Nyrstar Sees Zinc Prices Rising as Shortage Looms by End of Year

Nyrstar NV, the world’s largest refined- zinc producer, expects the price of the metal to increase further after the 500,000 metric ton Century mine in Australia shuts by the end of the year.

"We are heading into a period that is forecast to be short on both the concentrate market and the refined metal market,” Heinz Eigner, acting chief executive officer of Belgium-based Nyrstar, said in a phone interview. “This double deficit” is pushing the metal into a “very strong price range,” he said.
Zinc prices gained 6 percent last year amid speculation supply will fall short of demand as some mines shut. Stockpiles in warehouses tracked by the London Metal Exchange are at the lowest since October 2010. Strong consumer demand has helped buoy zinc, Australia & New Zealand Banking Group Ltd. said in a report Thursday.

Century, Australia’s largest open-cut zinc mine operated by MMG Ltd., the Hong Kong-listed unit of China’s biggest state-owned metals trader, is scheduled to shut in the third quarter.

"We expect for 2015 a well supplied concentrate market but then later this year Century mine will be depleting,” said Eigner, who took over as CEO when Roland Junck resigned in November, three weeks after Trafigura Beheer BV raised its stake in the zinc producer to 15.3 percent. “And that is 500,000 tons off the market, so just Century alone will have a significant impact.”

Commodities Transaction Tax should be reduced: Religare Sec

Budget should take steps to make commodities markets in India more vibrant. Taxation issues should be resolved and more investments should be encouraged into real infrastructure such as warehouses, cold storage logistics to ensure low wastage.

Any budget raises hopes, especially the first full-fledged one of a new government. This team has also had the privilege of a run up of 9 months to the budget after winning the elections, which has given them enough time to understand the issues at hand. And I must say the time has been utilized well.

On the commodities front, some of the expectations are old while others are new. But the ultimate aim of the budget should be to free our commodity markets and integrate them into the global economy to take maximum advantage of opportunities and get international buy and sell prices commensurate with our production and consumption numbers. While global factors significantly affect commodity prices of bullion, metals and energy, prices of agri-commodities are more affected by domestic policies because we provide them a level of necessary protection. Like every earlier year, agriculture will be a key focus area in this budget and this is an opportunity to address the most crucial issues in this sector.

The fundamental issue is, and has always been, that of adequate funding to lay out effective and comprehensive infrastructure for farming to improve productivity and permanently bring down food inflation. Institutional credit by way of availability of seeds, fertilizers and such at low prices will help raise productivity. Also, the Mandi Acts in different states need to be revisited and a national Act allowing free movement of good, perhaps with a single pay-point and a smart card to track goods movement, should be mooted. Real implementation of GST is a step in that direction. Then, wastage adds 30% to the cost of farm products and that is largely due to lack of suitable storage infrastructure; a policy to encourage a supply chain network – of warehouses and cold chains for example – will go a long way in holding prices low and ensuring availability everywhere. In fact, one of the biggest factors to focus on is storage of goods across the country which, given the scale and size of the mission and the investment and project execution skills required, will work best in Public Private Partnership format. The scope should include not only storage but also procurement and distribution for an integrated approach and the budget is the right platform to address this national requirement. 

The key message in the budget should be that we are a business-friendly globalized market and the medium term goal should be the ability to become a price-setter in the commodities in which we are among the larger producers or consumers of the commodity e.g. wheat, sugar and vegetable oils. Negotiable warehouse receipts are soon to become reality with the setting up of the Warehousing Regulator and incentives for creating infrastructure to support physical commodities trade will make it a winning combination. 

