Brazil’s Vale close to becoming world’s largest nickel producer

Brazil’s Vale (NYSE:VALE) is growing its nickel output at a pace that not even its own executives were able to predict, with the Rio de Janeiro-based iron ore giant posting Thursday a 16% production increase of the stainless steel ingredient.

Nickel production totalled 72,100 tonnes in the September quarter, which is the best third-quarter performance since 2008, Vale said.

The figure takes the miner’s total output of the metal this year to 201,400 metric tons and its next production target of 289,000 tons in 2014, higher than predicted by Norilsk Nickel, the world's largest producer of the metal

The figure takes the miner’s total output of the metal this year to 201,400 metric tons and its next production target of 289,000 tons in 2014, higher than predicted by Norilsk Nickel, the world's largest producer of the metal, which plans to produce 230,000 tons this year volume.

The historic output was reached despite planned maintenance at the company’s Thompson mine in Canada, Vale added.

Nickel production at the firm’s Canadian mines increased 18.7% year-on-year in the third quarter of 2014, reaching 41,700 tonnes, on higher volumes at its Sudbury and Thompson operations.

Analysts watch Vale's base metals division, of which nickel is the largest component, to see if it can help offset falling revenue from iron ore.

Deutsche Bank experts expect nickel to peak at $27,000 a metric ton in 2017. However, nickel for delivery in the last three months fell 0.4% to $15,145 a ton in London Thursday, the lowest since March 3.

Vale is expected to release its third-quarter financial results later this month.

LME Zinc to avg $2,520 a ton in 2015: Natixis

LME zinc prices are expected to average $2,520 a ton next year and $2,725 a ton in 2016, said Natixis in a Metals Review.

As the zinc market has progressively tightened over the past year, so zinc prices have rallied from less than $1,900 a ton throughout much of 2013 to around $2,300 a ton in September this year.

Despite forecasts for modest demand growth over the coming two years, the global zinc market is expected to tighten further as supply becomes increasingly constrained, and new mines are not expected to arrive until existing inventories are dangerously close to depletion.

Against such a backdrop, Natixis would expect to see substantial upward momentum in zinc prices over the period 2015-16.

In Natixis central scenario, after averaging around $2,200 a ton in 2014, they would expect zinc prices to push up to an average of $2,520 a ton in 2015 before $2,725 a ton in 2016.

Worldwide nonferrous metals exploration budgets down 25% in 2014

According to data compiled for the forthcoming 25th edition of SNL Metals & Mining's "Corporate Exploration Strategies" study, the estimated worldwide total budget for nonferrous metals exploration dropped to US$11.36 billion in 2014 from US$15.19 billion in 2013 — a 25% decrease

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SNL Metals & Mining's 2014 exploration data and analysis are based on information collected from almost 3,500 mining and exploration companies worldwide, of which almost 2,000 had exploration budgets for 2014. The companies, each budgeting at least US$100,000, budgeted a total of US$10.74 billion for nonferrous exploration in 2014. Including our estimates for budgets we could not obtain, the 2014 worldwide exploration budget comes to US$11.36 billion. Nonferrous exploration refers to expenditures related to precious and base metals, diamonds, uranium and some industrial minerals; it specifically excludes iron ore, aluminum, coal, and oil and gas.

Higher operating and capital costs, lower ore grades, uncertain demand for commodities and investor discontent have required major companies to focus on a return to healthy margins after years of growth-oriented spending. To that end, the majors have been divesting noncore assets and cutting back on capital project and exploration spending, which has led to an unsurprising 25% drop in the majors' exploration budget total in 2014. The juniors continue to battle lackluster investor interest, which has forced the group to rein in spending in order to conserve funds. The juniors' total exploration budget fell 29% year over year in 2014 after falling 39% in 2013, dropping their share of the overall budget total to 32% from a high of 55% in 2007.

