A year-end flourish to Chinese imports

Transcription

1 Deutsche Bank Markets Research Global Industry Date 28 January 216 Industry Update A year-end flourish to Chinese imports Seasonal stockpiling, but no more? The last three months of the year are normally good Chinese buying months, as manufacturers restock before the Chinese New Year. This year has proven to be no different, but with a little added zest due to the low prices. The whiff of SRB buying, the impending price induced production cuts and the growing expectation of a weaker RMB may have prompted some of the buying activity. The key question will be if the stockpiling efforts will be rewarded by a demand pick-up post Chinese New year. Although economic indicators have stabilized, channel checks have given no indication of a spurt in demand. Imports over the next few months are likely to disappoint. Chinese Aluminium production falls; are the cuts going to stick? Chinese Aluminium output for the month of December fell 8.7% month on month to lowest run rate since February 215. This would suggest that the announced curtailments have started to have an effect. Chinese domestic spot premiums are at 1 year high which is also indicative of a tighter domestic market. Bauxite imports to China in December (7.1Mt) were at highest level since September 213 and were up 31% month on month. The jump in Australian imports clearly indicates that there is unlikely to be a shortage of bauxite. Refined copper and copper concentrate imports at an all time high Demand for copper cathodes has been flat in 215, with imports up by 2.5% year to date. This is despite December imports (423kt) increasing significantly by 18% month on month and was highest import number of all time. Bargain hunting by manufacturers and traders stockpiling metal before Chinese New Year and possible purchases by the SRB are the main contributors to this year end flourish. At same time copper concentrate imports (1477kt) are also at an all time high, indicative of stockpiling ahead of some of the capacity cuts announced earlier in the year. Increased copper concentrate imports more than compensated for the fall in scrap imports (down 6%, year to date). Philippine nickel ore imports are down in 215 The trade flows around nickel continue to be more supportive. Refined nickel imports in December were up 32% month on month, and remain in robust territory. Ore imports from the Philippines are down c.6% versus 214. This is in contrast to our expectations of an small increase. The decline in imports is indicative of both declining reserves in our view, and the weak profitability of some of the marginal producers under the current pricing environment. Steel making materials remain weak, with further downside risks Chinese iron ore imports have followed the typical saw-tooth pattern we have come to expect; two months up, two months down. December imports were up 17% month on month and up 11% year on year. Year to date imports are now flat (+2.2%) despite December (96.3Mt) imports being at all time high. This trend is consistent with weak domestic steel demand and a loss in market share of the domestic iron ore producers. Likewise Coking coal imports, whilst rebounding slightly in the month remain weak, down 23% year to date. All time high exports of Coke in December, up 5% month on month and up 2% year to date is indicative of weak domestic demand and an over-supplied market. Grant Sporre Research Analyst (+44) grant.sporre@db.com Top picks Rio Tinto (RIO.L),GBP1,7. Glencore (GLEN.L),GBP9.45 Vale (VALE.N),USD2.31 Source: Deutsche Bank Companies Featured Rio Tinto (RIO.L),GBP1,7. 214A 215E 216E DB EPS (USD) P/E (x) EV/EBITA (x) BHP Billiton Plc (BLT.L),GBP679.6 Hold 215A 216E 217E DB EPS (USD) P/E (x) EV/EBITA (x) Anglo American (AAL.L),GBP275.9 Hold 214A 215E 216E DB EPS (USD) P/E (x) EV/EBITA (x) Glencore (GLEN.L),GBP A 215E 216E DB EPS (USD) P/E (x) EV/EBITA (x) Vale (VALE.N),USD A 215E 216E EPS (USD) P/E (x) EV/EBITDA (x) Source: Deutsche Bank Deutsche Bank AG/London Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/4/215.

