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.

BMO sees Copper supply surplus of 411,000 tons in 2014

BMO Research looks for a copper supply surplus of 411,000 tons this year and a surplus of 623,000 in 2015.

BMO’s base-case copper forecast is for an oversupplied market through 2018, before it moves back into deficit in 2019. They also looks for supply surpluses of 711,000 in 2016, 595,000 in 2017 and 172,000 in 2018.

However, the surplus is likely to be relatively benign at only 3% of demand. As a result, BMO looks for the price to dip only to $2.90 a pound in 2016, which would be the 93rd percentile on the estimated 2016 cost curve. 

However, BMO Research also noted that the bearish sentiment toward copper is due to the fact that the copper market has not really been in surplus since 2003 -- financial crisis aside. 

Copper prices have declined from sitting above the cost curve for a number of years. The undersupplied base meals in the near term are expected to be nickel, aluminum and zinc ahead of copper.

Mine supply is forecast to increase to 21.9 million metric tons in 2016 from 17.9 million in 2013, a level of growth that has not occurred since 2004.

The key difference this time is that demand is unlikely to be on pace to absorb this level of mine supply near term. 

“China remains the largest consumer globally, and while there is room to grow based on per capita figures, the pace is likely to slow as heavy industry overcapacity is reined in. Longer term, however, Asia and Latam are expected to drive the next up cycle,” BMO concluded.

LME Copper eyes a week-long Chinese holiday

Trading in Chinese markets will be suspended during October 1-7 for the National Day holiday. 

What are major factors analysts believe to affect LME copper prices during the week-long Chinese holiday?

History shows LME copper generally performed well in the holiday periods for the past seven years, except for 2008 and 2013. The red metal tumbled in early October in 2008 due to the global financial turmoil and slumped for the same period last year due to the Federal government shutdown.

As for the remaining five years, the gains in LME copper were mostly driven by a weaker US dollar and strong economic data, particularly manufacturing and hiring figures, which were the main causes behind both a 12.64% plunge in 2008’s holiday and the over 4% climb in 2011.

Besides, analysts noted that copper prices in China usually tracked the LME copper price trends during the holiday after the SHFE restarted.

This year, the US dollar index has jumped above 85 to an over four-year high, and the US economy is still recovering steadily, compared with China’s slowdown and continued gloominess in Europe.

The US CPI, September manufacturing PMI and non-farm payrolls are slated for release during China’s early-October break. These economic performance indicators will impact movements of the dollar, in turn, exerting influence on LME copper prices.

In addition, the European Central Bank (ECB) will decide whether to roll out further accommodative measures at its policy meeting scheduled for October 2, which is also expected to affect LME copper prices.

"The Ingredients Of A Market Crash": John Hussman Explains "Why Take The Concerns Of A Permabear Seriously"

Why take the concerns of a “permabear” seriously?

The inclination to ignore these concerns is understandable based on the fact that I’ve proved fallible in the half-cycle advance since 2009. That’s fine – my objective isn’t to convert anyone to our own investment discipline or encourage them to abandon their own. Somebody will have to hold equities through the completion of this cycle, and it’s best to include those who have thoughtfully chosen to accept the historical risks of a passive investment strategy, and those who have at least evaluated our concerns and dismissed them. The reality is that my reputation as a “permabear” is entirely an artifact of two specific elements since the 2009 low, but that miscasting may not become completely clear until we observe a material retreat in valuations coupled with an early improvement in market internals.

For those who understand and appreciate our work, I discuss these two elements frequently because a) I think it’s important to be open about those challenges and to detail how we’ve addressed them, and b) it’s becoming urgent to clarify why we view present conditions as extraordinarily hostile, and to distinguish these conditions from others that – despite an increasingly overvalued market – our current methods would have embraced or at least tolerated more than we demonstrated in real-time.

For us, the half-cycle since 2009 has involved the resolution of two challenges.

The first: despite anticipating the 2007-2009 collapse, the timing of my decision to stress-test our methods against Depression-era data – and to make our methods robust to those outcomes – could hardly have been worse. In the interim of that “two data sets” uncertainty, we missed what in hindsight was the best opportunity in this cycle to respond to a material retreat in valuations coupled with early improvement in market internals (a constructive opportunity that we eagerly embraced in prior market cycles, andattempted to embrace in late-2008 after a 40% market plunge).

The second: I underestimated the extent to which yield-seeking speculation in response to quantitative easing would so persistently defer a key historical regularity: that extreme overvalued, overbought, overbullish market conditions typically end with tragic market losses. Those extremes have now been stretched, uncorrected, for the longest span in history, including the late-1990’s bubble advance. My impression is that the completion of the present market cycle will only be worse as a result.

The ensemble approach we introduced in 2010 resolved our “two-data sets” challenge, and was moreeffective in classifying market return/risk profiles than the methods that gave us a nice reputation by 2009, but our value-conscious focus gave us a tendency to exit overvalued bubble periods too early. During the late-1990’s, observing that stock prices were persistently advancing despite historically overvalued conditions, we introduced a set of “overlays” that restricted our defensive response to overvalued conditions, provided that certain observable supports were present. These generally related to an aspect of market action that I called trend uniformity. In the speculative advance of recent years, we ultimately re-introduced variants of those overlays to our present ensemble approach.

