low

On Tuesday the gold price came under renewed pressure with April futures falling just over 1% to $1,153.80, a more than four-month low.

$1,150 an ounce is a crucial support level for the gold price – the metal has closed below this level on only two trading days since April 8, 2010.

The last time the dollar crossed the 100-mark was December 2002, when gold was trading at $347 an ounce

Those sessions were November 5 and 6 last year before an unusual decoupling between the gold price and the US dollar occurred.

All things being equal, commodities priced in US dollars have an inverse relationship to the world's reserve currency.

But after bouncing back from its November low gold started to appreciate even as the greenback continued its upward march.

On Tuesday, the USD hit a fresh 13-year high against the currencies of major US trading partners, with the dollar index reaching 98.7, up more than 22% in a year.

At the same time it appears that the historic negative correlation between the dollar and the gold price is once again in place.

And as this graph from Saxo Bank suggests it could spell further downside for gold as few expect a let up in dollar strength any time soon:

Mitsui Mining sees zinc price rising toward $2,300 later in 2015

(Reuters) - Japan's biggest zinc smelter, Mitsui Mining and Smelting Co Ltd  expects the zinc price to recover toward $2,300 a tonne in the second half of the year because of a likely deficit in the global refined zinc market through 2017.

Mitsui forecast last November that zinc would average $2,300 a tonne in 2015, but three-month zinc on the London Metal Exchange has fallen 16 percent from a three-year high of $2,416/T last July to around $2,037/T.

"It's been underperforming due to slumping oil prices, a higher dollar and worries about China," Osamu Saito, general manager of Mitsui's metal sales group, told Reuters on Monday.

"Still, the price is likely to rebound toward $2,300/T in the July-December half as fundamentals including an expected deficit of global zinc market in 2015, 2016 and 2017 remain unchanged."

Mitsui expects the global refined zinc market to register a 250,000-300,000 tonnes deficit this year, compared with a 366,000 tonnes shortage predicted by the International Lead and Zinc Study Group (ILZSG) last October.

The Japanese smelter's narrower estimated deficit reflects increased production by Chinese smelters in November and December to take advantage of higher processing fees and a wider gap in Shanghai and LME prices, Saito said.

Mitsui has also slashed its annual premiums to Asian buyers for 2015 by about 10 percent, marking the first cut in six years as rising exports by China spill into the region following a metals financing scandal in the port of Qingdao.

The scandal has squeezed access to credit, forcing Chinese selling of stocks to raise money and reducing zinc premiums - a surcharge paid to obtain metal. 

Faced with lower premiums in China, Mitsui has reduced term export contracts to the country for 2015, Saito said.

China, the world's top zinc consumer and a net importer of zinc, exported 131,369 tonnes of zinc in 2014, up from 3,406 tonnes in 2013. 

"China's export push will be short-lived, but its recent escalation in metal output is worrisome," he said.

Mitsui, which plans to produce 223,000 tonnes of zinc in the year ending March 31, is also still holding talks with miners on zinc treatment charges (TCs) for 2015.

"The talks are headed in favour of smelters, but we can't disclose details," he said, adding that the negotiations have been delayed as the recent fall in zinc price made it difficult to agree on the base price for this year.

MCX aluminium (₹111.85/kg): Sell

Aluminium has tumbled some 16 per cent since November last year. The global spot aluminium price recorded a high of $2,099 per tonne in November and fell to $1,765 . Declining demand for the metal due to the global slowdown, especially in China, has taken the aluminium price sharply lower.

Aluminium futures on the Multi Commodity Exchange (MCX) which move in tandem with the global price have tumbled about 15 per cent in the same period. The contract has been consolidating sideways since January within its overall downtrend. It is likely to extend its fall in the coming weeks, making it advisable to initiate fresh short positions.

Short-term view: Aluminium futures have been range-bound between ₹110 and ₹117 a kg since January. The 200-week moving average, currently at ₹110.5, is providing support for the contract. Though the sideways range remains intact at the moment, the price action on the daily chart suggests that the range is likely to be broken on the downside in the coming days.

Immediate resistance is at ₹113.5. Key short-term resistance is at ₹117 – which is the upper end of the current sideways range in which the contract is trading now. The short-term outlook is bearish as long as the contract trades below these resistances. A strong break below the support ₹110 can drag the contract lower to ₹106 in the short-term.

Traders with a short-term perspective can initiate fresh short position at current levels. Stop-loss can be placed at ₹114 for the target of ₹106. The outlook will turn bullish only on a strong break above ₹117. The next target is ₹118.5.

Medium-term view: The medium-term trend view is also bearish with key resistance at ₹118.5. The contract can fall to ₹104. Medium-term traders can go short with a wider stop-loss at ₹116 and for the target of ₹105. Intermediate rallies to ₹115 if seen can be used to accumulate short positions.

The level of ₹104 is a key medium-term trend-line support for the contract which has the potential to halt the current downtrend. A reversal from here can take the contract higher to ₹115 once again.