Peru reports robust metals production data for Mar ‘15

The production of almost all major metals by Peru reported strong growth in Peru during the month of March this year. While the output of copper, gold, silver and zinc reported significant increase during the month, tin production declined, in accordance with the official government data released yesterday.

According to data released by the Energy and Mines Ministry, copper production rose 9.3% from 118,036 mt in March last year to 129,051 mt in Mar ’15. The decline in copper output from Antamina and Cerro Verde mines was offset by increased mine output from Southern Copper, Toromocho and Antapaccay mines.

The increased output from Newmont and Barrick gold mines contributed to the 10.4% growth in gold production during March this year. The gold production totaled 393,059 Oz in Mar ’15, in comparison with the output of 356,097 Oz during the same month a year before.

Silver production increased 15% over the year from 9.4 MOz to 10.8 MOz in March. The Buenaventura, Volcan and Antamina mines reported higher silver production during the month.

Zinc production rose 24% from 94,978 mt a year before to 117,485 mt in Mar ’15. Lead output too rose 27% from 21,745 mt to 27,597 mt over the previous year. Lead output witnessed sharp increase in Volcan and Milpo. Molybdenum output too jumped 31% to 1,826 mt in March 2015.

Meantime, tin production by Minsur- the country’s only tin producer, declined sharply by nearly 15% from 1,945 mt in March 2014 to 1,665 mt in March this year.

Chinese Stocks Overtake US As Most Actively Traded Futures Contract In The World

Having lost its mantle as largest economy in the world to China... and world's biggest oil importer (again to China), 'exceptional' USA appears to have just lost its Number 1 status in financial market depth to China also...

China's Financial Futures Exchange CSI-300 futures contract has now traded more on average than the massively liquid S&P 500 e-mini contract for the last month...

Of course, with millions of new retail trading accounts every week in China, we suspect this 'false dawn' of activity will not be quite as exuberant as we have seen for 6 months.

Zinc: The souffle always rises twice

Of course it is well known that a soufflé never rises twice. However now we have a situation where the Zinc price is ringing on the doorbell for the second time in the last six months as it has burst through the key $1 per lb barrier, below which it ignominiously plunged when the oil price slump was erroneously misread as the end of life as we know it in global metals markets. Everyone now knows that was bogus thinking.

In the space of a few months in mid-2014 the metal, that suffered from chronic narcolepsy, awoke from its slumbers and rose from the low 90cts range to nearly $1.10 per lb before falling back into a swoon.

Despite this the real believers have proliferated and their enthusiasm is now being rewarded. The interesting thing is that while many may have regarded our enthusiasm as misdirected in the dark times, zinc is a metal that now has few naysayers. There is nobody out there (that we have encountered, or heard of) who would claim that there is a tsunami of zinc production or vast hidden stocks that will appear out of nowhere to mug us.

Everyone is in accord that the dark tunnel we have been through has denuded the production timetable of projects scheduled for production. We met with Alexco Silver a few weeks back and their CEO told us that people had been urging him to focus on the Zinc credits in his silver mines/deposits as that was the factor that would lower his cash costs. Likewise Chesapeake Gold has a very substantial Zinc stream potential at Metates that is icing on the cake for the rest of the project. The problem is that primary Zinc mines are now few and far between. It was interesting to note that MMG (controlled by China Minmetals) is openly talking about Dugald Rver as their next cab off the rank, after Las Bambas, which would have been regarded as a strange pronouncement only a year ago. The market is now desperate for Zinc stories that are realistic and of size.

At the time of zinc’s surge we pronounced our view that when zinc moves, it will move fast. Now that it has shucked off the fallacious story of oil as some sort of economic canary in a coalmine, it has shot from the low 90 cts area again to above the crucial $1 barrier in just a couple of weeks. We would reiterate that we would not be surprised to see it top $1.30 in 2015.

This is quite a rollercoaster ride. Buckle your seatbelts it’s going to be a bumpy ride.

Global silver output running low — Report

After over ten years of gains, global silver production is expected to drop this year, as new supply from projects won’t be sufficient to replace production losses from aging operations, a study released Wednesday shows.

