Chinese Zinc concentrate TCs to rise on growing supply

TCs for domestic zinc concentrate will rise on growing supply.

"Zinc concentrate imports are expected grow on increasing margins”, zinc analyst explains.

Profit from imported zinc concentrate increased 170 yuan to 520 yuan per ton (zinc content) above those from domestic concentrate this past week.

Recent rainstorms in Hunan and Guangxi have little impact on local mines due to suspension across SMEs from environmental protection inspections and stable production at large mines. Some mines were reluctant to sell on continuously falling zinc prices.

This week, TCs for imported zinc concentrate (50%) were $ 210-220 per dry metric ton (DMT), while those for domestic zinc concentrate (50%) were 5,300-5,500 yuan per ton (zinc content).

Source: Shanghai Metals Market

Will Copper Break below the January Trough?

Weak demand, declining trading activities and China’s poor data are pushing copper prices towards a low last seen in mid-January.

What’s next? Is the red metal falling below the January trough?

“Copper price dropped to a low never seen since 2009 in January, but this may not be the bottom for 2015 if you look at the data for construction,” said analyst of Everbright Futures.

The analyst explained that although home sales picked up, housing starts remained weak, presaging poor copper demand in the latter half of the year.

“Falling fixed asset investment means the economic growth will be less dependent on investment, which is certainly bad news for copper market,” analyst from Guotai Junan Futures told SMM.

Image Source: fastmarkets.com

Peru's metal output rises in April, silver production lags

The production of almost all major metals by Peru reported robust growth in Peru during the month of April this year. While the output of copper, gold and zinc reported significant increase during the month, silver production declined, in accordance with the official government data released yesterday.

According to data released by the Energy and Mines Ministry, copper production rose 18.5% from 103,410 mt in April last year to 122,506 mt in Apr ’15. The decline in copper output from Freeport-McMoRan's Cerro Verde was offset by increased mine output from Antamina, Southern Copper, Toromocho and Antapaccay mines.

The increased output from Newmont and Barrick gold mines contributed to the 15% growth in gold production during April this year. The gold production totaled 379,504 Oz in Apr ’15, in comparison with the output of 330,273 Oz during the same month a year before.

Silver production dropped marginally by 0.4% over the year from 9.57 MOz to 9.53 MOz in April. The output from Antamina mines dropped significantly, whereas Buenaventura and Volcan reported rise in silver production during the month.

Zinc production rose 17.7% from 97,128 mt a year before to 114,323 mt in Apr ’15. Lead output too rose 27% from 97,128 mt to 114,323 mt over the previous year. Lead output witnessed sharp increase in Antamina, Volcan and Milpo. Molybdenum output too jumped 45% to 1,632 mt in April 2015.

Meantime, tin production by Minsur- the country’s only tin producer, rebounded sharply in April this year, rising nearly 15% from 1,438 mt in April 2014 to 1,654 mt in April this year.

How central banks will push up the gold price

Gold on Tuesday was inching its way back to the $1,200 an ounce, a level it hasn't strayed too far from for the better part of three months.

A new research note by anlyst Simona Gambarini of Capital Economics suggests official sector buying can take much of the credit for establishing something of a price floor for the metal this year.

During the first quarter this year, the World Gold Council estimates that 120 tonnes of gold were added to global central bank reserves.

Central banks have upped their share of overall gold demand from around 2% in 2010 to as much as 14% last year and in 2013.

Just to up gold as a share of forex reserves to 5% central banks in emerging economies need to buy 8,000 tonnes

Gambarini expects this trend to strengthen adding that "any emerging market central bank looking to reduce exposure to the dollar still has few credible alternatives to gold":

Most developing countries still hold less than 10% of their reserves in gold, compared to 70% or more in advanced economies. Admittedly, the much higher share in the latter is mainly a legacy of the Gold Standard. Nonetheless, an optimal share that makes the most of gold’s diversification benefits would probably be at least 15%. Even the European Central Bank (ECB), established long after the demise of the Gold Standard, holds around 25% of its reserves in gold.

