Copper Production Consumption Stockpiles Inventories in 2013

In the long-term, many predict copper stockpiles to rise, prices to continue to fall, and global production to increase - leading to a severe oversupply situation. However, some recent forecasts for the other side of the equation - consumption - don't necessarily paint such a bleak picture.

Refined copper consumption in 2013 will most likely continue to be relatively flat in North America and slightly negative in Western Europe; however, India and China are both forecast to continue their high levels of consumption through the year and well into 2014/15. In fact, total Asian consumption is forecast to increase by approximately 4.5%-5% in 2013.

The below chart, presented by BofA Merrill Lynch at last month's World Copper Conference, does a great job of presenting their forecast relative to historical.

Yes, production will continue to increase - slightly outpacing consumption. However, their consumption forecast shows decent growth. Despite the supply/demand imbalance, global inventories will be returning to a level that is well within historic averages.

Technical Analysis – Zinc – Runs into overhead supply may correct lower.

Analysis

• Zinc stepped up a gear a week ago – prices have cut up through various resistance levels to set a high so far at $1,970. This took out the former resistance at $1,961.75 from March 25.
• Prices are now consolidating below yesterday’s highs and the stochastics have crossed lower intraday, which suggests there may be more consolidation in the near term. The MACD remains strong so we see this as just a pause rather than the end of the rally.
• Our next upside target is $2,012 if it crosses $1970

Conclusion

Zinc is looking good but it is back at the top of the range so we may well see selling cap the advance for a while.

ZINC could correct lower to $ 1890-95 range before deciding it's next move.

Finance Minister P.Chidambaram asked banks to discourage customers from buying Gold

Less than 24 hours after the Government raised the import duty on gold, Finance Minister P. Chidambaram asked banks to discourage customers from buying the yellow metal.

IMPORTS

“I think the RBI has advised banks that they should not sell gold coins. The RBI has put in place regulations that gold can only be imported on a consignment basis with increase in margins to 100 per cent. I would urge all the banks to please advise their branches that they should not encourage their customers to invest or buy gold,” said Chidambaram at the 66th Annual General Meeting of the Indian Banks’ Association. India imported 142 tonnes of gold in April and 162 tonnes in May. Last year’s monthly average was 70 tonnes. In the first two months of this fiscal, the monthly average of gold import is 152 tonnes.

Referring to this sharp jump, the Minister, in a lighter vein said, “I hope a day will come when we regard gold as any other metal. It just shines a little more than copper or brass.”

Chidambaram said the current account deficit remains a matter of concern. Gold imports have been the key contributor to the CAD, which touched a record 6.7 per cent of GDP in the October-December quarter.

‘FEARS PROVED TRUE’

CAD, a key indicator of a country’s external vulnerability, arises when a country's total import of goods, services and transfers is greater than exports. A widening CAD exerts downward pressure on the rupee, making imports costlier. This is a cause for concern for the government as costly crude oil imports have an inflationary impact.

“When there was a sharp drop in gold prices, millions were happy. I’m afraid I was not among the millions. I told the (RBI) Governor that the drop in gold prices internationally is bad news for India. My fears proved true.”

In the medium term, the Minister said he expects that the dip in inflation will make fixed income products more attractive as vehicles of savings and divert some of the disproportionate attention on gold to fixed income instruments.

At a summit later in the day, the Finance Minister said: “All I can do is appeal to the people of India that the country cannot import so much gold. Whatever gold is there in the country can be traded freely… there are no restrictions on that.”

Government Hikes Gold Import Duty To 8% from 6%

The government has hiked the gold import duty to 8% from current 6% in order to curb extremely high demand for the metal. 

This is the second hike in gold import duty since January. 

Gold import duty has been hiked to 8% from 2% in past two years.

The government is making increasing efforts to reduce the quantum of gold imports which are responsible for the country's growing Current Account Deficit. 

In April, 2013, gold and silver imports surged by 138% to $7.5 billion, as against $3.1 billion a year ago.

CTT Could Be Delayed To October 2013 - Commodity Transaction Tax

Punters may be able to breathe easy for a while longer as the new transaction tax on non-farm futures could be delayed with the administering body, Central Board of Direct Taxes, or CBDT, working out procedural details relating to how the levy would be collected, according to government sources. 

The imposition of CTT was announced by finance minister P Chidambaram during his presentation of the FY14 Budget in February. Along with CTT, Chidambaram reduced the Securities Transaction Tax (STT) in the equity derivatives segment, which was notified last month and became effective from June 1. However, there has been no notification on CTT even three months after its announcement. "It is likely that CTT could come into effect from the month of October" said one of the sources. 

The delay led to some commodity market officials doubting whether the tax could be made retrospective. However, an official from one of the leading commodity exchanges said they were told by income tax officials that since the nature of the tax requires it to be collected from a third party, it would not be imposed retrospectively. Exchanges are required to deduct both CTT and STT from brokers or trading members and deposit it with the income tax department. 

In the equity segment, STT was cut to Rs 10 per lakh from Rs 17 per lakh in FY14 Budget. CTT will be charged at the same rate on non-agri commodity futures. Effectively, traders will have to pay 0.01% tax, that is, Rs 10 for a transaction value of Rs 1 lakh. The current transaction cost (without any tax) is less than a third of this in commodity futures. Commodity exchanges had strongly resisted CTT imposition, but finance ministry was of the view that most non-agri trades were speculative in nature, so a tax was justified. 