2 28 January 216 Stockpiling and Seasonality Base Metals: Copper imports at all time high The last three months of the year are normally good Chinese buying months, as manufacturers restock before the Chinese New Year. This year has proven to be no different, but with a little added zest. Low prices have seen imports of metals up strongly in December, both on a month on month basis and on a year on year basis. To what extent imports are destined for SRB (State Reserve Bureau) stockpiles or earmarked for consumption remains to be seen. Given, the recent macro indicators, which were slightly more encouraging, we would suggest that some of the imports may be earmarked for consumption. The strong year end imports are symptomatic of stockpiling, bargain hunting and seasonality in our view. Copper cathode imports increased significantly in December (423kt), up 18% month on month and 34% year on year. Copper concentrate imports (1477kt) registered a record month and was up c.3% month on month pushing the year to date number up to 12.3%. We think some of the strong concentrate imports can be ascribed to stocking up ahead of potential shortages for next year as the Glencore cuts start to impact the market. Given this strong concentrate import number, this does pose a questions mark as to how serious the round of cuts announced really were. Copper scrap imports were up c.4% year on year, but down c.6% compared to 214. The strong December imports suggest that the first three months of 216 are likely to be quite weak. Figure 1: China refined copper metal imports Figure 2: China Copper concentrate versus scrap imports 4 3 1,4 1,2 1, 28 financial crisis Downward trend Refined copper imports Kt 2 'green fence' policy Copper scrap imports (kt) Copper ore and cons imports (kt) Source: Deutsche Bank, NBS Source: Deutsche Bank, NBS December semi s exports were marginally lower by 4.7% month on month. The export arbitrage for a Chinese semi s exporter remains robust at $266/t. Chinese Aluminium production in December fell 8.7% month on month to a 15 month low. The capacity curtailments seem to be sticking this time, but the market remain skeptical and will probably wait for further evidence to see if these are permanent. Due to the curtailment in Chinese smelter production, domestic spot P12 premiums have increased to highest levels since last year. This increase in domestic spot premiums may also play a role in subdued Page 2 Deutsche Bank AG/London

3 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec January 216 semi s exports. Chinese Bauxite imports continued to be very strong with December imports from Australia nearly doubling versus last month. Malaysian imports remained robust with no impact form the temporary ban as yet. Total year to date imports are up 54% and December imports were up 31% month on month, which was probably the catalyst for the ban. Refined nickel imports remained robust in December (36.5kt) up 32% month on month, while the year to date imports is up c.132%. Parts of these imports are however, simply a reallocation of stocks back to China. Nickel ore imports were down 38% month on month and down 26% year to date. Imports from the Philippines fell sharply by 38% month on month and 31% year on year. a. Full year imports are down 6%, suggesting that the big increase in Philippine ore exports seen in 214, was not sustainable. Part of the monthly decline is however due to weak demand and hence ore weak pricing not being attractive enough to export, and partly due to seasonality. We continue to question the sustainability of Philippine ore supply at current pricing levels. Ferronickel imports were significantly down month on month (-56%) but the year to date imports still remain very high (+131%). Figure 3: China aluminium semis Exports Figure 4: China bauxite imports 6 9, 5 kt 8, 7, (kt) 4 6, 3 5, 4, 2 3, 1 2, 1, China Aluminium Semis exports Indonesia Australia India Malaysia Dominican Republic Ghana Brazil Fiji Others Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Figure 5: China aluminium semi s export arbitrage 1, Figure 6: Chinese refined Nickel imports Export arbitrage for a Chinese semis exporter (USD/t) Aluminium semi's exports (kt) Nickel Imports kt Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, NBS Deutsche Bank AG/London Page 3

