Bank of America Merril Lynch bullish on base metals in 2015

Bank of America Merril Lynch in a research note published Wednesday forecasts bullish 2015 for base metals, backed by structural improvement of market fundamentals. The report also states that macro-economic pressures led to substantial retracement in prices of some base metals during summer this year.

According to the report, cyclical headwinds continue to exist for the time being. However, early signs of structural improvement in fundamentals are already visible in individual base metals. Aluminum market fundamentals are looking strong with the metal expected to shift to deficit in 2014. Bofa ML forecasts aluminum price to reach $2,010 per mt in 2015.

As for Nickel, the supply-demand situation may turn out to be extremely bullish through 2015. Higher Chinese refined and ferronickel imports and declining LME stocks may trigger further strengthening of market fundamentals for the metal. Nickel is expected to end in a deficit of nearly 50,000 mt in 2015, BofA notes. The Nickel prices may average at $23,836 per mt in 2015.

According to BofA Merril Lynch, copper still has the weakest fundamentals among base metals. China has de-stocked huge inventories of copper during summer, resulting in lower imports. But with copper inventories at substantially lower levels, the bank forecasts rebound in copper prices during 2015. The LME copper prices are likely to average at $6,939 per mt in 2015.

Natixis sees Copper to decline to $6,335 a ton in 2015

Since 2010, the mining industry has struggled to satisfy global demand for copper . In 2014 Natixis finally expected to see a surplus, only for China’s SRB to take advantage of the sharp fall in copper prices during March to add to its strategic reserves, leaving the market once again facing a deficit. 

This does not change the underlying fundamentals of the market, viz that copper is currently moving from deficit to surplus, but it has left the market with a dwindling supply of available copper stocks, keeping the forward price curve in backwardation for the time being.

With rising mine output and elevated TC/RCs, Natixis is increasingly optimistic that a copper surplus will soon become visible. This is expected to lead to further weakness in copper prices over the period 2015-16.

Natixis is therefore projecting a decline in copper prices to somewhere around $6,335 a ton in 2015. This would be followed by a gradual recovery in copper prices during 2016, averaging $6,500 a ton, as market expectations focus increasingly upon prospective deficits in the period out to 2020 rather than the surplus in the market during 2015-16.

Natixis predicts 275,000 mt deficit for global aluminum market in 2014

The French bank Natixis has predicted deficit for global aluminum market in 2014. The bank forecasts a deficit of 275,000 mt in 2014- the first annual deficit in eight years, primarily on account of large scale production cuts and rising aluminum demand across the globe.

According to Natixis, the global aluminum supply will total 49.2 million mt, whereas global consumption is likely to total 49.475 million mt, thus resulting in a deficit of 275,000 mt deficit.

Large number of Chinese smelters cut production during 2013 and H1 2014, due to rising power costs and falling profit margins. Cutbacks totaled approximately 1 million to 1.3 million mt in 2013 and 1.4 million to 1.8 million mt during first half of the current year. However, the bank predicts that many of these facilities may come back online during the last quarter of 2014.

In addition, Rusal had cut its aluminum output by 324,000 mt in 2013. The company also aims to further reduce its aluminum production by another 323,000 mt this year. Similar production cuts were implemented by Alcoa through closure of its smelters in Italy, Australia and Brazil.

Natixis forecasts global aluminum supply to reach 51 million mt in 2015. The global consumption will total 52.2 million mt, thus resulting in a deficit of 1.2 million mt. Furthermore, the bank predicts 5.5% growth for global aluminum demand in 2014 and 2015, followed by 6% growth in 2016.

DOW, SPX, DAX, FTSE ALL FALL DOWN.

SOURCE http://www.tradingchannels.co.uk/

Dow Drops 1500 Points In 3 Weeks, Nasdaq Enters 'Correction' As VIX Breaks 30

From 17,350 intraday highs "proving the recovery is here," we are 1500 points down just 3 weeks later. The Nasdaq just fell 10.5% from its highs, officially in correction. VIX broke above 30. Perhaps, just perhaps, the gap to fundamentals is finally about to be filled...

Dow ugly...

Nasdaq in correction...

VIX breaks above 30..

Global copper market in deficit in 2014 for 5th year in row -ICSG

The global copper market will be in deficit for a fifth straight year in 2014 before switching to a surplus of about 390,000 tonnes next year, an industry group said on Tuesday.

The International Copper Study Group forecast a deficit of 270,000 tonnes this year as operational failures combined with delays in the start-up of new mines will lead to lower-than-anticipated production growth.

The latest estimate is a reversal of the ICSG's previous forecast in April that production would outpace demand by about 400,000 tonnes as demand would lag output growth.

At that time, it predicted a surplus as big as 595,000 tonnes due to increases in output mainly in Asia and Africa.

Click here for the ICSG statement: ((http://bit.ly/1w6vepo))

Investors sold heavily into gold, silver price rally

On Tuesday gold futures managed to consolidate recent gains despite a strong dollar and a sharp drop in the price of crude oil.

In late afternoon trade on the Comex division of the New York Mercantile Exchange gold for December delivery was changing hands for $1,232.70 an ounce, as it continues to recover from nine-month lows sub-$1,200 hit earlier in the month.

Despite the strong bounce of the bottom, sentiment on the precious metals markets remains negative with both large investors and retail buyers using the 3.3% rally as an opportunity to exit the market.

The third quarter was the sixth quarter in a row holdings in global exchange traded funds backed by physical gold were reduced and September was the worst month for ETF funds since December 2013.

The selling continued into October. Last week 16.2 tonnes flowed from gold-backed funds, dropping total holdings to 1,662.3 tonnes, following a 10 tonne reduction in the week to October 3.

Last week silver funds lost just under 205 tonnes, the worst performance since May 2013

Overall gold bullion holdings are now at five year lows and a whopping 970 tonnes below the record 2,632 tonnes or 93 million ounces reached in December 2012.

Despite an even worse price performance, with the metal falling to four-year lows of $17.27 an ounce last week,

Retail investors in silver continued to pump money into silver-backed ETFs at the start of October pushing holdings to a record 20,182 tonnes, but silver's good week bouncing of four-year lows convinced some to reduce exposure to the metal.

Last week silver funds lost just under 205 tonnes, the worst performance since May 2013 and dropping total holdings to 20,136 tonnes.

Like ETF investors, speculators in gold and silver futures and options turned more bearish last week.

Bullish bets on gold – net long positions held by large investors like hedge funds – were reduced slightly in the week to October 7 according to Commodity Futures Trading Commission data

It was the eight week in a row hedge funds reduced their bullish positioning and is now at the lowest point this year.

On a net basis hedge funds hold 37,275 gold lots or 3.7 million ounces, a more than 10 million ounces cut from the the year high of 144,272 lots.

Silver price speculators moved further into a net short position, marking a dramatic reversal in sentiment towards silver by large investors or so-called managed money, falling to a 7,071 net short position from record longs of 46,795 or 240 million ounces only a three months ago.