China Zinc Exports Hit 6-Year High in August

 China’s zinc exports reached a –year high in August, and most exports went to LME-registered warehouses, Shanghai Metals Market learns.   

China exported 21,200 tonnes of refined zinc in August, up 28-fold YoY, bringing net imports only 37,000 tonnes, according to China Customs.  

Growing pressures in bonded-zone inventories, Qingdao’s financing fraud, high storage charges and cash flow problems all promoted export activities since June, especially in bonded zones.

The SHFE/LME zinc price ratio dropped to 7.1-7.2 June-August, holding losses for imports above 1,000 Yuan/tons, preventing goods in bonded zones from entering domestic market. 

Over the past few months, major export destinations of Chinese zinc products were Taiwan (China), Malaysia, Singapore and South Korea, and all these regions have LME-approved warehouses.

Besides, LME zinc inventories have grown from 700,000 tons to 750,000 tons since June. Hence, SMM estimates that most exports went to LME-approved warehouses in Asia. 

Outbound shipments of Chinese zinc products are expected to remain high in the near future due to the current price ratio and liquidity conditions.

Nickel prices to average around $20,000 per mt in 2015

According to Carey Smith, Research Analyst, Alto Capital, LME Nickel prices are most likely to average around $20,000 per mt in 2015. The high prices are on account of the Indonesian ban on nickel ore exports and the anticipated supply shortage during early-2015. The Nickel prices are likely to trade between $17,000 per mt and $23,000 per mt during 2015. The research report also states that the prices of the metal are expected to average at $18,000 per mt during 2014.

China relies heavily on Indonesian ore exports to produce nickel pig iron. The country had approximately 30 million mt of ore stockpiles, which is soon getting depleted. The stocks are likely to hit the bottom levels by early-2015, notes Smith. As of now China buys low-grade ore from Philippines. The supply from Philippines is expected to continue further. However, China has already started construction of nickel pig iron smelters in Indonesia, the earliest of which is expected to become online towards end-2015.

The research report forecasts that Chinese ore demand may continue to grow, even as nickel pig iron production dropped during 2014. Supply tightness will keep the nickel pig iron production by the country under pressure. The country will have to reach out to new supply sources or draw out from LME stockpiles.

Nickel prices have appreciated by nearly 40% since the start of the year, when Indonesia imposed ban on ore exports. The LME nickel prices have been rangebound between $18,000 per mt and $20,000 per mt. The current prices are down by almost 18% when compared with the 2014 peak of $21,500 per mt reached in May this year.

What to expect from Base Metals market in October ?

It is a traditionally peak demand period for base metal market in September and October. However, market conditions did not get improved over the past September.

Will base metal market improve in October after high consumption failed to materialize in September?

“At the macro front, the Chinese story is not a great one for base metal market”, said an analyst from COFCO Futures, citing the sluggish property market and the lack of fresh stimulus measures.

A strengthening dollar will also put a downward pressure on base metal market, he added in SMM’s latest interview.

“Market fundamentals, however, will paint different pictures for different products”, he added.

The copper market will see supply pressures growing in response to capacity expansion and high TCs, and this will send copper prices lower, while possible supply disruptions in aluminum and zinc market will help support the two markets, the zinc market in particular.

London Metal Exchange hikes 2015 trading fees by 34 percent

* LME owner HKEx seeks to boost profits after 2012 takeover

* Fees to be simplified, "all-in" transaction fee in dollars

* Significant discounts on LME open-outcry trading

* Makes progress on opening warehouses in China

 

The London Metal Exchange (LME) hiked trading fees for 2015 by 34 percent on Monday as its owner moved to boost profit from the world's biggest industrial metals market after a costly takeover.

 

The 137-year-old LME had warned of hefty increases after years of operating as a member-owned market that kept a lid on trading fees, but the average rise turned out to be significantly less than some members had feared.

 

The LME also said in a statement it would provide an

 

"all-in" transaction fee in a single currency, the U.S. dollar.

 

The hikes are another major step by the LME's owner, Hong Kong Exchanges and Clearing Ltd, to increase revenue after splashing out $2.2 billion to buy the exchange, a price that analysts said was very expensive.

 

"The new LME tariff is competitive and ensures we can continue focusing on innovation and offering users the highest levels of service," said Garry Jones, LME chief executive and HKEx co-head of global markets.

 

HKEx has invested hundreds of millions of pounds into the LME to modernise it, make it more competitive and due to increased regulation, Jones told a news conference. "The LME as was, just three years ago, would not survive in today's environment."

 

The new tariff structure includes a significant discount on

 

"ring" trading after the LME said in June it would keep open-outcry trading, bucking a trend by most other markets to shift to all-electronic operations. 

 

The LME said clearing fees will remain unchanged, a week after the exchange launched it own clearing house, LME Clear. 

 

"Members understand that we will have a much better exchange providing much higher quality of services, product capability, regional expansion, currency flexibility, and much greater Asian and China participation," HKEx Chief Executive Charles Li told a news briefing in Hong Kong.

 

 

PROGRESS ON CHINESE WAREHOUSES

 

Jones said the LME has moved forward in its long-standing goal of opening warehouses in top metals consumer China.