4 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep January 216 Figure 7: Ore imports from Philippines slows down 8, 7, kt 6, 5, 4, 3, 2, 1, Figure 8: Chinese Ferronickel imports % 1.% 5.%.% -5.% -1.% Other The Philippines Indonesia Ferronickel imports (kt) - lhs % change MoM - rhs Source: Deutsche Bank, NBS Source: Deutsche Bank, NBS Refined zinc imports increased significantly in December (94.4kt) up by 36% month on month, and up five-fold versus last year. Metal imports have picked up significantly over the last three months, making up for the slow start to the year. Zinc concentrate imports decreased significantly in December (231.2kt) and were down 29% month on month. YTD imports are still robust with a growth of 47%. We think the slight tail off in concentrate imports is reflective of the lower availability post the Glencore shuts, and the last of the Lisheen shipments. Spots TC s have been rising which is a further sign of the impending concentrate tightness. Figure 9: Refined Zinc net imports Zinc Net Trade Kt Figure 1: Zinc Ore & Conc imports Zinc Ores & Concentrates Imports Kt Source: Deutsche Bank, NBS Source: Deutsche Bank, NBS Bulks Materials: Weak imports and strong exports point to weak domestic demand Chinese iron ore imports followed the typical saw-tooth pattern we have come to expect; two months up, two months down. December imports were up 17% month on month and up 11% year on year. Year to date imports are however flat (+2%). Iron ore stocks at the Chinese ports have been on the rise (92Mt), which is above the long term average of 8Mt. Iron Ore imports from non-traditional suppliers are still down year to date, but there are some signs that exports from these regions may have stabilized. Weak currency blocks are Page 4 Deutsche Bank AG/London

5 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Apr-1 Aug-1 Dec-1 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec January 216 the notable exceptions, where output has increased; Russia (+22%), Venezuela (+123%) and Ukraine (+9%). Steel exports were robust in December (1.7Mt) up 11% month on month. Year to date, exports were up at a healthy c.2%. Coking coal net imports increased in December (4.45Mt), up by 9% month on month. Despite this, year to date net imports are down 23%. Coke exports in December (1.45Mt) were up 5% month on month and up c.2% year to date. Coke exports in December were the highest ever recorded. We think it is too early to suggest that domestic production has peaked. Figure 11: China Iron Ore imports 9 Mt Figure 12: China Steel exports 12. Mt Iron ore Imports Steel & Steel products Source: Deutsche Bank, NBS Source: Deutsche Bank, Bloomberg Finance LP Figure 13: Chinese iron ore port stocks mt Figure 14: Non Traditional suppliers have stabilized Mt Iran Sierra Leone Ukraine Peru Canada India Mongolia Mauritania Chile Malaysia Russia Source: Deutsche Bank, Antaike Source: Deutsche Bank, Bloomberg Finance LP Deutsche Bank AG/London Page 5

6 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct January 216 Figure 15: China: Coking coal imports Figure 16: Coke Exports from China 1,6 1,4 1,2 1, % 15% 1% 5% % -5% China: Coking coal imports (mt) Coke exports kt 3 month rolling average % Source: Deutsche Bank, NBS Source: Deutsche Bank, NBS Page 6 Deutsche Bank AG/London

7 Apr-9 Sep-9 Feb-1 Jul-1 Dec-1 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 Feb-9 Jul-9 Dec-9 May-1 Oct-1 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct January 216 Platinum and Palladium: Bargain hunting in platinum PGM imports are at odds with the underlying fundamentals in our view. Despite weak jewellery demand, Platinum imports into China were robust with December numbers (8,81 kg) down 3% month on month, but up 1% year to date. Trading activity on the SGE has also picked up over the past two months. We think this is indicative of bargain hunting. Unlike Platinum, palladium imports are weak with year to date imports down 25%. The weak import number belies the strong recovery in December vehicle sales growth. Figure 17: Chinese Platinum imports 14, 12, 1, 8, 6, 4, 2, Figure 18: Chinese Palladium imports 4, 3,5 3, 2,5 2, 1,5 1, 5 Platinum imports (kg) Palladium imports (kg) Source: Deutsche Bank, NBS Source: Deutsche Bank, NBS Oil: Apparent demand remains robust Oil imports in December (33Mt) were robust and up 22% month on month and up 8 % year to date. In contrast to the metals, we think underlying oil demand remains fairly robust. Figure 19: Chinese Oil imports Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Net Imports (Mt) Source: Deutsche Bank, NBS Deutsche Bank AG/London Page 7