Barron's quotes chief economist Warren Hogan and commodity strategist Victor Thianpiriya of ANZ, an Antipodean bank, on the same issue:

"If all central banks in the world were to hold at least 5% of their foreign exchange reserves as gold, this would require the purchase of almost 8,000 tonnes of gold,” argued Hogan and Thianpiriya. Emerging market central banks should remain net buyers of gold to bring their allocations more in line with developed countries’ – to the tune of about 75 tonnes a year, they added.

While Russia's central bank has been most active recently (30 tonnes in March and another 8.3 tonnes in April), rumours about massive buying from People's Bank of China are perennial.

China's gold reserves are officially put at 1,054 tonnes – a number authorities haven't updated since 2009.

Gold makes up only around 1% of the country's $3.8 trillion in reserves compared to more than 70% for the United States which holds more than 8,000 tonnes of gold in vaults.

ANZ expects the gold price to top $2,000 an ounce by the end of the decade while Capital Economics has a $1,400 forecast for the end of this year.

El Nino to Boost Lead Prices in Q3

The El Nino phenomenon will cut refined lead and lead concentrate supply, proffering impetus to lead prices in Q3.

China’s National Climate Center says the impact of the El Nino phenomenon will continue into autumn this year, bringing floods to south China and droughts to north China and some areas of northwest China.

China’s lead concentrate output has been falling this year due to environmental protection efforts and thin profits, and is set for sharper declines due to extreme weather conditions.

“Some major lead concentrate and refine lead producing regions will be affected by the abnormal weather, leading to production cuts, and in turn price hikes.”

Mines in Yunnan, Hunan, Guangxi and Sichuan may curtail production due to strong storms, while dressing operations in Inner Mongolia will be hindered by drought conditions in summer. Data from the National Bureau of Statistics indicate combined lead concentrate output from the five regions mentioned above makes up 68.67% of the national total.

Moreover, smelters in Henan, Inner Mongolia and Shandong which claims about 40% of China’s lead production will witness output declines due to high temperatures. Meanwhile, lead-acid battery market will enter peak season in summer months. The factors will combine to boost China’s lead prices.

“Worldwide, the El Nino will affect lead concentrate output of major producers, such as Australia, US, Peru and India, and the falling supply will garner considerable attention, particularly among speculators,” SMM research team added. Lead concentrate output from these four countries accounts for about 57.28% of the world’s total (excluding China output), according to the International Lead and Zinc Study Group.

S&P Go Short With SL of 2110 For Target Of 2065/2050

S&P One Can Go Short With SL of 2110 For Target Of 2065/2050 n Then a Minor Correction.

Go Short for target of 2023,1992,1968, 1947..... 

Trendline Support @ 2081.

World’s 2nd Biggest Stock Breaks 28-Year Trendline

On March 24, we posted a rare piece on an individual stock. As we do not invest in individual stocks, they are typically not our focus. Therefore, it takes extraordinary circumstances to inspire a post on a single stock. That was the case with the March 24 post which noted the fact that Exxon Mobil (XOM), the world’s 2nd biggest stock, was testing a trendline that began back in 1987.

The origin of the trendline, based on a logarithmic scale of XOM, is the low point of the October 1987 crash. It then precisely connects the 1994 and 2010 lows. Interestingly, the stock stopped on a dime in March once it hit the vicinity of the post-1987 trendline. I say interestingly because, at the time, the stock appeared to be in no-man’s land. There were no obvious support or resistance levels in the vicinity. And yet, the stock stopped right on the trendline. It then proceeded to “walk up” the trendline for the next 18 days.

To those who dismiss the influence of technical analysis and charting techniques on the behavior of stocks as completely random, I can hardly think of a better example of counter-evidence than this. What are the odds that a stock “respecting”, or adhering to, a nearly 3 decade-old trendline is completely random – for 18 days? Furthermore, after bouncing off this trendline into May, XOM returned to it over the past few weeks. It spent 6 straight days sitting squarely (again) on the trendline…before breaking below it yesterday.

This breakdown marks the first day that Exxon Mobil has ever closed below this trendline. Now, assuming the stock’s behavior around the trendline is not completely random, and considering its capacity as the 2nd biggest stock in the equity market, the effect of this breakdown may be profound. Absent an immediate reversal back above the trendline, this loss of 28-year support would appear to open the door to more downside in the stock.

Sourced : By Dana Lyons, partner at Lyons Fund Management and founder of 401kPro.com