Copper Plunge Continues Despite Chinese Stimulus

Since China unleashed its latest (and greatest since 2008) RRR cut, stock prices have surged amid the liquidity hype. However, perhaps more indicative of the underlying reality of just what good an RRR cut will do to a debt-saturated economy full of weak credits thanks to tumbling asset prices, copper prices have now plunged over 6% in the last 2 days...

But still BTFATH in Chinese stocks...

Charts: Bloomberg

10 Top Nickel-producing Countries

While many expected the nickel price to continue to rise in 2014 on the back of Indonesia’s ban on unprocessed ore exports, it ultimately fell on concerns over rising stockpiles and predictions that the new rules would soften.

Overall, global nickel production decreased slightly in 2014 compared to the previous year (2,400,000 tonnes vs. 2,630,000 tonnes). Similarly, the nickel price fell 12 percent in 2014, according to the US Geological Survey (USGS), and market watchers are divided about what’s in store going forward — some say production will ramp up, while others say the nickel market will turn in 2015.

Here’s a look at the 10 top nickel-producing countries from 2014, as reported by the USGS.

1. Philippines

Mine production: 440,000 tonnes

The Philippines saw a slight decrease in its nickel production from 2013, producing 440,000 tonnes. Even so, the country took advantage of Indonesia’s export ban and stepped in to distribute to China. In fact, the country’s nickel exports to China increased 24 percent in the first 10 months of the year, according to Bloomberg. Much of that came from stockpiles, but the Philippines plans on increasing the number of mines it has, hoping to permanently fill the gap left by Indonesia.

"If Indonesia’s ban goes on we’ll see more new mines in five years,” said Leo Jasareno, director of the Manila-based Mines & Geosciences Bureau. “Nickel will be the darling of mining in the next 10 years.”

2. Russia

Mine production: 260,000 tonnes

Russia also saw a drop in production from 2013, putting out 260,000 tonnes of nickel vs. 275,000 tonnes the previous year. While the Indonesian ban threw a wrench in the works for some companies and end users, Russia had its own export barriers to deal with. According to a 2014 article from the CBC, sanctions limited the country’s exports to the US and UK in light of last year’s tensions between Russia and Ukraine. While that didn’t keep the country from producing, it did shift its focus to Asian purchasers.

"Well, the problem with sanctions is very porous,” said Donald Rumball, a Toronto-based analyst. “If Russia was stopped from selling nickel, what would stop it from selling to China and Indonesia and Vietnam and who else.”

3. Indonesia

Mine production: 240,000 tonnes

Indonesia experienced a drastic cut in production from last year, with its output dropping from 2013′s 440,000 tonnes to just 240,000 tonnes. Most of that drop was due to the country’s export ban on unprocessed ores, which came into effect in January. With the ban, Indonesia is aiming to reap additional benefits from its natural resources by forcing companies to process ore domestically. However, the move led to thousands of job cuts, and economists have warned that the short-term negative effects of the ban will be extremely costly for Indonesia’s fragile economy.

4. Canada

Mine production: 233,000 tonnes

Canada saw mild gains in its nickel production from 2013 to 2014, producing 223,000 tonnes of nickel last year. Like other countries, Canada is looking to the Indonesian ban as a catalyst to increase production, and believes it could benefit not only via output growth, but by also adding jobs to its economy, according to a 2014 report from The Globe and Mail.

"We would have the additional jobs around refining and of course the value added inside the economy would be augmented that much more,” said Peter Hall, chief economist with Export Development Canada.

5. Australia

Mine production: 220,000 tonnes

Australia’s nickel production dropped from 234,000 million tonnes in 2013 to 220,000 tonnes in 2014. However, according to a Platts article from 2014, that decline was expected. The country is currently starting new mines in three states and expects to begin boosting output by 2018.