8 28 January 216 Base metal positioning slightly less bearish Base metal positioning remains bearish, although slightly less. Base metal continues to bear the brunt of negative China sentiment, compounding the weakness in the complex. Since Q4 215, positioning in tin has seen the sharpest decrease in net long positioning, while Zinc has seen the biggest increase. Investors remain wary of Aluminium, with the current net long position in nickel at c.5% of the LME open interest, decreasing from 7% at the start of Q The sharp decline in Chinese Aluminum production in the month of December 215, may start to attract some new long positions by money managers. Figure 2: LME - Net positioning of the Money Managers as a percentage of open interest 25% 2% 15% 1% 5% % -5% Aluminium Copper Nickel Lead Tin Zinc Source: Deutsche Bank, LME Nickel is the most preferred metal amongst money managers, despite the pricing being very weak. Multi-year lows in Nickel have seen the open interest at robust levels, suggesting some developing interest with the price cutting deeply into the cost curve, and production cuts starting to mount. Zinc positions (4%) saw a mild recovery since Q4 215, but prices remain weak, with questions marks remaining over Chinese demand growth. Copper remains the lightning rod for strengthening USD and a weaker than expected Chinese economy with positioning falling to a small net long (.6%). We think the new resistance level is below USD4,/t, based on the marginal C1 cost. Page 8 Deutsche Bank AG/London

9 28 January 216 Figure 21: Aluminium net positions of the Money Managers as a % of open interest Figure 22: Nickel net positions of the Money Managers as a % of open interest 15.% 13.% 11.% 9.% 7.% 5.% 3.% 2,2 2,1 2, 1,9 1,8 1,7 1,6 1,5 1,4 16% 14% 12% 1% 8% 6% 4% 2% % 2, 19, 18, 17, 16, 15, 14, 13, 12, 11, 1, 9, 8, Net Position Money Manager as % of open Interest Price (USD/t) - rhs Net Position Money Manager as % of open Interest Price (USD/t) - rhs Source: Deutsche Bank, LME Source: Deutsche Bank, LME Figure 23: Lead net positions of the Money Managers as a % of open interest Figure 24: Tin net positions of the Money Managers as a % of open interest 14.% 12.% 1.% 8.% 6.% 4.% 2,3 2,2 2,1 2, 1,9 16% 14% 12% 1% 8% 24, 22, 2, 18, 2.%.% -2.% -4.% 1,8 1,7 1,6 6% 4% 2% 16, 14, -6.% 1,5 % 12, Net Position Money Manager as % of open Interest Price (USD/t) - rhs Net Position Money Manager as % of open Interest Price (USD/t) - rhs Source: Deutsche Bank, LME Source: Deutsche Bank, LME Figure 25: Zinc net positions of the Money Managers as a % of open interest Figure 26: Copper net positions of the Money Managers as a % of open interest 23% 2% 17% 2,4 2,3 2,2 2,1 12.% 1.% 8.% 7,5 7, 6,5 14% 11% 8% 5% 2% 2, 1,9 1,8 1,7 1,6 1,5 6.% 4.% 2.%.% 6, 5,5 5, 4,5-1% 1,4-2.% 4, Net Money Manager positioning as % of open Interest Price (USD/t) - rhs Net Position Money Manager as % of open Interest Price (USD/t) - rhs Source: Deutsche Bank, LME Source: Deutsche Bank, LME On the Comex, Copper positioning is net short and the short positions are at an all time high since 2. In our opinion, the fundamentals for copper remain unchanged but the appreciating USD against producer currencies and fall in producer s cost due to fall in crude oil will continue to weigh on the market. Deutsche Bank AG/London Page 9