 

The LME has sought for many years to set up delivery networks in China to grow its business, but Chinese regulators have not approved the LME opening metals depots there.

 

"There's considerable progress and discussions going on all the time, we had some in fact the last few weeks," Jones said.

 

The LME would like to work with the Shanghai Exchange, which also trades base metals such as copper and aluminium, and already has a warehouse network, he added.

 

The LME, in setting its new fees, likely kept a close eye on remaining competitive with the CME Group .

 

Although the LME still controls the vast majority of industrial metals futures trading, its U.S. rival has been carving out a growing share of the global copper market with its Comex contract and in May launched a new aluminium contract in a big push to grab some of London's $51 billion market for the metal. 

 

A fund manager had told Reuters that the fees he was charged for trading on the CME were about 73 percent higher than the old LME fees.

 

"It's only logical now that you have to increase fees to be more in line with other exchanges that are for profit. It's still very competitive," said Robin Bhar, analyst at Societe Generale in London.

 

Before the LME's sale in December 2012, it was owned by the banks and brokers that used it and therefore trading fees were kept very low for members.

 

HKEx promised when it was bidding for the LME that it would freeze the low fees during an initial period, but the moratorium expires in January.

London Metal Exchange, eyeing CME, seeks big jump in trade fees

* LME to publish 2015 fee schedule on Monday
* Owner HKEx to boost fees to make takeover profitable
* LME fees 73 pct lower than rival CME - fund manager

The London Metal Exchange (LME), looking to boost profits, has scope for a significant hike to its trading fees whilst remaining competitive with arch U.S. rival CME Group .

The LME had warned of hefty increases when it publishes its new fees schedule for 2015 on Monday, but has kept the details under wraps.

The move will be another key step by the LME's owner, Hong Kong Exchanges and Clearing Ltd., to wring profits from its pricey $2.2 billion takeover of the world's biggest industrial metals market.

Before the LME's sale in December 2012, it was owned by the banks and brokers that used it and therefore trading fees were kept very low for members.

HKEx promised when it was bidding for the LME that it would freeze the low fees during an initial period, but the moratorium will expire in January.

Executives have been preparing the ground for a hefty increase, including HKEx Chief Executive Charles Li at a results presentation last month.

"The market knows and I don't think the market is going to be that happy about it," he said. "I can't tell you whether that's going to be a 20 percent increase, 30 percent increase or 50 percent increase..."

RIVAL CME

The LME, in setting the fees, is likely to keep a close eye on remaining competitive with the CME.

Although the LME still controls the vast majority of industrial metals futures trading, its U.S. rival has been carving out a growing share of the global copper market with its Comex contract and in May launched a new aluminium contract in a big push to grab some of London's $51 billion market for the metal. 

But due to the legacy of low fees, the LME has broad scope to boost revenue from that area and still remain competitive.

Exchange fee schedules are complicated, but one fund manager said the gap was huge between the fees he is charged for trading metals on the two rival markets.

Comex trading fees come in at an equivalent 73 percent higher than the LME, not including clearing fees, he said.

That would mean that the LME could increase fees by 50 percent and remain cheaper than its U.S. rival.

The LME declined to comment on how its fees compare with the CME.

Brokers say any fee hike will be difficult since the cost of trading has already soared due to additional costs from new regulations.

"This is a tough business to remain in," said an executive at a major LME broker, who said a rise in margin requirements and clearing costs was already hurting profits.

An executive at a major bank that trades commodities said he reckoned that total costs for trading on the LME could triple.

Initial grumbling would be expected, but users would have to accept the hikes, said analyst Robin Bhar at Societe Generale.

"At the end of the day people have to trade, consumers and producers have to hedge, so they will probably have to swallow those charges," he said.

"If the LME is still seen as competitive against other exchanges, then one could argue that they've been too low in the past."

Positive Zinc Outlook Not Necessarily a Sure Thing

Zinc market participants have likely grown used to hearing positive predictions about the metal, but in a recent article Mineweb's Kip Keen takes a look at the flip side of the coin.

As quoted in the market news:

"For a zinc refresher I called up Jessica Fung, a BMO mining analyst with a head for base metals, to talk about her more conservative view of the zinc sector.

Let's dig into some of her research.

First zinc consumption. It will come as no surprise that China consumes a lot of the world's zinc. Of total consumption last year China gobbled up about 46 percent, or 6,063 kt.

But, and this is one of the key considerations, China, unlike in the case of say copper , produces a huge amount of its own zinc. Zinc mine supply in China back in 2000 accounted for about 20% of global mine supply. Now it accounts for about 37%, which underscores massive mine supply growth over the past decade and near-half in which it demand also soared.

Fung is of the mind that this will continue, with potential for consolidation in the zinc mining sector in China and, as she puts it, economies of scale to be realized.

Click here to read the full Mineweb report.

Goldman Sachs Sees Aluminum Deficit to Lift Prices

 Goldman Sachs projects that LME aluminum price will rise from $ 1,869 per tonne in 2014 to $ 2,150 per tonne in 2017, citing that aluminum market will swing into deficit during the 2014-2017 period, news fund 123 reported on September 26.