Mitsui Mining sees zinc price rising toward $2,300 later in 2015

(Reuters) - Japan's biggest zinc smelter, Mitsui Mining and Smelting Co Ltd  expects the zinc price to recover toward $2,300 a tonne in the second half of the year because of a likely deficit in the global refined zinc market through 2017.

Mitsui forecast last November that zinc would average $2,300 a tonne in 2015, but three-month zinc on the London Metal Exchange has fallen 16 percent from a three-year high of $2,416/T last July to around $2,037/T.

"It's been underperforming due to slumping oil prices, a higher dollar and worries about China," Osamu Saito, general manager of Mitsui's metal sales group, told Reuters on Monday.

"Still, the price is likely to rebound toward $2,300/T in the July-December half as fundamentals including an expected deficit of global zinc market in 2015, 2016 and 2017 remain unchanged."

Mitsui expects the global refined zinc market to register a 250,000-300,000 tonnes deficit this year, compared with a 366,000 tonnes shortage predicted by the International Lead and Zinc Study Group (ILZSG) last October.

The Japanese smelter's narrower estimated deficit reflects increased production by Chinese smelters in November and December to take advantage of higher processing fees and a wider gap in Shanghai and LME prices, Saito said.

Mitsui has also slashed its annual premiums to Asian buyers for 2015 by about 10 percent, marking the first cut in six years as rising exports by China spill into the region following a metals financing scandal in the port of Qingdao.

The scandal has squeezed access to credit, forcing Chinese selling of stocks to raise money and reducing zinc premiums - a surcharge paid to obtain metal. 

Faced with lower premiums in China, Mitsui has reduced term export contracts to the country for 2015, Saito said.

China, the world's top zinc consumer and a net importer of zinc, exported 131,369 tonnes of zinc in 2014, up from 3,406 tonnes in 2013. 

"China's export push will be short-lived, but its recent escalation in metal output is worrisome," he said.

Mitsui, which plans to produce 223,000 tonnes of zinc in the year ending March 31, is also still holding talks with miners on zinc treatment charges (TCs) for 2015.

"The talks are headed in favour of smelters, but we can't disclose details," he said, adding that the negotiations have been delayed as the recent fall in zinc price made it difficult to agree on the base price for this year.

MCX aluminium (₹111.85/kg): Sell

Aluminium has tumbled some 16 per cent since November last year. The global spot aluminium price recorded a high of $2,099 per tonne in November and fell to $1,765 . Declining demand for the metal due to the global slowdown, especially in China, has taken the aluminium price sharply lower.

Aluminium futures on the Multi Commodity Exchange (MCX) which move in tandem with the global price have tumbled about 15 per cent in the same period. The contract has been consolidating sideways since January within its overall downtrend. It is likely to extend its fall in the coming weeks, making it advisable to initiate fresh short positions.

Short-term view: Aluminium futures have been range-bound between ₹110 and ₹117 a kg since January. The 200-week moving average, currently at ₹110.5, is providing support for the contract. Though the sideways range remains intact at the moment, the price action on the daily chart suggests that the range is likely to be broken on the downside in the coming days.

Immediate resistance is at ₹113.5. Key short-term resistance is at ₹117 – which is the upper end of the current sideways range in which the contract is trading now. The short-term outlook is bearish as long as the contract trades below these resistances. A strong break below the support ₹110 can drag the contract lower to ₹106 in the short-term.

Traders with a short-term perspective can initiate fresh short position at current levels. Stop-loss can be placed at ₹114 for the target of ₹106. The outlook will turn bullish only on a strong break above ₹117. The next target is ₹118.5.

Medium-term view: The medium-term trend view is also bearish with key resistance at ₹118.5. The contract can fall to ₹104. Medium-term traders can go short with a wider stop-loss at ₹116 and for the target of ₹105. Intermediate rallies to ₹115 if seen can be used to accumulate short positions.

The level of ₹104 is a key medium-term trend-line support for the contract which has the potential to halt the current downtrend. A reversal from here can take the contract higher to ₹115 once again.