10 28 January 216 Figure 27: Copper Non-commercial net positions in the Comex 5 K Contracts USc/lb 5 Net Long Net Short Non-commercial net positions (lhs) Copper price (rhs) Source: Deutsche Bank, Bloomberg Finance LP, CFTC Page 1 Deutsche Bank AG/London

11 28 January 216 Precious metals Platinum s non commercial net length on the Nymex decreased by c.3k contracts from start of year to 2.5K contracts. Platinum prices continued their slide from last year and are down 7% since the start of 216. The outlook on palladium has also moderated over the course of the year, with a decline in the net long position by 2.8K contracts from the start of year to 5.2K contracts. Palladium prices also started off the year on a weak note, and are down c.11% since the start of 216. Despite a recovery in Chinese Auto sales and a continuation of strong US Auto sales, sentiment on palladium remains weak, with the expectation that these levels are unsustainable. A depreciating South African Rand against the USD has been a headwind for the sector. Figure 28: Platinum Non-commercial net positions in Nymex 55 K Contracts USD/oz 24 Net Long Net Short Non-commercial net positions (lhs) Platinum price (rhs) Source: Deutsche Bank, Bloomberg Finance LP, CFTC Figure 29: Palladium Non-commercial net positions in the Nymex 29, K Contracts USD/oz 1,1 Net Long 9 21, 7 13, 5 5, 3-3, Net Short Non-Commercial Net Positions (LHS) Palladium Price (RHS) Short Short Source: Deutsche Bank, Bloomberg Finance LP, CFTC Gold s strong start to the year is a reflection of the financial markets pricing in two further rate hikes this year, well below the Fed guidance of four. Gold is currently seeing a safe haven rally, as stock markets throughout the world have a weak start to the year. Falling crude oil prices, combined with growing concerns about the Chinese economy, have dented world growth expectations. The negative sentiment in market may give the Fed some reason for deferring another interest rate hike in Q1 216, more positive news for Gold in the short term. Gold s long positions more than doubled since the start of 216 and is currently at 47K contracts. Gold prices have increased 5% since the start of New Year. Net long positions in silver have also improved since start of 216, and are at 28K contracts. Silver prices are up 1.4% year to date. Deutsche Bank AG/London Page 11

12 28 January 216 Figure 3: Gold Non-commercial net positions in the Comex K Contracts USD/oz Net Long Net Short Non-commercial net positions (lhs) Gold price (rhs) Figure 31: Silver Non-commercial net positions in the Comex 75 K Contracts USc/oz Net Long Net Short Non-commercial net positions (lhs) Silver price (rhs) Source: Deutsche Bank, Bloomberg Finance LP, CFTC Source: Deutsche Bank, Bloomberg Finance LP, CFTC Page 12 Deutsche Bank AG/London

13 28 January 216 Inventories falling LME, rising SHFE Aluminium inventories (2.82Mt) on the LME continued to fall with most of the outflows from the Vlissingen, Detroit and Baltimore warehouses. Aluminium inventories continue to rise on the SHFE and currently stand at 33kt, reflecting the weaker than expected demand conditions in China. LME Copper inventories (237kt) are down by 135kt from the peak inventory level of August 215 (372kt). Whilst there have been significant increase in copper inflows into the SHFE warehouses in the last six months, bonded warehouse stocks remain relatively low at 45kt. LME nickel inventories increased significantly by 5kt since the start of December 215 and remains relatively high at 45kt. LME Zinc inventories crept up in October and subsequently fell to 479kt in January 216, while SHFE inventories are at all time high levels of 27kt. Lead inventories in LME spiked in December 215 by more than 6kt and at present the inventory stands at 188kt. Figure 32: LME Aluminium stocks vs price Figure 33: LME Copper stocks vs price 6, 5, 4, Kt US$/t 3,5 3, 2, Kt US$/t 1, 9, 8, 3, 4 7, 2, 2, 3 6, 1, 1, , 1, Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 4, Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 LME Aluminium stocks (LHS) LME Aluminium price (RHS) LME Copper stocks (LHS) LME Copper price (RHS) Source: Deutsche Bank, Thomson Reuters Datastream Source: Deutsche Bank, Thomson Reuters Datastream Figure 34: LME Zinc stocks vs price Figure 35: LME Nickel stocks vs price 1,4 1,2 Kt US$/t 2,8 2, Kt US$/t 25, 22,5 1, ,4 2,2 2, 1,8 1, , 17,5 15, 12,5 1, 2 1,4 8 7,5 1,2 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 5, Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 LME Zinc stocks (LHS) LME Zinc price (RHS) LME Nickel stocks (LHS) LME Nickel price (RHS) Source: Deutsche Bank, Thomson Reuters Datastream Source: Deutsche Bank, Thomson Reuters Datastream Deutsche Bank AG/London Page 13