The contentious Commodities Transaction Tax (CTT) should be reduced to Rs 1 per Crore of trading to encourage the fledgling but high-potential new industry and the amount collected should be diverted to improving warehousing & infrastructure facilities. There is also a strong need for a structured and common clearing and settlement system across products – equity, commodity and currency. This has been touched upon by earlier governments but should be implemented in earnest. This will strengthen our risk management systems and reduce transaction costs in markets. There is also a need to increase market participation by allowing banks to hedge the commodities they have exposure in their lending book. Allowing FIIs and MFs will add depth, prevent price manipulation and facilitate hedging by large corporates. And these participants will need new products like options and indices to enable efficient markets. Importantly , primary sector reforms are necessary including enabling sale on competitive market prices as against minimum support prices guaranteed by the government. 

The wish list is long but a firm start with a clear road map will be beneficial for India in the long run.

Commerzbank: Unexpectedly Tight Market Should Help Copper Recover

Despite falling copper prices and rising inventories, Commerzbank (ETR:CBK) is suggesting that the market for the red metal may not be as oversupplied as many believe.

In a commodity research note put out on Friday, the firm admits that copper prices fell at the end of last month to five-and-a-half-year lows on the back of pressure from falling oil prices, concern over an economic slowdown in China, rising inventories and pressure from “speculative financial investors.”

But despite all that, Commerzbank is predicting that an “unexpectedly tight market” could help copper recover — “perhaps fairly strongly given the latest price slide.”

To be sure, since the end of last year inventories on the Shanghai Futures Exchange have gone up by 55 percent, to 137,000 tonnes, while inventories on the London Metal Exchange (LME) have risen over 70 percent, to 285,000 tonnes.

On top of that, Commerzbank suggests that the red metal has been “facing headwind” from financial investors, with money managers betting on copper prices to fall on the COMEX for almost the past five months, and net long positions at their lowest since last July on the LME.

However, Commerzbank believes that the situation might not be as dire as it seems.

“In our opinion, copper has now been oversold and many risks are already priced in,” the firm states in its report. “Any shift in sentiment among speculative financial investors would no doubt contribute to significantly rising copper prices.”

Commerzbank identifies several points to support its case:

•Market tighter than it looks — According to data from the International Copper Study Group (ICSG), the global copper market was in a “seasonally adjusted deficit of 532,000 [tonnes]” for the first 10 months of last year. The organization also reported tight supplies of high-grade copper scrap.

•Surplus predictions optimistic — While the ICSG is predicting a surplus, Commerzbank isn’t so sure. It notes in its report that wage negotiations are set to take place for mineworkers in Chile, the world’s largest copper producer, and that production could be curbed if strikes occur. Furthermore, the firm points out that Codelco and Freeport-McMoRan (NYSE:FCX9) have cut investments due to low prices for the red metal, and suggests that “hardly any new projects are likely to be pushed forward at the current low prices.”

•Is Chinese demand really falling? — Despite slower economic growth, Commerzbank sees market watchers anticipating stimulus measures from China’s government. For example, as others have previously pointed out10, the country recently announced an investment of roughly $70 billion in electrical infrastructure, and that will require plenty of copper. Beyond that, Commerzbank believes that current low prices could spur demand as China’s State Reserve Bureau could take advantage of the situation to buy up copper.
Of course, Commerzbank isn’t the only entity to be making such arguments as of late. Ian Parkinson11 of GMP Securities has also said that projections for a surplus could be optimistic, and that current prices are not high enough to incentivize new production. Certainly, that could be problematic down the road.

Similarly, Lawrence Roulston12 of Resource Opportunities has admonished investors not to get hung up on short-term copper prices, and has suggested that worries of a slowdown in China could be overstated.

All in all, Commerzbank sees the “current pessimism as exaggerated” for copper, and anticipates copper rising to $6,500 per tonne by the end of 2015.

US Lead usage rises during Jan-Nov; EU down by 1.6

Lead usage In the United States increased by 3.9% during January to November, while demand Europe declined by 1.6%.

According to International Lead and Zinc Study Group, an increase in global demand for refined zinc metal of 5.4% was primarily a consequence of a reported rise in Chinese apparent demand of 10.5% during January to November.

The global market for refined zinc metal was in deficit by 255kt over the eleven months from January to November 2014 with total reported inventories declining by 326kt over the same period, said ILZSG report.