Hedge funds cut bullish commodity bets to 6-year low

Large scale speculators in gold futures added massively to short positions – bets that prices will fall – ahead of Friday's jobs report in the US which sent gold prices tumbling.

On Monday the gold price regained some of its footing, but is still trading at the lowest since November after retreating more than $140 an ounce from its 2015 high above $1,300 hit in January.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – was last trading at $1,166.40 an ounce, up $2.10 or 0.2% from Friday's close.

Silver futures trended weaker on Monday with May contracts recovering from a day low of $15.71 an ounce to exchange hands at $15.79 an ounce in early afternoon trade. Like gold, silver went off to the races at the start of the year to hit a 2015 high of $18.36 on January 22, but has since given up most of those gains.

The precious metals' break in upward momentum is evident in the futures positioning of large investors like hedge funds or so-called "managed money".

Large scale futures investors cut bullish exposure to 24 commodities by 29% during the week

Net long positions of gold – bets that the price will go up – held by hedge funds surged in January to 167,693 lots or 16.7 million ounces to hit the highest level since 2012 when gold was trading north of $1,700 an ounce.

But in the week to March 3 according to the Commodity Futures Trading Commission's weekly Commitment of Traders data bullish positioning was trimmed for the fifth week in a row.

Hedge funds increased short positions on gold – bets that prices will fall – by 18% and cut long positions at the same time, reducing the net long position by 15% to 8.8 million ounces.

Silver positioning also turned bearish last week with speculators adding 32% to short positions and scaling back longs for a net bullish position of 103 million ounces, down nearly 30% from last week.

Like the price of silver, speculation in silver futures tend to be volatile. Hedge funds had to cover a net short position of 53 million ounces in October last year after pushing longs to a record of 234 million ounces only three months earlier.

It's not only precious metals that have fallen out of favour with hedge funds.

Large scale futures investors cut bullish exposure to 24 commodities by 29% during the week. Across all sectors – from soybeans and diesel to lean hogs and palladium – net-long were run down to just 451,000 lots of futures and options.

Sentiment on commodity markets has not been this bearish since March 2009 during the global financial crisis according to data from Bloomberg and Saxo Bank.

North American Aluminum demand surged 5% in 2014

The latest statistics released by The Aluminum Association suggests that the aluminum industry demand in the US and Canada jumped higher by 5% during the entire year 2014. The North American aluminum demand during the previous year touched 25.5 billion lbs, when compared with the demand of 24.3 billion lbs during 2013. Moreover, the aluminum demand during 2014 hit the highest levels after 2006.

The growth in aluminum orders started picking up towards the second half of 2014. The growth in aluminum orders were merely 0.8% during the initial four months of the year, on account of cols climatic conditions that prevailed across the region. The growth rate climbed higher significantly starting May 2014 onward. The growth rate touched record highs of 7.1% during the eight -month period from May to December last year.

According to Ryan Olsen, Vice President, Business Information and Statistics Division at the Aluminum Association, the aluminum demand growth is set to increase sharply during 2015, aided by robust orders for aluminum products, especially from the automobile industry. The year is most likely to surpass 2014 growth rate.

The Aluminum Association is a trade association for the aluminum production, fabrication and recycling industries, and their suppliers. The Association is a 501 non-profit organization based in Arlington, Virginia, United States.

Vale Reports Annual Production Records in Copper, Gold, and Highest In Nickel Output

Vale S.A. (Vale) achieved several production records, and also reduced capital expenditures by another $2.254 billion in 2014, the company said in its performance report. 

In 2014, its output of iron ore , copper and gold was 331.6 million tonnes, 379,700 tonnes and 321,000 oz, respectively, all annual production records. 

Over the year, the company also reported the highest annual production in nickel since 2008, producing 275,000 tonnes, according to its report.  

The company also registered record sales volumes of iron ore and pellets (313.6 million tonnes) and gold (351,000 oz), and the highest sales volume of nickel (272,000 tonnes) since 2008, it noted. 

In 2014, the company also completed eight capital projects, negotiated a key partnership for our coal operation in Mozambique and still paid $ 4.2 billion in dividends while preserving a healthy capital structure.