14 28 January 216 Figure 36: LME Lead stocks vs price 45 Kt US$/t 3, , , ,1 1 1,8 5 1,5 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 LME Lead stocks (LHS) LME Lead price (RHS) Source: Deutsche Bank, Thomson Reuters Datastream Figure 37: SHFE aluminium inventories Figure 38: SHFE zinc inventories 6 24, 45 22, kt 22, 2, 18, 16, 14, 12, 1, kt 2, 18, 16, 14, 12, 1, 8, 8, SHFE aluminium inventories (kt) SHFE price RMB/t - rhs SHFE zinc inventories (kt) SHFE price RMB/t - rhs Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Figure 39: SHFE copper inventories Figure 4: China SHFE and bonded warehouse stocks 3 25 kt 8, 7, 1,2 1, (kt) 2 6, , 6 1 4, 4 5 3, 2 2, SHFE China bonded warehouse SHFE copper inventories (kt) SHFE price RMB/t - rhs Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Page 14 Deutsche Bank AG/London

15 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan January 216 Iron ore inventories at Chinese ports increased significantly towards the end of 215 and during January 216 (92Mt), were way ahead of long term average levels of 8Mt. Coking coal port inventories continued to decrease and are at 2.3 Mt during December 215, way below the average inventory of 5.9Mt. Figure 41: Imported coking coal inventory at four major ports mt Average: 5.91mt Figure 42: Iron ore inventory at Chinese ports mt Source: Deutsche Bank, Mysteel Source: Deutsche Bank, Bloomberg Finance LP Deutsche Bank AG/London Page 15

16 28 January 216 Precious metals Gold ETF holdings have increased by c. 3% year to date and are currently at 1,53 tonnes, which is consistent with the 5 % price increase since start of 216. Silver ETF holdings decreased by 1.2% year to date and are currently at 18,638 tonnes. Silver prices have increased by 1.3% year to date. Platinum ETF holdings have decreased marginally by 1.2% year to date at 2.36Moz. Platinum price is down c.7% year to date and remains at a USD265/oz discount to gold. The further depreciation of Rand in the current low demand market scenario is negative for Platinum. Palladium on the other hand had seen a steadier outflow of metals with the ETF holdings down c. 2.5% year to date, and prices down 11% since the start of 216. The sell down has come from the South African listed ETF s. Figure 43: Total Gold ETF holding Figure 44: Total Silver ETF holding 2,8 2,4 Total gold ETF holding (tonnes) Gold price (USD/oz, rhs) 2, 1,8 25, 2, Total silver ETF holding (tonnes) Silver price (USD/oz, rhs) 6 5 2, 1,6 1,6 1,4 1,2 1,2 8 1, , 3 1, 2 5, Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Figure 45: Total Platinum ETF holding 3. Total platinum ETF holding (Moz) Platinum Price (USD/oz) RHS 2, ,2 2, 2. 1, ,6 1,4 1. 1,2 1, Figure 46: Total Palladium ETF holding 3.5 Total palladium ETF holdings (million oz) 1, Palladium Price (USD/oz) RHS Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Page 16 Deutsche Bank AG/London