Exploration allocations for all targets except platinum group metals decreased in 2014. Although gold remains the most attractive target, gold budgets declined for the second consecutive year — dropping 31% to US$4.57 billion — to account for the metal's lowest share of worldwide exploration budgets since 2009 at just 43%. Despite base metals budgets falling by US$1 billion, their collective share of total budgets increased 2% to reach the highest level since 2008. Base metals and gold allocations have a consistently inverse relationship in terms of their shares of overall budgets.

Despite lower allocations for most countries, companies continue to explore across the globe; exploration is planned for 124 countries in 2014, down from 127 in 2013. The share of budgets allocated to mature mining regions such as Canada and the United States fell in 2014; Canada's total budget was down 22% year on year due to weakness in the country's junior sector, while the United States' total declined 27% as many major copper producers scaled back exploration programs. Canada and Australia remained the top countries overall, with the United States, Mexico, and Chile rounding out the top five. Although Latin America's 26% year-over-year decline is relatively on par with the overall decrease in exploration budgets in 2014, two of the top exploration destinations within the region, Argentina and Colombia, saw declines of 46% and 42% respectively due to local opposition to mining and political instability. West Africa declined more than the African region — 38% compared with 28% — due primarily to the faltering gold price and regional insecurity; the Ebola crisis will almost certainly result in even further cutbacks to West Africa exploration programs in the second half of 2014.

For the first time since SNL Metals & Mining began the series of "Corporate Exploration Strategies" studies, the proportion of overall exploration budgets dedicated to mine site work surpassed the budget for grassroots activity. Since 2012, producers have been increasingly emphasizing brownfields programs as a less capital-intensive and less risky means of replacing and adding reserves. The proportion of the annual total allocated to grassroots exploration hit a record low this year, as many junior companies, which have historically accounted for the largest portion of grassroots spending, sharply curtailed programs to conserve cash as the exploration sector struggles to rebound from a two-year downward trend. This reduced focus on early stage and generative work has led to concern that many companies, and perhaps the industry in general, are sacrificing long-term project pipelines in favor of consolidation and maximizing returns.

This Is Who Is Quietly Buying All The Cheap Oil

With the US Shale Oil industry up in arms, Venezuela screaming, and Russia awkwardly quiet (as the Ruble slides with the falling oil price stabilizing domestic inflows), the 'secret' Saudi-US oil deal that pressured prices for crude down to $80 (18-month lows today) has 'hurt' a lot of the world's producer nations. However, as Bloomberg reports, there is one nation that is very grateful. The number of supertankers sailing toward China’s ports surged to a nine-month high as over 80 very large crude carriers (VLCCs) - the industry’s biggest ships - sail toward the Asian country’s ports. At an average of 2 million barrels each, the 160 million barrels will help refill China's 727 million barrel SPR which it started in 2012.

As Bloomberg reports,

The number of supertankers sailing toward China’s ports surged to a nine-month high amid speculation an oil-price slump is encouraging the world’s second-biggest crude importer to accelerate purchases.

There are 80 very large crude carriers, the industry’s biggest ships, sailing toward the Asian country’s ports, according to IHS Fairplay vessel-tracking signals compiled by Bloomberg at about 10 a.m. today. That’s the highest since Jan. 3. Average shipments are 2 million barrels.

Brent crude, the global benchmark, plunged to a four-year low yesterday amid speculation Saudi Arabia, Kuwait and other nations in the Organization of Petroleum Exporting Countries won’t curb production. The slump is likely encouraging buying to fill China’s strategic stocks, according to Energy Aspects Ltd., a London-based consultant.

“There’s a lot of bargain hunting going on,” Richard Mallinson, an analyst at Energy Aspects, said by phone. “Whilst prices are low we think there’ll be buying for Strategic Petroleum Reserve filling and also just trying to capture these discounted crudes.”

...

The 80 bound for China compare with an average of 63 for the past two years and match a record in data that started in October 2011.