Falls in zinc mine output in Australia, Canada, India, Ireland and Namibia were more than balanced by increases in China, Mexico, Peru, Sweden and the United Sates resulting in an overall global rise of 1.9%.

Despite reductions in India and the United States, world refined zinc metal production rose by 4.2%. This was due mainly to higher output in China.

India overtook U.S. as buyer of Chilean copper in 2014

(Reuters) - India overtook the United States to become the fourth-largest overall importer of copper from Chile in 2014, according to figures published by the Andean country's state copper commission Cochilco this week.

The world's top producer, Chile exported a seven-year high of 5.66 million tonnes of the base metal, used in construction, last year. Total production was 5.78 million tonnes, Cochilco said last week.

The largest buyer by far is China, which despite a cooling property market still took around 2.2 million tonnes, or 39 percent of Chile's copper exports.

Asian buyers accounted for the top four destinations of Chilean copper last year, with Japan and South Korea placing second and third respectively.

Sales of mostly bulk copper to India are rising fast as its nascent economy grows. It was the first time India ranked above the United States since 2010, as far back as Cochilco publishes the data.

Chile copper exports by top destination (thousands of tonnes)

Destination 2010 2011 2012 2013 2014

China 1785 1649 1648 2095 2193

Japan 661 697 698 720 791

South Korea 398 379 376 423 472

India 220 218 339 298 387

USA 228 315 372 436 299

Total 5442 5070 5233 5590 5662

Gold, knocked lower by strong U.S. jobs data

* U.S. nonfarm payrolls increase 257,000 in January

* Dollar boosted by higher U.S. Treasury yields

* China 2014 gold consumption fell by a quarter 

(Reuters) - Gold fell more than 2 percent on Friday as global stock markets and the dollar rose on stronger-than-expected U.S. jobs data, raising expectations that the Federal Reserve will increase interest rates by midyear.

U.S. nonfarm payrolls increased by 257,000 last month, topping expectations for 234,000, with the unemployment rate ticking up to 5.7 percent due to more people entering the labor force.

"The U.S. employment report was good and there has been quite a sharp adjustment in interest rates expectations, with 10-year Treasury yields up 10 basis points," ABN Amro analyst Georgette Boele said.

"I expect lower precious metals prices for the next six months up to the moment the U.S. really starts hiking interest rates."

Spot gold dropped to a three-week low of $1,228.25 an ounce earlier and was down 2.4 percent at $1,234.70 an ounce by 2:02 p.m. EST (1902 GMT), its biggest fall since Dec. 15. It has lost 3.8 percent so far this week, which would be its largest fall since the week ended Oct. 31. 

U.S. gold for April delivery fell 2.2 percent to settle at $1,234.60 an ounce.

"If nothing else changes, earlier hikes in interest rates by the U.S. central bank would be likely to undermine the prices of precious metals, notably gold and silver," Capital Economics said in a note.

"If Fed tightening is gradual and interest rates remain low by past standards, as we expect, there would be plenty of scope for other, more positive factors to dominate."

The dollar rose 1.2 percent against a basket of leading currencies, helped by a rise in the benchmark 10-year U.S. Treasury yield to more than 1.9 percent. Wall Street rose and European equities hit a seven-year high.

"The negative pulls for gold are the elevated speculative positions, hawkish Fed and stronger dollar, while the lowering of the reserve requirements in China, negative yields in most European countries and uncertainty in Greece lend support," Saxo Bank senior manager Ole Hansen said.

Elsewhere, holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose on Thursday to 24.86 million ounces, the highest since September.

China's gold consumption fell 24.7 percent to 886 tonnes last year even as output from the world's top consumer climbed 5.5 percent, the China Gold Association said.

Spot silver slid 3.7 percent to $16.62 an ounce. Platinum was down 2.6 percent at $1,218.

The Oil Collapse Is Over (Again); WTI Jumps 5%, Tops $51 (Again)

And in 3...2...1... "oil is stabilizing"... this is it...