17 28 January 216 Figure 47: Deutsche Bank Rhodium ETC koz 2, 1,75 1,5 1,25 1, Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 DB ETC (LDN) DB ETC (FFT) Price (USD/oz) - rhs Source: Deutsche Bank, Bloomberg finance LP Research Contribution The authors of this report wish to acknowledge the contribution made by Praveen Kartha, employee of Irevna, a division of CRISIL Limited, a third-party provider to Deutsche Bank of offshore research support services. Deutsche Bank AG/London Page 17

18 28 January 216 Appendix 1 Important Disclosures Additional information available upon request Disclosure checklist Company Ticker Recent price* Disclosure BHP Billiton Plc BLT.L (GBp) 28 Jan Anglo American AAL.L (GBp) 28 Jan 16 6,9,14,15,17 Glencore GLEN.L (GBp) 28 Jan 16 1,6,7,9,14,15 Vale VALE.N 2.31 (USD) 27 Jan 16 8,14 Rio Tinto RIO.L 1, (GBp) 28 Jan 16 1,6,7,9,14,15 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes. 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months. 14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. 15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services. Page 18 Deutsche Bank AG/London

19 28 January 216 Important Disclosures Required by Non-U.S. Regulators Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes. 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 9. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by India law. 17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m Euros. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Grant Sporre Deutsche Bank AG/London Page 19

20 Security Price 28 January 216 Historical recommendations and target price: BHP Billiton Plc (BLT.L) (as of 1/28/216) 2,5. Previous Recommendations 2,. 1,5. 1, Strong Market Perform Underperform Not Rated Suspended Rating Current Recommendations Hold Sell Not Rated Suspended Rating *New Recommendation Structure as of September 9,22. Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Date Oct 14 Jan 15 Apr 15 Jul 15 Oct /4/213:, Target Price Change GBP2, /1/214:, Target Price Change GBP2, /4/213:, Target Price Change GBP2, /1/214:, Target Price Change GBP2, /5/213:, Target Price Change GBP2, /12/214:, Target Price Change GBP2, /6/213:, Target Price Change GBP2, /1/215:, Target Price Change GBP2, /6/213:, Target Price Change GBP2, /2/215:, Target Price Change GBP2, /7/213:, Target Price Change GBP2, /3/215:, Target Price Change GBP1, /8/213:, Target Price Change GBP2, /4/215:, Target Price Change GBP1, /9/213:, Target Price Change GBP2, /6/215: Downgrade to Hold, Target Price Change GBP1, /1/214:, Target Price Change GBP2, /6/215: Hold, Target Price Change GBP1, /2/214:, Target Price Change GBP2, /7/215: Hold, Target Price Change GBP1, /4/214:, Target Price Change GBP2, /8/215: Hold, Target Price Change GBP1, /7/214:, Target Price Change GBP2, /9/215: Hold, Target Price Change GBP1, /7/214:, Target Price Change GBP2, /9/215: Hold, Target Price Change GBP1, /8/214:, Target Price Change GBP2, /11/215: Hold, Target Price Change GBP1, /9/214:, Target Price Change GBP2, /12/215: Hold, Target Price Change GBP935. Historical recommendations and target price: Anglo American (AAL.L) (as of 1/28/216) Page 2 Deutsche Bank AG/London

