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Monthly Archives: October 2011

China Steel Prices, at 10-Month Low, May Trigger Output Cuts

China Steel Prices, at 10-Month Low, May Trigger Output Cuts


By Bloomberg News

Chinese steel prices may extend their decline after slumping to the lowest in 10 months, prompting producers in the world’s biggest consumer of the alloy to bring forward maintenance or cut output, analysts said.

Hot-rolled coil was 4,538 yuan ($712) a metric ton on Oct. 14, the lowest since Dec. 20, according to researcher Beijing Antaike Information Development Co. The benchmark product has fallen since reaching 4,837 yuan at the end of August, data compiled by Bloomberg show.

Prices are dropping on concern a slowing global economy and moderating demand from construction in China may curb consumption. The decline is starting to squeeze profits, with Angang Steel Co., the largest Hong Kong-traded Chinese steelmaker by market value, saying on Oct. 14 its nine-month net income may have fallen 91 percent from a year earlier.

“Steel mills are not willing to cut production until they see negative margins – one reason we believe steel prices have not yet reached a bottom,” Shirley Zhao and Henry Liu, Hong Kong-based analysts at Mirae Assets Securities, said today in an e-mailed note.

Chinese steelmakers produced 1.64 million tons of the building material a day in the first 10 days of October, up 0.2 percent from the prior 10 days, Custeel.com said, citing data from China Iron and Steel Association released today.

Angang Falls

Angang Steel fell as much as 3.3 percent to HK$5.06 and traded at HK$5.10 as of 3:08 p.m. in Hong Kong, compared with a 1.5 percent gain in the benchmark Hang Seng Index. The company was downgraded to “neutral” from “trading buy” at OSK (Asia) Securities after it said its nine-month profit may have plunged.

Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, said on Oct. 12 it kept the prices of most of its products unchanged for November, ending two months of increases.

“Prices charged by mills may be higher than spot prices, so steelmakers are still profitable at the moment,” said Hu Yanping, an analyst at Custeel.com. “They may have to cut production in future if prices continue to fall.”

This may result in lower output in November than this month, she said.

Maanshan Iron & Steel Co., China’s biggest train-wheel maker, plans to stop two of its blast furnaces for as long as nine days for inspection and a slab line for five days, Custeel.com said on its website. Angang Steel, along with some smaller mills, may also halt medium-plate production for 13 days, according to the industry portal.

October 17, 2011

Barclays: Global refined copper imports gains to highest level in 16 months

Barclays: Global refined copper imports gains to highest level in 16 months

Prices rebounded firmly on Friday as whims in macro sentiment continued to drag the complex around in a volatile fashion. Copper and Lead rose by 6-7% on the day, reported Barclays Capitals.

Despite a fair bit of uncertainty surrounding the euro zone crisis as EU leaders deferred final decisions on their strategy until a second summit on Wednesday, base metals prices have surged this morning with copper rising above US$7400/t, recouping most of the losses last week. One of the key drivers would have been China's October HSBC flash PMI.

The latest October reading rose to 51.1 from the final readings of 49.9 in August/September, with the gain mainly attributable to the pick-up in new orders and output, according to the HSBC report, and strengthening export orders. Meanwhile, factory price pressures eased, with the input price index falling to 54.3 from 58.8 in September.

According to Barclays the latest September data point to modest upside risks to our Q4 GDP forecast of 8.3%, which should help to balance the downside risks from a possible weakening in external demand. Following the uplifting of PMI data, the final China trade data released on Monday also indicates continued healthy Chinese appetite for base metals. Refined copper imports rose to the highest level in 16 months and continues the upward trend since May this year. At 275Kt, September imports are up by 14% y/y and 17% m/m.

Nevertheless, on a YTD basis, such strong import levels are not as yet sufficient to offset the weak import levels earlier this year. YTD import levels are still down by 21.9% y/y. What is interesting is also that more refined copper are arriving from India suggesting that Indian smelters might have gained market share as Japanese smelters lost capacity owing to the earthquake earlier this year.

The strength of September imports have not been surprising given:
(i) the SHFE-LME spread that is favourable for imports through August until now; and
(ii)the SHFE curve moving into backwardation in August.

The strong spot demand stems largely from anticipation of seasonally stronger demand in Q4 but could also be supported by domestic refined copper production showing signs of moderating from highs, traders willing to bring in spot material as LME prices declined during September and some shipments possible being brought forward in view of the Golden Week holidays in first week of October.

Copper concentrate imports have eased from August level (second record high), down by 17% m/m and 18% y/y. Such weakness is more likely owing to the lack of availability of concentrates, with endemic labour issues and declining ore grades, rather than weak demand by domestic refined smelters. Miners' talks of more regular negotiation of TC/RCs and hence the prospect of lower TC/RCs as supply disruptions become more frequent could arguably affect smelters' motivation to maintain concentrate demand.