6. New Caledonia

Mine production: 165,000 tonnes

Like Canada, New Caledonia saw its nickel production gain marginally in 2014, rising from 2013′s 164,000 tonnes to 165,000 tonnes. Caltrac, which is an arm of Hastings Deering, is expanding mining operations in the country and opened a state-of-the-art maintenance facility in October. The new facility has six operational bays compared to two at the previous facility, according to Mining Australia

"We are one of the leading commercial entities in New Caledonia and deeply involved in the business life of the region,” said Michele Verges, Caltrac’s director general.

7. Brazil

Mine production: 126,000 tonnes

Brazil also saw a decrease in nickel production in 2014, falling short of 2013′s 138,000 tonnes. However, as MINING.com notes, companies in the country saw record-hitting increases as the year progressed. For example, Vale (NYSE:VALE), which is a global leader in nickel production, saw an increase of 18.7 percent from the previous year in the third quarter.

8. China

Mine production: 100,000 tonnes

China increased its nickel production in 2014 by roughly 5,000 tonnes compared to its 2013 total. According to Reuters, China is the world’s leading producer of nickel pig iron , which is a low-grade ferronickel used in stainless steel. When the price of nickel ore nearly doubled between February and April, that raised the cost of production for nickel pig iron, as demand for the material stayed low due to overcapacity in China’s stainless steel sector.

9. Colombia

Mine production: 75,000 tonnes

Colombia’s production stayed relatively constant from 2013 to 2014. However, according to Bloomberg, production could have gone differently had a mining strike gone ahead in the country. The action was a response to workers being angry over extended hours. However, the strike was refused by the union in November and mines continued to operate as normal.

"This is something of a knee-jerk reaction from Colombia that a mine strike had been expected, but is no longer going ahead,” said Nic Brown, head of commodities research at Natixis (EPA:KN) in London. “If you take away the potential strike, the picture is not quite as positive as the market thought it was.”

10. Cuba

Mine production: 66,000 tonnes

Cuba also recorded similar levels of nickel production from 2013 to 2014. According to Reuters, the country cut production at one of its two nickel plants last year to focus on maintenance and capital improvements at the facility.

Copper contango returns for 1st time since July as mood darkens

 (Reuters) - The contango in the copper market returned for the first time in nine months on Tuesday, as traders braced for another slug of metal to enter warehouses amid increasing gloom about weak demand from China, the world's top consumer.

The cash price on the London Metal Exchange was at a discount of $2 per tonne to three-month on Tuesday, the first cash-to-three-month contango since July last year, according to Thomson Reuters data.

In January, the backwardation with cash prices at a premium to the forward prices was as high as $84 per tonne.

That premium has lured metal into warehouses, easing the perception of tightness even as one investor has kept a tight grip on the lion's share of available metal even as prices sank.

LME-registered stocks have risen for nine straight months to just under 340,000 tonnes, more than doubling in size since the backwardation first emerged last summer.

Now traders are braced for another slug of metal to enter the system in the next month as spot physical demand deteriorates

It's not clear on Tuesday if that dominant position was still in tact.

The most up-to-date LME-dominant position report shows one holder of cash warrant positions equivalent to between 50 percent and 80 percent of open tonnage. That data relates to Friday's positioning.

With the exception of the cash to May spread, the whole forward curve was in contango on Tuesday for the first time in a year, according to traders.

Swings in spreads further forward were particularly violent as investors who were lending out metal closed out positions as the backwardation disappeared.

"Some borrowed positions were washed out today," said Tai Wong, director of metals trading at BMO Capital Markets in New York.

Lending out metal to buy back at a future date is a profitable bet when the market is in backwardation.

The spread between three-month and the average price for 2018 settled in a contango of $71 on Tuesday, compared with a backwardation of $2 on Monday, he said.

Still, the spreads aren't yet wide enough for merchants to start building stocks, like those seen in aluminum over the past five years or more recently in oil during the market's worst crisis in years.

The cost of financing inventory is about 50 cents a day, which means the cash to three contango would need to flare out to $15 per tonne before it would cover costs.

Will Chinese RRR cuts lift Aluminium, Copper?

