Shanghai to Launch Nickel Futures on Mar. 27

China’s first nickel futures contract is expected to be launched on Shanghai Futures Exchange (SHFE) on Mar. 27, local media reported.  

So far, no approval has been received from China’s State Council and Securities and Futures Commission. 

SHFE began to solicit public opinion on draft regulations of nickel futures contract earlier this year.  

In accordance with the proposed draft, nickel futures contract will be traded in unit of 1 ton/lot with trading code NI. The daily price limit will be ±4%, with minimum transaction margin 5% of contract value trading.  

Flood of aluminum seen heading for market as financiers eye exit

* Regional premiums down 10-15 pct over past month
* Some analysts, traders see falls of 40-50 pct this yr
* Lower premiums, LME rules make financing deals less profitable

(Reuters) - A deluge of aluminum , held as collateral in financing deals, could be released back onto global markets as surging Chinese exports of the metal cause surcharges for physical material to extend their dramatic slide.

Premiums - which lurched lower for the first time last month after years of hitting record highs - are also facing pressure from market reform aimed at untangling controversial storage practices and the prospect of higher U.S. interest rates.

The surcharges, paid by buyers on top of the London Metal Exchange cash price to obtain immediate delivery of metal, had soared by up to nine-fold since 2009. This was partly due to expensive backlogs at LME-registered warehouses of up to two years to get access to material. 

They have already shed 10-15 percent in Asia, Europe and the United States and some analysts and traders expect them to tumble by another 40-50 percent this year.

An estimated 10-12 million tonnes of aluminium are in storage worldwide, but until recently the bulk has not been available to the market, locked in financing deals or in warehouse backlogs.

"The whole equation has now changed," said Nic Brown, head of commodities research at Natixis in London.

"The risk is you can get a bit of a stampede from people who are holding metal in these financing transactions. That falling premium is now a negative rather than a positive for these financing trades."

Under financing deals, investors have profited handsomely in recent years by selling forward metal at a higher price, then leaving it in storage while also reaping the benefit of sky-high premiums.

Other elements are also making the financing deals less attractive, including a flatter forward curve in aluminium, reducing the forward selling price, and expected hikes in U.S. interest rates, boosting borrowing costs.

Another factor expected to inflate supply and curb premiums is the LME's wide-ranging reform of its warehousing policy, driven by consumer complaints about the long delays to obtain aluminium from storage.

LME REFORMS

More metal is also expected to flow out of LME-certified warehouses, which hold just under 4 million tonnes of aluminium, after the exchange announced plans earlier this month aimed at slashing delivery backlogs twice as quickly as under current reforms. 

Rising exports of Chinese aluminium have been a key factor in adding to supply and pressuring premiums in Asia and Europe, traders and analysts say.

"There's a knock-on from other geographies," said analyst Edward Meir at broker INTL FCStone, who says the U.S. Midwest premium could fall to as low as 12-15 cents a lb by late summer from about 21 cents currently. 

In February, China exported 420,000 tonnes of unwrought aluminium and aluminium products, more than double the 160,000 tonnes shipped in the same month last year. 

A European source at a producer said it appeared that more metal from Russia was flowing into Europe as some of its Asian customers were now buying Chinese metal.

Producers were in a quandary over whether to liquidate material as premiums fall, a trader in Singapore said.

“It’s a staring contest... As a seller, you’re in a lose-lose scenario. Do you lose less, or do you lose a lot. As a buyer you’re laughing,” the trader said.

“Half the team says,‘Don’t be the first one to liquidate.’ The other half says, ‘don’t be the last one out'.”

Almighty dollar is pushing gold price near 5-year low

On Tuesday the gold price came under renewed pressure with April futures falling just over 1% to $1,153.80, a more than four-month low.

$1,150 an ounce is a crucial support level for the gold price – the metal has closed below this level on only two trading days since April 8, 2010.

The last time the dollar crossed the 100-mark was December 2002, when gold was trading at $347 an ounce

Those sessions were November 5 and 6 last year before an unusual decoupling between the gold price and the US dollar occurred.

All things being equal, commodities priced in US dollars have an inverse relationship to the world's reserve currency.

But after bouncing back from its November low gold started to appreciate even as the greenback continued its upward march.

On Tuesday, the USD hit a fresh 13-year high against the currencies of major US trading partners, with the dollar index reaching 98.7, up more than 22% in a year.

At the same time it appears that the historic negative correlation between the dollar and the gold price is once again in place.

And as this graph from Saxo Bank suggests it could spell further downside for gold as few expect a let up in dollar strength any time soon:

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.