But with secondary scrap supply remaining tight as scrap producers are reluctant to sell at weak prices, cathode demand has been supported and smelters would likely be motivated to suffer lower TC/RCs in order to maintain cathode output. In order to meet such cathode demand, domestic concentrate output and scrap imports in September have both hovered near record highs, with Q3 scrap imports at its highest in the last two years, despite delays in scrap imports due to extensive inspection of scrap cargoes and limited scrap trade globally on low prices.

In terms of global data, the International Copper Study Group monthly data showed the refined copper market was in a 18Kt surplus in July. Refined production (1.63Mt, flat y/y) outpaced refined consumption (1.62Kt, -3% y/y) over the course of the month. However, the market is still in a 118Kt deficit for the year as a whole.

July was the third consecutive month that global refined copper demand has fallen in y/y terms, although for the year-todate overall demand levels are still up by 2.1%. In terms of regional breakdown, in July, the ICSG stated y/y declines in demand in China (-3.5%), Europe (-2.5%), North America (-9.6%) and Japan (-15.5%). The other area of weakness in the data was in terms of mine output performance in July. Mine production fell 7% y/y during the month to 1.27Mt, with declines in Indonesia (-31Kt y/y, -39% y/y) and Papua New Guinea (-10Kt y/y, -66% y/y) key factors.

Remaining on Indonesia, Freeport McMoran announced on Friday that it had resumed talks with labour union at its Grasberg mine with a view to ending the month-long strike. This followed the deaths of three men on an access road to the mine on Friday, following a similar incident a week earlier. It was also reported (Reuters) that the pipeline carrying concentrate from the mine to the port has started leaking, but that mine workers were currently unable to review the issue due to security forces closing down the access road.

The latest CFTC data showed speculators moderately reduced the size of short positions in COMEX copper futures contracts for the week ending 18th October. New short positions fell 1.7K lots to 5.3K lots by the end of the week, largely owing to a 1.6K lot position reduction on the short side.

METALS-LME copper retreats from two-week high

METALS-LME copper retreats from two-week high

[] Text [+]

By Carrie Ho

    SHANGHAI – London copper slipped 1.7
percent on Thursday on lingering worries over the euro zone
crisis and uncertainties ahead of key Chinese data this week
also weighing on base metals.
    Three-month copper on the London Metal Exchange fell
to $7,403.25 a tonne by 0703 GMT, after touching $7,544.75 in
the previous session, its highest since Sept. 28, before closing
3.2 percent higher.
    LME copper has risen 7.2 percent from the start of the month
until Wednesday's close, after losing a quarter of its value in
the three months through Sept. 30.
    The most-active December copper contract on the Shanghai
Futures Exchange SCFc3 closed 0.1 percent lower at 54,880 yuan
($8,630.966) per tonne.
    Despite a pick-up in copper buying for immediate use by
Chinese consumers in recent weeks, speculators are selling based
on fears of a gloomy global economic climate.
    "Speculators, both overseas and in China, are more inclined
to short base metals today, especially copper, as the price of
the metal is still far above its marginal costs, which means
there is more downside room in a bear market," said a
Shanghai-based trader.
    Analysts put copper's current marginal costs at $4,000.
    A Chinese industry group has told copper experts the
country's stocks reached a surprisingly high 1.9 million tonnes
at the end of last year, the Financial Times reported on
Wednesday, citing unnamed sources.
    The source for the figures, the China Non Ferrous Metals
Industry Association, has since confirmed those stockpile
numbers to Reuters. But analysts said this would not dampen
copper's outlook.
    "The figures are not surprising to me, since the import
numbers were quite low earlier this year, and all signs point to
the fact that China had been drawing down from this high
stockpile for most of the year. I believe that we have only 40
percent of those stocks left," Jinrui Futures analyst Zhao Kai
    Data showed that China's imports of copper rose 11.8 percent
to 380,526 tonnes to a 16-month high in September from the
previous month.
    Analysts said this was due to favourable arbitrage and spot
premiums, as well as steady prices in August, which encouraged
forward orders for delivery in September.
    The euro zone's debt crisis continues to weigh on sentiment
despite efforts to straighten out the region's finances and
recent positive news.
    The bloc is set to ask banks to accept losses of up to half
on their holdings of Greek debt as part of a plan to avert a
disorderly default and stem a crisis that threatens the world
    Euro zone industrial production was much stronger than
expected in August, data showed on Wednesday, indicating the
economic slowdown in the third quarter might be smaller than
    Italy is set to pay lower yields when it sells up to 6.5
billion euros of bonds on Thursday, with growing optimism that
European leaders are responding more effectively to the euro
zone debt crisis outweighing two rating downgrades in less than
a week.
    In industry news, Chile's state copper giant Codelco
said on Wednesday it secured a $6.75 billion bridging
loan from Japan's Mitsui & Co, enabling it to exercise
an option to buy a 49 percent stake in Anglo American Sur.

Thu Oct 13, 2011 7:38am GMT

UPDATE 1-Pan Pacific agrees unchanged 2012 copper premium

UPDATE 1-Pan Pacific agrees unchanged 2012 copper premium

(Reporting by Yuko Inoue; Editing by Michael Watson)


 Pan Pacific Copper , Japan's biggest copper smelter, has kept its copper premiums for 2012 supply contracts for Asian customers unchanged from 2011, reflecting solid appetite for the industrial metal, a company source said.

