Dr.Copper Pumped-And-Dumped On China's Schizophrenic Economic Data

Copper fell by its most in 5 weeks today on the heels of China's HSBC PMI miss overnight. This follows the 'economist' commodity's biggest rise in a month yesterday following China's official PMI beating expectations. It seems the farce of Chinese data has now made a farce of the commodity market as anything but an headline-induced algo trade... even though so many 'renowned' investors still view it as omniscient... 

Copper is right back to unchanged from before the Chinese data on the weekend... so Dr. Copper is none the wiser...

Alcoa said mulling shift in gear toward Nasaac

"We do not comment on market rumors," an Alcoa spokeswoman told AMM. However, the Pittsburgh-based company previously sold material into the contract and has registered brands deliverable against Nasaac, including large sows, ingots and T-bars, according to the LME's website. 

The Nasaac cash contract closed the official session at $2,300 per tonne on June 3, up 29.2 percent from $1,780 per tonne on February 10.   The Nasaac spike has sent offer prices from secondary aluminium alloy makers to as high as $1.16 per lb for A380.1, giving many market participants the option to sell metal directly into LME warehouses, which offer instant cash payments and at least 4 cents per lb in incentives, according to traders. 

The NASAAC (North American Special Aluminium Alloy Contract) is an aluminium alloy contract that reflects the production and consumption of aluminium in North America.

Nickel Miner, MMG Exploration Starts Drilling Program in Tanzania

MMG Exploration Holding Ltd, a Global resources company has started a major nickel sulphide mining program at Ntaka Hill of Southern Tanzania. This is joint venture project with IMX Resources. IMX has already agreed with MMG for this JV investment project of $60 million last year for a high grade mineralization at Nachingwea.

This has marked the culmination of exploration effort, worth $50 million, over 8 years and has identified as the world class nickel sulphide province in southern Tanzania. Gary Sutherland, IMX Resources Limited Managing Director said that the drilling would test a host of wide, greenish and advanced nickel sulphide targets, which was discovered during the MMG’s recent soil sampling and geophysics programs.

Gary Sutherland said that the extensive new investment reflected the joint venture partners’ strong belief that the Ntaka Hill could become a world-class nickel sulphide province. MMG will mine a set of new targets in order to mark up the high-grade nickel sulphide mineralization. The new targets were uncovered during the step of comprehensive programs led by MMG for the last seven months and this gave a significant breakthrough in the exploration process in Nachingwea.

Sutherland also said that the current drilling program wills continue till August 2014 and the drilling program comprises of 14,775m of diamond drilling and 8,700m of RC drilling i.e., a total of 23,000m drilling at Ntaka Hill, Lionja. They also aim at regional areas across the border of Nachingwea Province.

Under the JV investment norm, MMG can earn up to 60 percent of the Nachingwea Property as it spends $60 million for exploration and other related activities for a period of five year. The current program is the first part of the JV agreement, in which MMG will earn about 15% share by investing $10 million by this year September. The first results are expected to flow out in early next quarter. The Ntaka Hill Nickel Sulphide Project is located on IMX's Nachingwea Property of south-eastern Tanzania.

Aluminum Premiums Seen by Rusal Exceeding $500 on Demand

Premiums paid to secure aluminum are poised to exceed $500 a metric ton as soon as the coming quarter on stronger demand and limited supplies, according to United Co. Rusal (486), implying a jump of at least 20 percent.

At least 75 percent of stockpiles in London Metal Exchange warehouses are tied into financing transactions and unavailable for immediate withdrawal, Deputy Chief Executive Officer Oleg Mukhamedshin said today in a telephone interview from Moscow, where the company is based. The “overall” global surcharge, added to the price on the LME, will be “well above” $500 a ton in the third quarter, he said.

Buyers in Japan, Europe and the U.S. are paying record premiums for supplies of the lightweight metal. Stockpiles tracked by the LME fell in 19 of 20 sessions as of today to the lowest since May 2013. Aluminum for delivery in three months rose 2.5 percent this year to $1,846 a ton on the LME. A $500 premium would make up about 21 percent of total buying costs.

“There is quite a deficit in the spot market,” Mukhamedshin said. Surging premiums “should be a concern for the consumers who need to hedge.”

Buyers in Japan, Asia’s largest importer, agreed to pay a record premium for this quarter at $400 a ton. Spot premiums in Europe gained 47 percent this year to $412.50 a ton, including the European Union import duty, while the U.S. surcharge jumped 61 percent to 18.9 cents a pound ($417 a ton), according to Metal Bulletin data.

‘Strong Demand’

Aluminum usage outside China will exceed production by 1.3 million to 1.4 million tons this year on “quite strong demand,” Mukhamedshin said. Producers outside the Asian nation reduced output by about 3 million tons since 2012 and should cut a further 1.6 million tons this year, he said.

The market in China, the biggest producer and consumer of the metal, should be balanced as local output falls further, according to Rusal. The nation’s producers are losing money at current prices and output is set to slow as banks cut credit to loss-making companies, Mukhamedshin said.