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In summary, just like Chinese gold imports rise when the price of gold drops; so China does the logical thing with other commodities, (i.e. oil) when prices tumble and instead of selling into the paper rout, it buys all the physical it can get its hands on.

Asian gold demand up as India’s Diwali boost sales

Asian demand for physical gold has picked up in recent days, thanks partly to low prices lifting demand during India’s Diwali, the festival of lights, which is the country’s biggest gold-buying occasion of the year.

Analysts say that nearly 20% of annual sales are generated during the five-days-festivity that kicked off today

Analysts say that nearly 20% of annual sales are generated during the five-days-festivity that kicked off today, and the World Gold Council predicts that India will import 850 to 950 tonnes of gold in 2014, RT.com reports.

Given the gold craze in India, it is no surprise that the precious metal is the second biggest import item after crude oil. The country's total gold and silver imports stood at $55.7bn in the 2012-13 financial year.

But this has had an adverse impact on the current account deficit (CAD), which is the gap between export revenues and imports payments.

In 2013, the government raised import tariffs to 10% to bring down the deficit. It also made it mandatory for trading agencies to then export 20% of the goods, which had been imported.

These curbs had a major impact on supply, with the value of gold and silver imports dropping 40% to $33.4 billion in 2013 -14.

However, as a result, the deficit narrowed to $32.4bn from $87.8bn during the same period, according to the Reserve Bank of India.

Now as India relaxed some import restriction, which led to a 34% drop in demand in the first half of 2014, purchases are set to improve in the Asian giant.

Gold moved sharply lower in the first half of last year, witnessing its biggest yearly drop since 1981. This year, rising volatility in the stock market and worries over inflation have sent gold shares higher by 3.4%.

Macquarie’s LME Week Base Metals Summit Survey

Macquarie’s Base Metals Summit, a linchpin of LME Week for the past decade, was held today where an audience of over 400 market participants were polled on their views on the outlook for base metals over the next 12 months.

Providing a strong indication of market sentiment in the metals industry at the start of the annual LME Week gathering in London, the 2014 Macquarie LME Week Summit Survey indicates that market fundamentals will continue to drive differentiation across base metals, though macro headwinds are increasingly a concern.

The results also show a large swing in participant preference towards nickel , despite weak recent performance. In contrast, copper is now the favourite short for the first time since the global financial crisis on strong supply growth.

Commenting on the results, Macquarie’s Head of Commodity Research, Colin Hamilton said “The results reflected confidence in the 2015 story for nickel, while the market seems well aware of the supply headwinds facing copper”.

Further highlights from the survey include:

• 46% of the audience expected the global economy to be moderately weaker over the next 12 months, while 35% expected it to be much the same. Only 7% predicted a growth shock.

• Global metals demand is expected to grow modestly in 2014 by 47% of the audience, while 24% think it will contract – a figure much higher than the 2013 summit.

• 77% of the audience expects Chinese GDP growth to drop below the 7% mark in 2015.

• 36% of participants believe the impact of global deflation will be the key theme being discussed by the market in mid-2015.

• 40% consider the volume of ‘invisible’ metal stored off-market as the biggest problem in current base metals markets.

• When asked in which metal they would most like to hold a short position on a 12-month view, copper was the favourite for the first time in 6 years, while zinc was the least preferred short.

• When asked in which metal they would most like to hold a long position on a 12-month view, nickel took 47% of the poll (up from 10% in 2013). In contrast, only 7% voted for copper.

• Delegates think that another co-ordinated global easing is the biggest risk to the upside over the next 12 months, while a China collapse presented greatest downside risk.

In terms of the individual metals:

• The audience's weighted average price expectation for cash copper was $6,663/t a year from now, compared with Monday's LME official price of $6,615/t. This is 9% lower than 2013 Summit expectations.

• 53% expected the copper market to take until 2017 or beyond to move back to deficit.