Both NSE and BSE together pay STT between Rs 5,000 crore to Rs 7,000 crore and government could end up earning similar revenue from CTT once it is imposed.

Source : Economic Times

Copper Rises on Freeport-McMoRan Copper & Gold Inc.’s Grasberg Mine Shutdown

Copper futures rose to the highest in almost two weeks on prospects for reduced supply as the world’s second-biggest mine remained closed following deadly accidents.

Freeport-McMoRan Copper & Gold Inc.’s Grasberg mine in Indonesia will be shut for as long as three months while the government holds an investigation. Closing the mine for the entire period would remove about 140,000 metric tons of copper supply, according to Macquarie Group Ltd., about 20 percent of the investment bank’s disruption allowance for 2013.

“The potential for an extended shutdown at the giant Grasberg mine has helped lend support to copper prices,” Leon Westgate, an analyst at Standard Bank Plc in London, said in a report e-mailed today. “The most immediate impact will be felt on the concentrate market.”

A tunnel collapse at Grasberg on May 14 killed 28 people, and another worker died June 1 in a separate incident. A landslide in April reduced production at Rio Tinto Group’s Bingham Canyon mine in the U.S., and output at Chile’s Collahuasi also is limited. Vedanta Resources Plc, controlled by billionaire Anil Agarwal, said on May 24 that its Konkola Copper Mines unit in Zambia plans to cut 24 percent of the workforce.

As a result, copper supply is set to be curbed in what is normally a seasonally strong period for demand, according to Goldman Sachs Group Inc. The metal will trade at $8,000 a ton in six months, the bank predicted.

BHP Billiton Ltd.’s Escondida site in Chile is the world’s largest copper mine.

On the London Metal Exchange, copper for delivery in three months climbed 1.6 percent to $7,455 a ton ($3.38 a pound), the biggest gain since May 8. Aluminum, nickel, zinc and lead gained, while tin dropped.

Weekly Economic Data; Economic & Political Events, Data for the week 01-Jun-13 to 07-Jun-13

Data for the week 01-Jun-13 to 07-Jun-13

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
03-Jun-2013	06-30 AM	European Monetary Union	ECB's Draghi Speaks at Conference in Shanghai
03-Jun-2013	07-15 AM	China	HSBC Manufacturing PMI	49.6	50.4	-0.80	0.89	Neutral
03-Jun-2013	01-18 PM	France	Markit Manufacturing PMI	45.5	44.4	1.10	1.53	Neutral
03-Jun-2013	01-23 PM	Germany	Markit Manufacturing PMI	49.0	48.1	0.90	1.37	Neutral
03-Jun-2013	07-30 PM	United States	ISM Manufacturing PMI	50.5	50.7	-0.20	1.35	Neutral
04-Jun-2013	06-00 PM	United States	Trade Balance	$-41.0B	$-38.8B	-2.20$	3.21	Neutral
05-Jun-2013	01-18 PM	France	Markit Services PMI	44.3	44.3	0.00	1.90	Neutral
05-Jun-2013	02-30 PM	European Monetary Union	Gross Domestic Product s.a. (QoQ)	-0.2%	-0.6%	0.40%	0.18	Very Good
05-Jun-2013	02-30 PM	European Monetary Union	Gross Domestic Product s.a. (YoY)	-1.0%	-0.9%	-0.10%	0.53	Neutral
05-Jun-2013	04-30 PM	United States	MBA Mortgage Applications		-8.8%		7.79
05-Jun-2013	05-45 PM	United States	ADP Employment Change	170K	119K	51.00	46.50	Neutral
05-Jun-2013	07-30 PM	United States	Factory Orders (MoM)	1.4%	-4.0%	5.40%	3.36	Neutral
05-Jun-2013	08-00 PM	United States	EIA Crude Oil Stocks change		3M		3.45
06-Jun-2013	03-30 PM	Germany	Factory Orders s.a. (MoM)	-1.0%	2.2%	-3.20%	3.85	Neutral
06-Jun-2013	04-30 PM	United Kingdom	BoE Interest Rate Decision	0.5%	0.5%	0.00%	0.00	Neutral
06-Jun-2013	05-15 PM	European Monetary Union	ECB Interest Rate Decision	0.5%	0.5%	0.00%	0.06	Neutral
06-Jun-2013	06-00 PM	European Monetary Union	ECB Monetary policy statement and press conference
06-Jun-2013	06-00 PM	United States	Initial Jobless Claims	345K	354K	-9.00	14.63	Neutral
06-Jun-2013	08-00 PM	United States	EIA Natural Gas Storage change		88B		37.88
07-Jun-2013	03-30 PM	Germany	Industrial Production s.a. (MoM)	-0.2%	1.2%	-1.40%	2.36	Neutral
07-Jun-2013	06-00 PM	United States	Nonfarm Payrolls	168K	165K	3.00	43.00	Neutral
07-Jun-2013	06-00 PM	United States	Unemployment Rate	7.5%	7.5%	0.00%	0.13	Neutral