Marc Faber Warns "The Market Is Waking Up To How Clueless The Fed Is"

"I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash," warns a somewhat excited sounding Marc Faber, adding that he thinks "it will be worse."

The pain is just getting started as Faber notes that "the market is slowly waking up to the fact that the Federal Reserve is a clueless organization." Internet and Biotech sectors (growth stocks) are "highly vulnerable because they're in cuckoo land in terms of valuations," and fully expects the selling to spread as The Fed "have no idea what they're doing. And so the confidence level of investors is diminishing," and that means we will see a major decline.

Copper, iron ore imports defy China weakness

Markets were shocked on Thursday by surprisingly weak trade data from China, the world's second largest economy, that showed overall imports falling by double digits and exports declining 6.6%.

But China's appetite for raw materials like iron ore and copper appear undiminished.

Chinese steel mills and iron ore traders made the most of soft prices for the commodity in March, ramping up imports 21%.

After a steep drop off, mostly attributed to seasonal factors, in February of more than 25 million tonnes from the record setting pace in January, imports jumped to just under 74 million tonnes in March.

First quarter imports are 19% higher than last year and at 222 million tonnes imply an annualized tally of almost 890 million tonnes, compared to 2013's 820 million tonnes.

The surge in imports also come despite iron ore stockpiles at China's ports reaching fresh highs of 108 million tonnes this week.

Long a practice in the copper market, some estimates put the portion of the country's iron ore stockpiles used as collatoral for trade credit at 40%.A factor boosting imports is tightening domestic credit conditions in China which encourage imports as part of financing deals.

The benchmark price of iron ore was down slightly on Thursday, but is up 14% from 18-month lows suffered early March.

According to data from the The Steel Index, the import price of 62% iron ore fines at China's Tianjin port lost $0.30 to $119.10 per tonne on Thursday, down from $134.20 at the start of the year.

Copper shipments also defied weakness in China, rising a whopping 31.4% on year to 420,000 tonnes. That's up from 379,000 tonnes in February due to the Lunar New Year holiday, but down from a particularly strong 536,000 tonnes in January this year.

China's copper imports are very price sensitive and the red metal fell to a near four-year low in March of $2.92 a pound.

The copper price has since recovered to above $3.00 a pound, but is down more than 10% year to date and a new study suggests more pain is in the offing.

The closely-watched Thomson Reuters GFMS Copper Survey forecasts a period of copper market surpluses as global mine supply ramps up and predicts the average price to test $2.75 a pound ($6,000/tonne) in the second half.

Is Aluminum’s Nine-year Surplus Finally Ending?

2013 wasn’t a great year for aluminum. During the first nine months of the year, production of the metal exceeded demand by 1.2 million metric tons (MT), The Wall Street Journal quotes the the World Bureau of Metal Statistics as saying. That’s more than double the surplus recorded during the previous year.

Unsurprisingly, prices for the metal were hit hard by that oversupply. Specifically, states the news outlet, as the year drew to a close, three-month aluminum on the London Metal Exchange (LME) was down at $1,748 per MT, its lowest point since July 2009.

That may sound bad, but a broader look at the aluminum market shows that it’s not just this past year that the metal has performed poorly — it’s been down in the dumps for nearly a decade. As Bloomberg notes, “[t]here have been nine years of excess global production … with Chinese output tripling in the period.”

All that doom and gloom makes this week’s news that in 2014 the metal may go into deficit that much more significant.

Alcoa’s positive prediction

Providing that positive news was Alcoa (NYSE:AA), one of the world’s top aluminum producers. It released its first-quarter results on Tuesday, at that time also commenting that it sees the aluminum market falling into a 730,000-MT deficit this year. That’s up significantly from the deficit of 106,000 MT the company predicted back in January, as per Bloomberg.

Driving that deficit, the company said, will be a 7-percent increase in worldwide aluminum demand, much of which is expected to come from the aerospace sector. However, auto sector demand, particularly from Ford (NYSE:F), which needs the metal for its lightweight F-150 pickup truck, will also play a role, said Klaus Kleinfeld, chairman and CEO at Alcoa. “The opportunity in auto is tremendous,” Bloomberg quotes him as saying.

Price update

Aluminum prices have certainly gained some support from Alcoa’s new outlook. Most recently, Bloomberg pegged LME aluminum for three-month delivery at $1,827 per MT, above the $1,700 to $1,800 range it traded in for 2014′s first quarter.

However, that prediction isn’t the only factor that’s been positively impacting the metal’s price — a week prior to the company’s announcement, aluminum broke its 200-day moving average for the first time since March 2013, with three-month aluminum approaching $1,850 per MT, as per MetalMiner. Explaining the gain, Forbes notes that it was related to the UK High Court’s decision to uphold Rusal’s (EPA:RUSAL) block on the implementation of new LME warehouse rules. If put in place, the rules would have “depressed the spot premiums manufacturers like Alcoa depend on.”

At the moment, it’s uncertain if prices for the metal will continue to rise. After all, as Forbes points out, structural factors such as “persistently high aluminum inventory relative to demand” are still an issue. However, Alcoa’s deficit prediction certainly seems to indicate that a shift may be in the works.