Japan's Mitsui cuts zinc premiums for 1st time in 6 yrs as China exports rise

(Reuters) - Japan's biggest zinc smelter, Mitsui Mining and Smelting Co Ltd , has slashed its annual premiums to overseas buyers for 2015 by around 10 percent, marking the first cut in six years as rising exports by top user China spill into the region.

Premiums are a surcharge paid to producers on top of futures prices to obtain metal.

"Overall premiums for zinc for overseas buyers, mainly Southeast Asian buyers, for this year have been settled at about 10-percent lower than last year," said Sumikazu Ogata, investor and public relations manager at Mitsui Mining.

He added that the step had been driven by growing exports from China in the wake of a metals financing scandal in the port of Qingdao.

"We think China stepped up exports as some companies wanted to cash their inventories after the Qingdao problem," he said on Monday.

Last year's Qingdao metals financing scandal has squeezed access to credit for metals players in the region as banks have tightened lending terms, which sent zinc premiums to two-year lows in December. 

Mitsui Mining, which plans to produce 223,000 tonnes of zinc in the year ending March 31, typically holds talks on annual premiums which are added to the cost of London Metal Exchange

(LME) cash prices and include shipping and insurance costs.

This year's discussions with overseas buyers are nearly finished, Ogata said.

He did not give specific premium levels for this year, but two traders quoted Japanese producer zinc premiums for 2015 at $170-185 per tonne on a cost insurance and freight (CIF) basis, depending on the Asian port.

China, the world's biggest zinc consumer and a net importer of zinc, has exported 131,369 tonnes of zinc in 2014, up from 3,406 tonnes in 2013, according to the country's customs data

London Metal Exchange aims to double cuts to warehouse logjams

* To launch new aluminium premium, ferrous contracts in Oct

* New proposals could cut queues twice as fast
* Opens door to capping, banning rents in warehouse queues

(Reuters) - The London Metal Exchange (LME) announced new rules and proposals on Monday aimed at slashing delivery backlogs at its global network of warehouses twice as quickly as under current reforms.

The move is part of a wide-ranging reform drive sparked by consumer complaints about long delays to obtain aluminium from storage and lawsuits accusing banks and commodity companies of conspiring to restrict supply through the warehouse network.

The LME, the world's oldest and biggest market for industrial metals, also said in a statement it planned to launch new contracts for aluminium premiums and ferrous products on Oct. 26.

The LME launched consultations last November on a second layer of rules governing physical delivery and on Monday it requested even more feedback on further measures.

The exchange asked members for their opinion on proposals that would force warehouses to reduce queues faster.

The 137-year old LME won a major court battle in October, giving it the green light to implement its initial set of regulations on Feb. 1 aimed at cutting delivery queues to a maximum of 50 days from up to two years at some depots. 

On Monday it said was now responding to complaints that under the current reform it may take as long as four years to cut backlogs at the worst affected site -- the Dutch port of Vlissingen.

Under the new tougher rules, it would take a maximum of 2.3 years to reduce queues to 50 days, Matt Chamberlain, LME head of business development, told a news conference.

"So in this example, the rate at which queues will fall would double -- the queues would last half as long."

NEW CONTRACT DELAY

The exchange, owned by Hong Kong Exchanges and Clearing Ltd , also set a firm October date for the launch of three new contracts: aluminium premiums, steel scrap and steel rebar.

The aluminium premium contract, which allows people to hedge additional surcharges for buying metal for immediate delivery, has been delayed from a second quarter launch.

This was because the LME first wanted to conclude any further warehouse reforms, which could have had an impact on premiums, Chamberlain said.

The exchange also released a discussion paper on the possibility of capping or banning rents in queues.

Buyers of metals have complained about having to pay high rent during the months that metals were stuck in backlogs waiting to be delivered from warehouses.

Previously the LME has rejected the idea of setting rent levels at warehouses, saying it had legal advice that it might fall foul of competition law.

The exchange published a detailed set of new rules on Monday to take effect on June 1, one of which will require warehouse firms to report anonymously incentives paid to metal owners so it can determine whether those payments were market distorting.