As I observed in June, the adaptations we’ve made in recent years have addressed both of these challenges. See the section “Lessons from the Recent Half-Cycle” in Formula for Market Extremes to understand the nature of these adaptations. When we examine the cumulative progress of the stock market in periods we classify as having flat or negative return/risk profiles (and that also survive the overlays), the chart looks like the bumpy downward slope of a mountain. Present conditions are worse, because they feature both a negative estimated return/risk profile and negative trend uniformity on our measures. The cumulative progress of the stock market under these conditions – representing less than 5% of history – looks like the stairway to hell, and captures periods of negative market returns even during the bull market period since 2009. The chart below shows cumulative S&P 500 total returns (log scale) restricted to this subset of history. The flat sideways sections are periods where other return/risk classifications were in effect than what we observe today.

Though we’ve validated our present methods of classifying market return/risk profiles in both post-war and Depression-era data, in “holdout” validation data, and even in data since 2009, there’s no assurance they’ll be effective in the current or future instances. As value-conscious, historically-informed investors, we remain convinced that the lessons of history are still relevant. Our efforts have centered on embodying those lessons in our discipline.

While all of these considerations are incorporated into our approach, we’ve had little opportunity to demonstrate the impact we expect over the course of the market cycle. Applied to a century of historical market evidence, including data from the present market cycle, we’re convinced that the adaptations we’ve made have addressed what we needed to address.

Our concerns at present mirror those that we expressed at the 2000 and 2007 peaks, as we again observe an overvalued, overbought, overbullish extreme that is now coupled with a clear deterioration in market internals, a widening of credit spreads, and a breakdown in our measures of trend uniformity. These negative conditions survive every restriction that we’ve implemented in recent years that might have reduced our defensiveness at various points in this cycle.

My sense is that a great many speculators are simultaneously imagining some clear exit signal, or the ability to act on some “tight stop” now that the primary psychological driver of speculation – Federal Reserve expansion of quantitative easing – is coming to a close. Recall 1929, 1937, 1973, 1987, 2001, and 2008. History teaches that the market doesn’t offer executable opportunities for an entire speculative crowd to exit with paper profits intact. Hence what we call the Exit Rule for Bubbles: you only get out if you panic before everyone else does.

Meanwhile, with European Central Bank assets no greater than they were in 2008, and more fiscally stable European countries quite unwilling to finance the deficits of unstable ones, the ECB has far more barriers to sustained large-scale action than Draghi’s words reveal. Moreover, to the extent that the ECB intends to buy asset-backed securities (ABS), which have a relatively small market in Europe, the primary effect (much like the mortgage bubble in the U.S.) will be to encourage the creation of very complex, financially engineered, and ultimately really junky ABS securities that can be foisted on the public balance sheet. Watch. In any event, even if such monetary interventions continue indefinitely, I have no doubt that we’ll have the opportunity to respond more constructively at points where we don’t observe upward pressure on risk-premiums and extensive deterioration in market internals.

I should be clear that market peaks often go through several months of top formation, so the near-term remains uncertain. Still, it has become urgent for investors to carefully examine all risk exposures. When extreme valuations on historically reliable measures, lopsided bullishness, and compressed risk premiums are joined by deteriorating market internals, widening credit spreads, and a breakdown in trend uniformity, it’s advisable to make certain that the long position you have is the long position you want over the remainder of the market cycle. As conditions stand, we currently observe the ingredients of a market crash.

Extracted from John Hussman's "The Ingredients of a Market Crash"

Major Sell Program Trips 50-DMA, Sends Stocks Sliding

A "huge" institutional sell order, covering almost 200 individual stocks, is rumored to have been responsible for getting this morning's weakness across stocks going as equity indices catch down to bonds and credit. The S&P 500 broke key support at its 50-day moving-average (for first time in 2 months) and is back at 6 week lows. The Russell 2000 is now down 4.25% from the FOMC meeting last week...

S&P 500 cash breaks key technical

What Wall Street Thinks About Today's Selloff

Aside from Russian threats, weaker-than-expected Durable Goods, and #Bendgate, here are nine other reasons for today's sell-off...

Via FBN Securities' Michael Naso,

Thoughts from the Options Desk and the Technical Desk about this Mornings Action

Month End:  It’s the last day for underperforming or performing hedge funds to get names off the books so they don’t show up in quarterly report which equates to selling pressure.

Position Closing: Chatter that there was and maybe still is a massive asset allocator selling equities and buying bonds to rebalance books as the equity move made them a bit too long equities which again equates to selling pressure.

Holiday: There is very little liquidity because of the Jewish holiday making any selling pressure magnified however as of noon the S&P 500 is running +20% vs its 30 day average volume.

High Yield: Many High Yield traders have been trying to sell HY and IG bonds today with quarter end upon us, much like they did at the end of the June Qtr. Given the lack of liquidity and participants today, HY sellers have no bids to hit, so they have turned to selling equities and underlying names to hedge their positions or de-risk. Tuesday the slope of the BofA Us High Yield Master II OAS 200 dma turned higher for the first time since May 2012.  The changing of trend has forewarned of equity markets largest reversals since inception of this HY index.

SKEW: SPX Skew is at some of its highest levels in years, showing traders are running for out of the money puts, usually spike skew is closer to a bottom then a top.

Volatility: VIX is up 18%, its biggest 1 day % move since July 31st.

TRIN: Highest intraday TRIN reading since Feb 3rd '14, which is an indication of material selling pressure (the Feb 3 spike marked the years low).

Sentiment: Bears in the AAII survey jump to a 7 week high, majority of the new Bears moved from the Neutral camp rather then from the Bullish camp.

S&P 500 Levels of Support: 1954.50 ( 100 dma), 1946-44, 1936

Chart Below Showing High Yield putting pressure on Small caps which in turn is applying pressure to the S&P 500