The People’s Bank of China (PBOC) will reserve requirement ratio (RRR) by one percentage point, the central bank announced on Sunday.

The monetary stimulus will boost aluminium market, but any price rally should be limited, given the poor market fundamentals, Guoxin Futures told SMM. Guoxin Futures added that power tariff cuts will weaken cost support for aluminium prices, another factor that will arrest sharp price gains.

The recent rise in aluminium prices was aided by China’s pro-growth policies and hopes for more stimulus measures, rather than an improvement of market fundamentals, Hongyuan Futures told SMM. The chronic overcapacity means that this round of RRR cuts will have limited impact on aluminium prices, Hongyuan Futures added. 

Analyst from Guosen Futures agreed with the opinion and told SMM in an interview that the RRR cut will help ease worries triggered by last week’s poor economic releases. “That plus the slower growth in copper inventories during a high demand season will send copper up to 44,500 yuan per tonne, probably heading towards 46,000 yuan.”

“The monetary easing will definitely benefit copper market, and we now see copper to climb to 45,000 yuan per tonne,” chief analyst from COFCO Futures predicts.

However, analyst from Western Futures warned that the easing measures were also a reflection of fragile economy in China. Besides, it may take some time for these measures to produce results. “Thus, we expect copper to meet resistance at 45,000 yuan per tonne.”

Copper’s top 10 – Countries and Companies

Thomson Reuters GFMS today released its Annual Copper survey – Copper 2015 – in which it predicts a continuing copper surplus and a 12% fall in average copper price for the year to $5975/tonne compared with 2014.  The findings and more data from the 88-page report will be covered in more detail in a following article, but here we will just take a brief look at the top 10 producing nations – which between them accounted for 80% of global copper supply last year, and the top 10 producing companies.

Top 10 copper producing nations 2014

Rank 2014	Country	Production (000t)
1.	Chile	5,745
2.	China	1,614
3.	USA	1,368
4.	Peru	1,339
5.	Australia	961
6.	DR Congo	905
7.	Russia	753
8.	Zambia	725
9.	Canada	688
10.	Mexico	522
	Global Total	18,270

Source:  Thomson Reuters, GFMS

As can be seen from the table, Chile remains far and away the world’s largest producer.  In comparison with 2013, the U.S. claimed the No. 3 spot with an 8.5% increase in output, thus moving ahead of Peru where estimated production also rose, but only by 1.4%.  The only other changes in the top 10 were that Russia moved up a place at the expense of Zambia and Mexico moved into 10th spot, replacing Indonesia where output fell due to export restrictions and some labour problems largely at the country’s largest mine – Freeport’s Grasberg.

Top 10 Copper producing companies 2014

Rank 2014	Company	Production  (000t)
1.	Codelco	1,841
2.	Freeport McMoran	1,470
3.	Glencore	1,296
4.	BHP Billiton	1,203
5.	Southern Copper	665
6.	Rio Tinto	636
7.	KGHM Polska Miedsz	506
8.	Anglo American	504
9.	Antofagasta	455
10.	First Quantum	380

Attributable Production.    Source:  Thomson Reuters, GFMS

There was no change in the ranking order of the top 10 copper producing companies with production losses at some operations largely offset with new project production elsewhere.  Overall global new mined production rose around a modest 1.5% with some significant new big operations coming on stream, or ramping up – Codelco’s Hales, Turquoise Hill (51% owned by Rio Tinto)’s Oyu Tolgoi and Chinalco’s Toro Mocho mine in Peru being among the largest.  All of these are still ramping up to full production so should see further significant rises in output again this year.

But the production rises were mostly offset by declining grades at a number of aging copper mining operations, and some closures.  With the copper price likely to remain disappointing this year due to an anticipated continuing production surplus, the incentive for new project development remains muted, apart from those operations already in the pipeline while greenfields exploration activity will also tend to be depressed.  There are a couple of major new projects due on stream this year though – Southern Copper’s Buena Vista mine in Mexico and First Quantum’s Sentinel project in Zambia being the biggest.

