Copper up, FCX down as workers halt production at Grasberg

The copper price recovered from a one-month low on Wednesday to gain 3 percent on Thursday, as the metal markets reacted to a dovish Fed statement and news out of Indonesia that production has stopped at the Grasberg copper and gold mine.

Workers blocked an access road to Grasberg – the world's second largest copper mine by capacity – for the fourth day, Thursday, leading to speculation that the shutdown will have a material affect on prices, The Australian reported. A statement by the US Federal Reserve the same day signalling that the central bank is less likely to raise interest rates than expected, was also supportive of copper.

Three-month copper on the London Metal Exchanged leapt 3.2 percent to close at $US 5,850 a tonne, the biggest one-day percentage gain since February 3 and well above Wednesday's one-month low of $US5,621.50, the Australian said.

Bloomberg reported that the blockade was not organized by the union, but about 50 workers from seven tribes in Papua who are seeking promotion for not participating in a labor dispute last year. Output was suspended starting Monday but shipments from old stockpiles continue, according to a union spokesman quoted by Bloomberg.

Nevertheless, Freeport-McMoRan Copper & Gold’s (NYSE:FCX) investors saw the labor dispute as good reason to dump the stock. Trading on heavier-than-normal volumes, FCX slipped 5.32 percent to $17.26 a share on Thursday in New York, just under a dollar above the 52-week low of $16.43.

Work stoppages at Grasberg are fairly common. Last October open-pit operations were suspended as protesters demanded management review safety conditions following an accident involving a truck that killed four workers. The previous year workers set a tent on a mine access road following a landslide in Big Gossan that killed 28 employees.

Gold Spikes On Sudden $1.2 Billion Bid

For no good reason aside from the algos had their fun to the downside and crude ran its stops, precious metals' futures have suddenly exploded higher on heavy volume... The surge in gold saw approximately $1.2 billion notional traded...

WTI Plunges To $42 Handle On Massive API Inventory Build

For what appears to be the 10th week in a row, API reports a massive 10.5 million barrels (far bigger than the 3.1 million barrel expectation) and a 3 million barrel build at Cushing. If this holds for DOE data tomorrow (and worryingly API has tended to underestimate the build in recent weeks) it will be the biggest weekly build since 2001. WTI has plunged on this news hitting $42.60 on the April contract.

If API data is accurate (and it has tended to underestimate the inventory build in recent weeks) then this will be the biggest build since 2001...

The US is running out of room to store its oil: Greenspan

Oil production has not eased despite low prices and America's major storage facility is running out of room, said former Federal Reserve Chairman Alan Greenspan on Bloomberg TV on Friday.

Greenspan expected supply to ease but noted that data shows domestic crude production continues to rise:

If you look at the data, our major domestic facility for storage is in Cushing, OK, which is a delivery point for West Texas Intermediate crude contracts. We're probably at the point now where at the current rate of fill we are going to run out of room in Cushing by next month. The question then is where does the crude go? Everyone's forecast was . . . prices collapse and a sharp curtailment of shale oil production. That has not happened. The weekly figures produced by the [energy administration], through March 6, showed a continued rise in domestic crude production, and it's got no place to go because we can't legally export the way we could with most products.

Essentially, we are bottling up a huge amount of crude oil in the United States so if the West Texas Intermediate is running $10 a barrel under Brent Crude, which is the global price. That means we are creating great abnormalities in the system and unless we find a way to get out of this dilemma, prices will continue to ease because there is no place for that oil to go.

Greenspan said the large price differences between WTI and Brent will result in a volatile spot price for oil.

Hat tip, Business Insider

These are the most bullish gold price charts you'll see today

Amid a fresh sell-off on US equity markets (third down week in a row) and another crude oil rout (down 9.6% for the week), gold managed a small gain on Friday with April futures finding a thin cushion against the crucial $1,150 an ounce level.

Gold's resilience is all the more remarkable since it's been into the teeth of a rabid dollar. Gold historically has inverse relationship to the value of the USD and on Friday the greenback jumped back above the 100-mark against the world's major currencies to the highest since early 2003.

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 first chart from a new research note by Julian Jessop, Head of Commodities Research Capital Economics, shows just how big a gap has opened up between the dollar and the gold price.

While the two do diverge from time to time (look at the pattern at the height of the global financial crisis) all things being equal you could expect gold to be trading closer to $400 an ounce at the moment. That supplies plenty of upside for gold once the dollar retreats from its lofty heights, which eventually it will.

An even closer negative correlation exists between the gold price and US inflation-adjusted interest rates (Treasury Inflation Protected Securities or TIPS).

Some analysts go so far as to say that the correlation is so strong that the gold price can be used as a predictor of interest rates, serving as an early warning system of both the direction and magnitude of the move in rates.

The underlying reason for the relationship is that as US yields rise – as is widely expected – the opportunity costs of holding gold increases because the metal is not income producing. The expectations of higher rates in the US is also a major factor behind the surging dollar.

Taking chart number two at face value, the eventual return of US real yields to more normal levels of around 2% would be consistent with the gold price falling back below $1,000 per ounce. But real yields have remained stubbornly low and the second chart would suggest gold should be scaling $1,400 right now.

A level which Capital Economics predicts we'll reach by the end of the year.

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.