Another SPX Chart 1946 2014 Co-relation

German Vice Chancellor Warns 'No Alternative To Russian Gas'

'No Alternative to Russian Gas'

Even Germany's vice chancellor Sigmar Gabriel realizes that there is no alternative to Russian gas for Germany, at least not in the near future. It should be noted to this that Germany's energy policy has driven energy prices to the very edge of what the population and industry can still handle.

On the one hand, there is the vast subsidization of 'green energy', which is not only thoroughly uneconomic and blighting the landscape, but the costs of which have been off-loaded on consumers, who pay a special 'ecological fee' on top of their already far too high bills.

On the other hand, after the Fukujima accident, Germany's government quickly gave in to pressure from the Greens and decided to completely phase out nuclear energy (as if Germany were in danger of being hit by a tsunami). This is of course a completely futile gesture, as the country is surrounded by other countries brimming with nuclear reactors over which it has no control whatsoever (admittedly, even one nuclear accident would be one too many). However, this hasty step has once again made electricity more expensive.

Oil and Gas Reserves Infographic

We have come across a neat infographic published by RIA Novosti on the countries harboring large oil and gas reserves – all data are per capita and in USD terms.

Indebted Rusal flags steeper loss for 2013 due to Norilsk Nickel

Loss-making Russian aluminium group United Company Rusal Plc said it has revised down its earnings for 2013 after a review of its share of profits of associates in Norilsk Nickel showed the figure was overstated by $100 million.

Rusal is of the view that a lower profit share in Norilsk Nickel will have an adverse impact on its consolidated financial statements for 2013, the world's biggest aluminium producer said in a filing to the Hong Kong bourse on Thursday morning.

Rusal's 2013 loss has now been revised to $3.322 billion from $3.222 billion and its share of profits of associates should be $84 million instead of $184 million, it said.

Carrying value of the company's investment in Norilsk Nickel, the world's largest nickel and palladium producer, should be $7.801 billion, rather than $7.901 million.

Rusal had reported its full-year net loss for 2013 was at $3.22 billion, versus $528 million loss in 2012. 

Lenders have granted the world's biggest aluminium producer a three-month breather, giving the loss-making firm time to try to hammer out revised terms for $3.7 billion of debt repayments without risk of default. 

Copper Refusing to Budge, Even for an Earthquake

Speculations regarding Chinese demand continued to keep the red metal in flux this week as copper rose to $6,675 per tonne on Monday on hopes that China would step in aggressively to meet economic growth targets. Today, the pendulum swung again, as apprehension over the upcoming release of Chinese data drew prices back by 0.5 percent to $6,636.50 per tonne. Other factors have failed to make much of an impact on copper prices .

Chile copper mines were rocked by an 8.2 magnitude earthquake on April 2, causing prices to rise up to 1.1 percent according to Bloomberg. However, most of Chile’s larger copper mines remained largely unaffected, and even though the country was forced to close several ports, metal prices continued to react more to an expected global surplus and slowing demand from China than to news of the quakes.

On Tuesday, Reuters reported that Japan could expect an increased copper demand due to expanding urban development and a greater amount of refurbishment of older infrastructure. Furthermore, the country is seeing an increased demand for copper automobile parts and copper electric cable as a result of the construction of new solar power plants on the island nation, but demand from the small island nation will not be enough to make a dent in the worldwide surplus. According to Reuters, Japanese demand will likely be met by a 4 percent increased output from local miners.

Industry leaders are meeting this week at the CESCO world copper summit in Santiago, and the worldwide surplus is definitely up for discussion. Notably, Thomson Reuters released its much anticipated annual GFMS copper survey tuesday, further highlighting forecasted trouble for red metal prices. The report predicted a modest surplus of 2 percent relative to global consumption, despite robust economic growth increasing demand for copper consumers.

Is overproduction halting?

In recent weeks, miners have so far fulfilled the Thompon Reuters prediction that copper companies will continue to follow through with investments they made during the red metal boom years, further contributing to the broader trend of a growing copper surplus.

Chilean miner Coldelco revealed it has found significant deposits near its current South American operations this week following explorations over the past four years, while Copper Mountain Mining Corporation (TSX:CUM) achieved record production results from its British Columbia Copper Mountain mine for the first quarter of 2014.

However, it is also worth noting that Freeport McMoRan Copper & Gold Inc (NYSE:FCX) may fail to meet a deadline for its copper smelter venture with Indonesia’s Aneka Tambang, which could mean a dramatically reduced copper output from the fifth largest copper mine in the world if the miner is unable to comply with recent changes to Indonesian export laws. Furthermore, Bloomberg reported that a sizeable portion of copper projects under consideration in Chile are being revised or postponed.

Investors are speculating that copper may have finally bottomed, as Canaccord Genuity noted that shares for Teck Resources (TSX:TCK.B) and First Quantum Minerals (TSX:FM) have traded up. However, the market is still poised to react in either direction to China’s economic intentions.