According to the World Silver Survey 2015, published by The Silver Institute and Thomson Reuters GFMS, global silver output went up by 5% in 2014 to reach 877.5 million ounces, the 12th successive gain and a new record. This year, however mine supply is set to decrease.

“We’re just not seeing the investment in new mine capacity that would be needed to sustain continued record peak production,” Andrew Leyland, an analyst with GFMS who worked on the report, told The Street.

Weak silver prices are to blame, the report says. The precious metal lost 20% of its value last year, closing at $15.70, and dropped 36% in 2013, exceeding the losses in gold and other precious metals. In the year through Tuesday silver prices have recovered by 6.2%, but they are still close to the five-year low of $15.365 an ounce set in March.

About 70% of the global silver supply is produced while mining other metals, especially gold, copper, lead and zinc. Weak prices for these commodities are also likely to weigh on silver supply going forward, the report adds.

India to take the lead

India’s demand for jewellery surged by 47% to 62.2 million ounces, and it is set to outrank China as the world’s largest consumer, where jewellery fabrication dropped 26% to 46.7 million ounces.

“Despite the Chinese economy growing at a reported 7.4% in 2014, the true impact on the ground failed to reflect this robust performance,” the report says.

“Consumers were less inclined to spend as a result, with gold, silver, and platinum jewellery all recording annual declines as sentiment became cautious,” it adds.

The outlook for the year is rather lukewarm. The report concludes that while silver prices will see some short-term weakness, they are likely to end 2015 at more than $17 an ounce, with a couple of years of modest price increases to follow.

Antofagasta cuts copper output forecast over rain, protests in Chile.

Disruptions at two of Chile-focused Antofagasta’s (LON:ANTO) mines during the first quarter of the year has forced the copper company to scale back its production guidance for 2015.

The miner said Wednesday it lost about 8,000 metric tons of copper output due to a 10-day protest over water supplies at its flagship Los Pelambres mine in early March. Later that month, it was also forced to suspend operations at its Centinela, Michilla and Antucoya operations due to torrential downpours in northern Chile's Atacama desert, one of the world's driest places.

The company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

As a result, the company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

"Normal operations" have now resumed, said the London-listed miner, including at Los Pelambres mine,which produces more than 400,000 tonnes of copper a year, following anagreement reached with the local community. Antofagasta added it expected to recover some of the lost output through the rest of the year.

The miner, which plans to spend close to $1.3 billion in capital projects this year after $1.6bn of capex in 2014, is in the middle of a sequence brownfield expansions at its Chilean operations.

Construction at the $1.9 billion Antucoya project, said Antofagasta, is on track to be completed in the second quarter of 2015 and in full production by the start of 2016.

Shares in the company were down 3.3% to 26.50 pounds by 12:48 GMT.

Chile generates about a third of the world’s copper, with companies including BHP Billiton, Anglo American and Japan’s Sumitomo Corp all operating in the country.

U.S. aluminum premiums tumble to lowest in year as arb draws imports

(Reuters) - U.S. aluminum premiums have plunged by as much as 20 percent in the past week, reaching their lowest in more than a year as imports flood into the last remaining bright spot in a worsening global market.

Premiums paid for physical delivery on top of the London Metal Exchange benchmark have sunk to 14-15 cents per lb this week, the lowest since early 2014, from 18 cents last week as financing deals unravel and demand remains weak.

The decline from record highs above 24 cents earlier this year will provide some relief to can- and car-makers such as MillerCoors and Coca Cola Co . For producers like Alcoa Inc and Rusal <0486.HK>, it has removed a major prop to profits as LME prices tumble, increasing pressure to reduce high-cost capacity.

Market participants had expected premiums to fall after the LME introduced much-anticipated rules to reduce queues at warehouses with logjams. In Detroit, the wait time to take delivery of metal is a year and a half. 

Still, the scale and speed of the decline have sounded alarms among traders, reminiscent of the dramatic slump in 2008 when carmakers dumped millions of tonnes of unwanted metal in Detroit as sales collapsed at the height of the global economic crisis.