• The audience's weighted average price expectation for cash aluminium was $1,997/t a year from now, compared with Monday's LME official price of $1,955/t. This is 5% higher than 2013 Summit expectations.

• A flood of Chinese supply is viewed as having greatest potential to cause aluminium inventory unwind.

• The audience's weighted average price expectation for cash nickel was $19,859/t a year from now, compared with Monday's LME official price of $15,315/t. This is 12% higher than 2013 Summit expectations.

• The majority of the audience expected the Indonesian nickel ore ban to stay in place over the coming year.

• The audience's weighted average price expectation for cash zinc was $2,325/t a year from now, compared with Monday's LME official price of $2,223/t. This is 9% higher than 2013 Summit expectations.

• The majority of participants expect some Chinese mine supply growth in 2015, but only when incentivised by price.

• The audience's weighted average price expectation for cash lead was $2,137/t a year from now, compared with Monday's LME official price of $2,012/t. This is 6% lower than 2013 Summit expectations.

• The audience's weighted average price expectation for cash tin was $19,809/t a year from now, compared with Monday's LME official price of $19,400/t. This is 25% lower than 2013 Summit expectations.

HKEx to introduce first Asia commodities contracts

Hong Kong Exchanges and Clearing Limited (HKEx) will introduce its first Asia commodities contracts – London Aluminium Mini Futures, London Zinc Mini Futures and London Copper Mini Futures – for trading on Monday, 1 December 2014, subject to market readiness.

The three mini metals contracts will trade in Renminbi (RMB). Other contract details, including the hours of the after-hours trading session, are shown in the tables below.

HKEx decided to postpone the introduction of its US-dollar traded API 8 Thermal Coal Futures so it could focus on the launch of the mini metals contracts. HKEx remains committed to the coal contract and will announce its rollout date later.

"This is another big step in our commodities strategy following our launch of self-clearing at the London Metal Exchange (LME) last month and our announcement last month of new LME fees, starting 1 January 2015, to support our ongoing investment in the LME," said HKEx Chief Executive Charles Li. "The new contracts will provide currency convenience, they will expand our range of RMB products, and they will further strengthen Hong Kong's position as the leading offshore RMB centre," Mr Li added.

"These new contracts are part of our fixed income, currency and commodities strategy in Asia and our efforts to expand our Hong Kong markets into new asset classes," said Romnesh Lamba, HKEx’s Co-head of Global Markets.

"RMB traded mini-contracts traded at HKEx, referenced to the LME global reference price, further develops our coverage for global metals traders and enhances liquidity," said HKEx’s Co-head of Global Markets and LME Chief Executive Garry Jones.

Trading Details

The new mini metals contracts will be traded on Hong Kong Futures Exchange Limited (HKFE) and cleared through HKFE Clearing Corporation Limited. They are all monthly cash-settled futures contracts. The trading hours for the new London Aluminium/ Zinc/ Copper Mini Futures will be 9:00 am to 4:15 pm and 5:00 pm to 1:00 am the next morning Hong Kong time Monday to Friday, excluding the public holidays on HKEx's trading calendar. Pre-holiday arrangements will also be the same as those for existing contracts traded on HKFE. Key contract specifications are shown in the table below.

Liquidity Providers, Active Trader Programmes and Possible HKFE-LME Reciprocal Scheme

HKEx is seeking Liquidity Providers for the new contracts and there are two Active Trader programmes with fee rebates (please see this circular for details). HKEx is also aiming to introduce a scheme to encourage LME Members to become HKFE Participants and vice versa. Subject to regulatory approval, there will be a low-cost way for LME Members and related entities that meet certain requirements to become HKFE Participants, and for qualified HKFE Participants and related entities to become LME Members.

Key Contract Specifications

Ends --

The London Metal Exchange, Hong Kong Futures Exchange Limited and HKFE Clearing Corporation Limited are wholly-owned member companies of HKEx.