Financing transactions, involving a simultaneous purchase of nearby metal and forward sale, are intended to capitalize on a market in contango, when prices rise for later deliveries. Changes in borrowing costs and storage fees affect the accords’ profitability. Aluminum for immediate delivery on the LME settled today at a $22-a-ton discount to the three-month contract, the narrowest gap since December 2012, according to data compiled by Bloomberg. That compares with $45 on Jan. 2.

Off-Warrant

“The contango is OK and interest rates are still low, so financial transactions are still profitable and the stock which goes off-warrant is still not available,” Mukhamedshin said, referring to supplies held outside the LME’s network. “This is exactly why the premiums are going up, and we expect more record-high premiums in the third quarter, well above $500 per ton.”

Glencore to Slash 124 Jobs at Its Rosh Pinah Zinc Mine

The largest publicly traded commodities supplier, Glencore Plc has decided to cut around one fifth of full time in its Rosh Pinah Zinc and Lead Mine located in Namibia.

The company said during Monday that management of Rosh Pinah Zinc Corp. has already announced about the changes that deals with the major economic pressures. They said that the changes would affect around 124 full time jobs. The company did not disclose any further information relating that.

Based on the Namibian Chambers of Mines’ annual report, Rosh Pinah Zinc and Lead Mine is an underground mine, which is located 800 kilometers south of Windhoek, the capital city of Namibia. By the end of 2013, according to the report, the mine has a total of 600 permanent employees and around 138 contractors and temporary employees. Last year mine produced about 113,818 metric tonnes of zinc concentrate, which widely used in steel auto parts, rubber and even in sunscreen and lead produced also rose 18% to 20,551 tonnes.

Zinc metal for delivery in LME has rose 1.4 percent while, lead metal has decreased 4.3 percent in the three month period. In the first quarter of this year, Glencore’s zinc production decreased to 306,000 tonnes, while lead showed a little change of about 79,000 tonnes. Rosh Pinah Corp. said that it has made discussion with the chamber for securing new jobs for the affected employees.

New Benchmark for the North American Aluminum Industry, CME Symbol ALI

After several months of steady decline, the price of aluminum surged 5 percent during the month of April. Some have suggested that the recent price activity could signal a turnaround, but prices remain low from a historical perspective and until we see further strength, the current rally appears to be a normal market reaction amid a longer-term downtrend.

This price, however, is not in line with the prices seen by commercial buyers and industry analysts in North America. For the past few years, this decline in the LME aluminum price has been offset by a surge in the US Midwest (MW) premium which has led to a situation where the MW premium represents an ever-increasing percentage of the all-in cost.

The disconnect between the price quoted on the London Metal Exchange and the deliverable price of aluminum has made it increasingly difficult for hedgers and investors to use the LME contract as their benchmark for physical aluminum. The price that producers, manufacturers, analysts and investors are trying to forecast roughly translates to the LME price + the MW premium.  The CME Group’s Midwest Premium contract (AUP) helps commercial market participants hedge the MW premium portion of their risk, but a mix of two price markers is not an ideal situation for anyone.

Major producers, commercial buyers and financial firms have all expressed interest in a transparent benchmark that will allow them to efficiently hedge and invest in the “all in” price of aluminum.  As a result, CME Group launched a physically settled aluminum contract to specifically address these issues.  CME Group’s new contract incorporates all available information into a single price and provides commercial buyers with a swift and efficient delivery process for the physical metal.

Tim Weiner, MillerCoors Global Risk Manager recently said in regard to the CME ALI contract, “We firmly believe the contract can become the new benchmark for the North American aluminum industry…I applaud CME Group for responding to the concerns of aluminum users like MillerCoors and bringing this new risk management tool to market.”

CME Group’s “all in” ALI contract launched on May 6th and garnered early support from the industry’s largest participants including UC Rusal, Reynolds Consumer Products and MillerCoors along with Macquarie Bank executing the first trades.

Will the Contract Be Successful?  

That remains the $800m question but early indications appear positive for a number of reasons. First, large industrial buying organizations gave the contract its initial liquidity – a most necessary step. Second, though not a lot from a daily volume perspective open interest continues to grow – initially through the first six months and now through May 2015. Third and perhaps most important, we see the makings of a dynamic forward curve which helps industrial buyers and other market participants create a Midwest price benchmark.

In addition, CME Group has confirmed banks have begun to open trading accounts with FCM’s (Futures Commission Merchants), many with interest in physical delivery.

But the ultimate test involves whether or not an end user can gain access to his or her material as described in the CME Group contract specifications – when, where and for the price specified.

And this last piece – efficient product delivery – will provide industrial buying organizations with the confidence to move more of their positions on to the screen creating a dynamic forward price curve.  If successful, aluminum buyers will once again have the ability to accurately define and manage their aluminum price risk.

Newmont halts copper output from Indonesian mine - union

(Reuters) - Newmont Mining Corp has halted production of copper concentrate at its Batu Hijau mine in Indonesia, a union official told Reuters on Tuesday, as a deadlock continues over a mineral export ban in Southeast Asia's largest economy.

"Production activities have been stopped since two days ago because our concentrate stockpiling facility is full," Yoesrawan Galang, chairman of the Newmont Nusa Tenggara unit of an Indonesian mine workers' union, told Reuters.

"As of now there (has been no) layoffs," Galang said, adding that the firm had not declared force majeure yet.

Newmont's Indonesian office could not be reached immediately for comment.