"Asia doesn't need anything. Europe doesn't need anything. There's inventory everywhere," said one U.S. trader.

For traders holding stock, the appearance of a backwardation this month, with cash prices higher than forward, has made financing deals unprofitable. The cash-to-three-month spread was around $9.75 per tonne on Wednesday.

The surcharges are tumbling quicker than expected as a wide arbitrage lures material from exporters who might otherwise sell to Europe, where premiums have nearly halved to around $250-$290 per tonne duty-paid from records seen in November last year.

In recent months, material has landed on U.S. shores from India in bulk for the first time in more than a decade, adding to the big flows of metal from the Middle East, Russia and Canada.

This week's drop has narrowed the arbitrage with Europe to around $100 per tonne, but traders say the cost of shipping metal to the United States may put a floor under premiums in the long term, helping to prolong the arbitrage game.

Estimates range between 8 and 12 cents per lb, which is $180-265 per tonne. They are historically still very high.

"Premiums will continue to fall, but not to historic levels because the U.S. is short of aluminum," said David Wilson, metals analyst at Citigroup. He reckoned premiums will fall to 9-11 cents per lb in the second half of the year.

INDIA, THE NEW SUPPLIER?

The pace of imports will reinforce concerns among producers about oversupplies and Chinese aluminum flooding the global market. Unwrought imports in the first two months of the year breached 500,000 tonnes for the first time in six years, with bigger-than-usual tonnages from Germany and India.

In February, India imported 1,027 tonnes of aluminum, the highest monthly total for the country since 2001, according to U.S. trade data.

That's still small compared with Canada and Russia, but it was likely due to new smelting capacity from Vedanta Resources Plc and Hindalco Industries Ltd , traders said.

India only imported metal in four months last year and over the past decade or so, it has only sporadically imported aluminum into the United States.

That's on top of hefty inflows last year of 3.06 million tonnes, the highest in five years, as Alcoa's smelter in the Middle East ramped up.

Zinc Deficits Drop as Prices Rise

 Zinc producers, along with investors, have been hoping for a supply crunch to materialize after repeated warning of mine closures and predictions of ore shortages, but supply has remained stubbornly robust.

As recently as October, the International Lead and Zinc Study Group (ILZSG) was predicting a zinc

deficit for this year of 366,000 tons, a figure more than halved to 151,000 tons this month, and itself still higher than a recent Reuters poll predicting a 143,000-ton deficit for the year. Overall, about a million tons of supply will eventually be taken out, Robin Bhar of Societe Generale predicts, but one unknown is how much mothballed production could come back onstream.

New Mining Coming Online

At $2,200 per metric ton most miners are operating profitably, a 10% rise (we have seen this much already over the last two months) would probably seal the case for restarts, in addition to several smaller projects already in the pipeline.

Some point to falling London Metal Exchange inventory as a sign of deficit but to what extent this is metal coming off-warrant to be moved into lower rent non-LME storage is not clear. Zinc has suffered from the same distortion as aluminum in recent years, with the stock and finance trade soaking up a percentage of production and inflating the impression of apparent demand.

The current LME forward curve does not support that trade at present, but that doesn’t negate the fact a significant percentage is still locked up in those deals.

For now there is ample ore supply, Reuters reports, as evidenced by treatment charges that have risen to $245 an mt, a 10% gain, from last year. To clear up a misconception, treatment charges rise with supplies as mining groups compete to find smelters to process their material.

Everyone Gets a Surplus

This year, the Chinese domestic zinc market is expected to be in surplus as domestic output and imports rise, while demand for the metal weakens. A slowing manufacturing sector and tightening environmental standards could also trim zinc demand sapping expectations of a rise in demand.

Against such a backdrop the rally in prices seen in recent weeks could be said to be overly bullish, fueled as it is by falling inventory and expectations of a looming supply crunch, the current market realities don’t support a near-term supply shortfall, but markets are said to trade on expectation so maybe investors’ optimism about higher prices is right, just ill-timed.

Original text link:http://agmetalminer.com/2015/04/28/predicted-zinc-deficits-fall-as-prices-rise/