Consumers in China, Taiwan and South Korea agreed to pay $100 a tonne above the London Metal Exchange cash price for a total of 110,000 tonnes of refined copper for shipments in 2012, the source said.

"Real demand for copper in China remains solid," the source said, adding that the contract volume was bigger than the 100,000 tonnes deal signed by the company at this time last year. "Europe's economy may be weak, but the market situation is different in Asia."

Japan's exports of refined copper to China and Taiwan totalled 353,212 tonnes in 2010, Finance Ministry data show. But exports in the January-August period of this year were down 40 percent from the same period a year ago at 165,600 tonnes as the March earthquake damaged plants and squeezed supply.

Sumitomo Metal Mining Co , Japan's second-biggest smelter, said it planned to finalize deals by the end of November. Mitsubishi Materials Corp , the No.3, declined to comment.

Trading sources in London said on Wednesday Chile's Codelco , the world's top copper producer, is offering lower annual physical copper premiums for European buyers for 2012 at $90 a tonne, down nearly 9 percent on this year's terms.

The annual contracts for copper supply are hammered out between Codelco and its clients, starting for Europe during the LME Week global industry gathering now underway in London. Most Asian buyers tend to negotiate their contracts later this month and into November.

Japan's copper premiums for Chinese customers are usually higher than Codelco's contracts for Japanese and Chinese customers as the proximity to China, which allows flexible handling of contracts, make Japanese smelters more bullish, an industry official said.

12:13am EDT



Volatility lays bare the perils of tipping base metal prices

 Volatility lays bare the perils of tipping base metal prices


Robin Bromby

CAREY Smith, an analyst with Alto Capital Research, made the understatement of the week by saying that global economic uncertainty rendered commodity price forecasting a challenge.

Last Monday in this space we dealt with copper going below $US7000 a tonne as something that may happen but probably not for a while anyway.

That proved a little off the mark. Once the London Metal Exchange opened on Monday, the red metal hit $US6800/tonne before clawing its way back over $US7000 by the close. It was not a good look. Copper was down again on Friday to $US6880/tonne but — according to some analysts' comments — there was a concerted effort to ramp up the price just before the close to see copper finish at $US7019. Another finger in the dyke.

Smith was talking at the annual nickel conference in Perth and was predicting extreme volatility in prices between $US17,500/tonne and $US22,500 over the next four years. He argued that new mines would leave the market flush with nickel, but the metal's price was unlikely to fall below $US15,000/tonne for any extended period and the market would lift from 2014.

It's a perilous business, this forecasting — which is why analysts are routinely issuing revised forecasts when things don't quite work out as planned. Over the weekend it was reported that the Nikkei commodity price index had, in September, taken its biggest monthly dive since the height of the GFC.

Nickel closed at $US17,600/tonne on Friday, falling by 5.7 per cent on the session. You can see the volatility of the market from the day's trading extremes, with nickel going from $US18,910 after the LME opened on Friday but at one stage touching $US17,545 — a range of $US1365 in just one trading session.

It was only in March 2007, although it seems a lifetime ago, that nickel went through $US50,000/tonne. As for the risks of sticking out your forecasting neck, it was just 18 months ago that leading British commodity forecaster Roskill saw a robust stainless steel sector in 2011 and the possibility of prices once again surging to $50,000 soon after.

Back to Friday's action, and tin was also acting up, with trades varying from $US21,600/tonne to $US19,800, or a range of $US1800 in the session. The zincing feeling continues, with that metal closing at $US1860 and lead also in the dumps.

Of course, there was a good deal of book squaring for the end of the quarter. With the Chinese on holiday this week, it's hard to say what might happen, but any substantial bounce seems unlikely because it would have to be predicated on news of Chinese metal buying, something that doesn't happen this week.

But to put it all in perspective, we reported online during the week the comments by Fat Prophets that it was sentiment rather than any big dent in demand that was driving down copper. That applies right across the base metals complex.

Brokers Intersuisse, in putting a "buy" on Morocco explorer Kasbah Resources (KAS), said they believed the tin market to be fundamental deficit but the rise in LME stocks was due to sale of inventories in China and higher production in Indonesia. "We are still believers in the tin price," they added.

Meanwhile, many have been spooked by the recent selloff in gold. But we note several comments that many traders sold the metal because their gold positions were the only ones showing a profit as September 30 loomed, and they took those profits. They had nothing else to sell that would dress up their books for the quarter.

Europe continues to unwind. Commentators over the weekend are calling the German bailout vote "too little, too late", Greek public servants are striking and delaying that country's rescue package and the IMF has rushed to give Romania a E675 million ($935m) "precautionary" loan as the wheels come off that EU member. It is only a matter of time before the money printing presses move into overdrive once again and gold will be back on an upward path.

October 03, 2011 12:00pm



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