A copy of the full 88-page Copper 2015 report, and other GFMS publications, may be requested by clicking on this link.

Sourced: Lawrence Williams of mineweb.com

10 Top Copper Producing Countries

While demand for copper dropped slightly in 2014 compared to 2013, global production of the metal increased by 400 million tonnes to hit 18,700 million tonnes, according to a report from the US Geological Survey (USGS).

Here’s a look at the top copper-producing countries for 2014, as reported by the USGS. Chile took the top spot again last year, although other producers, including China and Peru, recorded increases in output.

1. Chile

Mine production: 5,800 million tonnes

Chile took the lead by a long shot, producing 5,800 million tonnes of copper last year; that’s a slight increase over 2013′s 5,780 million tonnes. According to a Reuters article from June 2014, Chile’s copper production has been increasing for the past decade. However, technical and regulatory issues could cause roadblocks for the country’s plans to keep ramping up production going forward.

2. China

Mine production: 1,620 million tonnes

China also upped its copper production in 2014, putting out 1,620 million tonnes of the metal, a climb from 2013′s 1,600 million tonnes. In particular, Reuters notes that the country’s production increased during the second half of the year, in large part due to the restart of a 100,000-tonne-a-year smelter in the country’s northeastern Liaoning province in November after five years of being idle.

3. Peru

Mine production: 1,400 million tonnes

Peru saw gains in copper production from 2013 to 2014, producing 1,400 million tonnes last year compared to 1,380 million tonnes in 2013. The country is aiming to double its production by 2016 to replace China as the second-largest producer of the metal in the world. Five major projects are on schedule to begin that year, with one in particular, Cerro Verde, to begin initial production in the second half of 2015.

4. United States

Mine production: 1,370 million tonnes

The US produced 1,370 million tonnes of copper in 2014, a 10-percent increase from 2013′s 1,250 million tonnes. Growth has been mainly credited to production increases in Arizona, New Mexico and Utah. The USGS notes that those three states, as well as Nevada and Montana, accounted for 99 percent of the county’s production.

5. The Democratic Republic of the Congo

Mine production: 1,100 million tonnes

The Democratic Republic of the Congo saw its copper production increase from 970,000 tonnes in 2013 to 1,100 million tonnes in 2014. Similar to other countries on this list, copper output from the country has been steadily on the rise the past few years as new projects have come into play. The mining industry in the Congo also plays a significant role in driving economic growth, and was responsible for an 8.5-percent push in 2013 and an 8.7-percent increase last year.

6. Australia

Mine production: 1,000 million tonnes

Copper production in Australia broke into the millions in 2014, reaching 1,000 million tonnes, a step forward from 2013′s total of 990,000 tonnes. According to domestic government resource Geoscience Australia, most of the country’s copper comes from underground mines. The traditional method of recovery involves a flotation process that separates the ore mineral grains from waste material.

7. Russia

Mine production: 850,000 tonnes

Russia’s copper production saw mild gains in 2014, with output hitting 850,000 tonnes compared to 833,000 in 2013. However, though production increased over the course of the year, some Russian companies hinted at slowing production in early 2015 when the rouble​ dropped and demand for the metal fell. Specifically, the industry doesn’t want to repeat the situation that occurred during the 2008 financial crisis, in which high production led to large inventories.

8. Zambia

Mine production: 730,000 tonnes

Zambia is the only country on this list that recorded a drop in production from 2013 to 2014. In 2013, the country produced 760,000 tonnes of copper, but production dropped off to 730,000 tonnes last year. The country’s government stepped up efforts to establish a stronger relationship with the mining industry in 2014, but disputes occurred over the country’s move to increase royalties from 6 percent to 20 percent for open-pit mining operations. That led companies such as Glencore (LSE:GLEN) and First Quantum Minerals (TSX:FM) to put expansion objects on hold. Recently, the country reversed its decision on the royalty increase, and sources now say the royalty will only rise to 20 percent.

9. Canada

Mine production: 680,000 tonnes

Canada saw mild production gains in 2014, reaching output of 680,000 tonnes compared to 632,000 in 2013. This growth is expected to continue going forward. Last December, Seabridge Gold (TSX:SEA,NYSE:SA) received approval to move forward with its massive KSM project from Canada’s minister of environment. The KSM project is the world’s largest undeveloped gold -copper project by reserves, and the deposit is estimated to contain 9.9 billion pounds of copper.

10. Mexico

Mine production: 520,000 tonnes

Mexican copper production reached 520,000 tonnes for 2014, an increase from 480,000 in 2013. Still, the Mexican copper industry saw its fair share of issues last year, with a September toxic spill at Grupo Mexico’s Buenavista copper mine contaminating water supply for about 800,000 people.

_________________________________________________________________________________________

(June 16 2014)

2013 Top 10 Copper-producing Countries

In terms of copper production, it’s Chile that accounts for the lion’s share of world output. However, there are still several other countries with significant operations, including neighboring Peru, as well as China, the United States and Russia.

The US Geological Survey has released its most recent set of data on copper-producing countries, and Copper Investing News took a look to see which made the top 10. Below is a list of those countries, along with a little background information on each nation.

1. Chile

Mine production: 5,700,000 tons

Up first is Chile, which produced a whopping 5,700,000 tons of copper in 2013. That’s up from 5,430,000 tons in 2012. As The Economist reports, the red metal provides 20 percent of the country’s gross domestic product and accounts for 60 percent of its exports. The publication also notes that thanks to copper, Chile’s economy is expanding by 6 percent annually; it also credits the industry with the country’s low rates of inflation and unemployment.

2. China

Mine production: 1,650,000 tons

China is the closest second, producing less than half of what was put out by Chile. It recorded 1,650,000 tons of copper production in 2013, an increase from the 1,630,000 tons produced in 2012. China, the world’s largest single consumer of copper, hit record rates of production for the red metal in November 2013, according to Reuters. New production sites continued to come online through 2013 in China, increasing production at a steady rate. Additionally, importing raw copper concentrate to China is costly, causing domestic smelting operations to begin to rise.

3. Peru

Mine production: 1,300,000 tons

Peru produced 1,300,000 tons of copper in 2013, not moving much from its 2012 production level. Peru This Week reported that the country’s mine production could rise by as much as 10 percent in 2014, and Peru’s energy and mines minister, Jorge Merino, has projected a 17-percent increase in copper production alone as the result of several new projects set to open in the year ahead. The country also expects more foreign investment into its mining sector as a result of these projects.

4. United States

Mine production: 1,220,000 tons

The US saw 1,220,000 tons of copper production for 2013, up slightly from its figure of 1,170,000 tons in 2012. MINING.com notes that this increase came despite a catastrophic landslide at Utah’s Bingham Canyon mine in early 2013; the incident caused it to cease production for an extended period of time. The total copper production in the US is worth more than $1 billion.

5. Australia

Mine production: 990,000 tons

In 2013, 990,000 tons of copper were produced in Australia, marking an increase from 958,000 tons in 2012. Geoscience Australia, a government agency, notes that most of the copper resources in the country are located in Queensland and South Australia, though there are resources in each state and in the Northern Territory as well. Most of the country’s production is centered in the Mount Isa region in Queensland and the Olympic Dam mine in South Australia.

6. Russia

Mine production: 930,000 tons

Russia ranks sixth, having produced 930,000 tons of copper in 2013. That level is up from the 883,000 tons it produced in 2012. NASDAQ reported that Russia has about 10 percent of the world’s copper reserves, and that these deposits are located primarily in Siberia and the Urals. The vast majority of Russian copper projects are in remote regions, away from population and infrastructure, which makes mining operations relatively difficult. Additionally, the country has laws restricting the amount of foreign investment in its mineral reserves.

7. The Democratic Republic of the Congo

Mine production: 900,000 tons

The Democratic Republic of the Congo produced 900,000 tons of copper in 2013, a significant rise from the 600,000 tons produced in the country in 2012. The International Monetary Fund believes this level of production may spur the country’s economic growth to the tune of 8.7 percent in 2014, according to Bloomberg. In 2012, the mining industry comprised more than 15 percent of the Congo’s gross domestic product, the news outlet notes.

8. Zambia

Mine production: 830,000 tons

In Zambia, 830,000 tons of copper were produced in 2013, marking an increase from 2012′s 690,000 tons. 2013 saw several new copper projects begin in Zambia, boosting production by 21 percent in the first 11 months of the year, according to The Wall Street Journal.

"We are at a level where most copper projects that have been in the pipeline a few years back are coming on stream,” Fredrick Bantubonse, an independent metals analyst based in Zambia, told the Journal.

9. Canada

Mine production: 630,000 tons

Canada just made it into the top 10 with 630,000 tons of copper production in 2013, up from 579,000 tons in 2012. Natural Resources Canada notes that copper volume and value both increased despite decreases in the metal’s price throughout the year. The organization attributes this rise to new mine openings by Glencore Xstrata (LSE:GLEN) and Hudbay Minerals (TSX:HBM).

10. Mexico

Mine production: 480,000 tons

Coming in at number 10 is Mexico, which produced 480,000 tons of copper in 2013, clocking an increase from the 440,000 tons it produced in 2012. Like other countries on this list, Mexico forecasts increases in copper production over the next two years, as per Bloomberg. However, the publication notes that copper prices will need to remain steady in order for that to occur.

CHARTS: What will happen to gold price after Greek exit

New study shows Greek bond yields as proxy for euro-zone break-up risk is more reliable than the strength of the US dollar in predicting the gold price

The real possibility of a Grexit is back on the cards. And with it a resurgent gold price.

New York gold futures moved back above the $1,200 an ounce level on Wednesday on news that Greece is preparing to declare a debt default by the end of April amid stalled negotiations with its international creditors.

A report by the Financial Times On Monday said Greece will withhold $2.7 billion in May and June repayments to the International Monetary Fund because it's running out of money to pay state salaries and pensions:

A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received a €245bn bailout

“We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said.
A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €262bn.
Default is a prospect for which other European governments, irritated at what they see as the unprofessional negotiating tactics and confrontational rhetoric of the Greek government, have also begun to make contingency plans.

On Wednesday a report by the Wall Street Journal said negotiations between Greece and its creditors "are nowhere near resolution" for bailout money to disbursed and quotes a US Treasury official:

“It’s important that a strategy be found in which Greece can continue to honor their obligations,” the U.S. official said. “If that doesn’t happen, if there’s not an agreement on that, then there would be economic, potentially tough economic challenges, for Greece,” he warned.

“It would also enhance and amplify uncertainties for Europe and for the global economy. So it’s of great importance that an agreement be reached,” the U.S. official added.

A new report by Capital Economics which examines the relationship between the US dollar, trading at near 12-year highs against the euro, and the price of gold and argues that when the US starts to raise interest rates as it is expected to do perhaps as early as June could potentially "mean more upside for gold than the dollar:"

"The fallout from, say, a 25% rise in the gold price would be largely positive (including the boost to producers’ incomes and the favourable wealth effects). But the same rise in the dollar could have a significantly negative impact on the US economy, and prompt the Fed to delay raising interest rates. This asymmetry may be especially relevant in the event of a shock such as the break-up of the euro."

The report by Julian Jessop, Head of Commodities Research at the independent London-based research firm includes two charts showing the asymmetry of the relationship and how well gold has held up against the dollar like it did in the second half of 2008 and in the first half of 2010.

The second chart plots the gold price against Greek government bond yields as a proxy for euro-zone break-up risk. "This relationship has been more reliable than that between gold and the dollar," says Jessop, who is predicting gold will rise to $1,400 by the end of the year.

Sourced :- Frik Els of MINING.com