21 Security Price Security Price 28 January 216 2,5. Previous Recommendations 2,. 1,5. 1, Strong Market Perform Underperform Not Rated Suspended Rating Current Recommendations Hold Sell Not Rated Suspended Rating *New Recommendation Structure as of September 9,22. Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Date Oct 14 Jan 15 Apr 15 Jul 15 Oct /1/213:, Target Price Change GBP2, /5/214: Hold, Target Price Change GBP1, /2/213:, Target Price Change GBP2, /7/214: Hold, Target Price Change GBP1, /4/213:, Target Price Change GBP2, /7/214: Hold, Target Price Change GBP1, /4/213:, Target Price Change GBP2, /9/214: Upgrade to, Target Price Change GBP2, /6/213:, Target Price Change GBP1, /12/214:, Target Price Change GBP1, /7/213:, Target Price Change GBP1, /2/215:, Target Price Change GBP2, /7/213:, Target Price Change GBP1, /3/215:, Target Price Change GBP1, /9/213:, Target Price Change GBP1, /6/215:, Target Price Change GBP1, /1/213:, Target Price Change GBP1, /7/215:, Target Price Change GBP1, /12/213: Downgrade to Hold, Target Price Change GBP1, /9/215:, Target Price Change GBP1, /2/214: Hold, Target Price Change GBP1, /11/215:, Target Price Change GBP1, /4/214: Hold, Target Price Change GBP1, /12/215: Downgrade to Hold, Target Price Change GBP /4/214: Hold, Target Price Change GBP1,51. Historical recommendations and target price: Glencore (GLEN.L) (as of 1/28/216) 45. Previous Recommendations Strong Market Perform Underperform Not Rated Suspended Rating 25. Current Recommendations Hold Sell Not Rated Suspended Rating *New Recommendation Structure as of September 9,22. Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Date Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Deutsche Bank AG/London Page 21

22 Security Price 28 January /5/213:, Target Price Change GBP /7/214:, Target Price Change GBP /5/213:, Target Price Change GBP /9/214:, Target Price Change GBP /6/213:, Target Price Change GBP /9/214:, Target Price Change GBP /7/213:, Target Price Change GBP /11/214:, Target Price Change GBP /8/213:, Target Price Change GBP /12/214:, Target Price Change GBP /8/213:, Target Price Change GBP /12/214: Downgrade to Hold, Target Price Change GBP /9/213:, Target Price Change GBP /1/215: Hold, Target Price Change GBP /9/213:, Target Price Change GBP /6/215: Hold, Target Price Change GBP /1/214:, Target Price Change GBP /8/215: Hold, Target Price Change GBP /2/214:, Target Price Change GBP /8/215: Hold, Target Price Change GBP /3/214:, Target Price Change GBP /9/215: Hold, Target Price Change GBP /4/214:, Target Price Change GBP /9/215: Hold, Target Price Change GBP /5/214:, Target Price Change GBP /11/215: Upgrade to, Target Price Change GBP /5/214:, Target Price Change GBP /12/215:, Target Price Change GBP /6/214:, Target Price Change GBP411. Historical recommendations and target price: Vale (VALE.N) (as of 1/27/216) Previous Recommendations Strong Market Perform Underperform Not Rated Suspended Rating Current Recommendations Hold Sell Not Rated Suspended Rating 2. *New Recommendation Structure as of September 9,22. Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Date Apr 15 Jul 15 Oct /4/214:, Target Price Change USD /3/215:, Target Price Change USD /6/214:, Target Price Change USD /9/215:, Target Price Change USD /1/214:, Target Price Change USD /12/215:, Target Price Change USD /12/214:, Target Price Change USD13. Page 22 Deutsche Bank AG/London

23 Security Price 28 January 216 Historical recommendations and target price: Rio Tinto (RIO.L) (as of 1/28/216) 4,. 1 Previous Recommendations 3,5. 3,. 2,5. 2,. 1,5. 1, Strong Market Perform Underperform Not Rated Suspended Rating Current Recommendations Hold Sell Not Rated Suspended Rating 5. *New Recommendation Structure as of September 9,22. Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Date Oct 14 Jan 15 Apr 15 Jul 15 Oct /2/213:, Target Price Change GBP4, /9/214:, Target Price Change GBP4, /4/213:, Target Price Change GBP4, /9/214:, Target Price Change GBP4, /4/213:, Target Price Change GBP4, /11/214:, Target Price Change GBP4, /5/213:, Target Price Change GBP4, /11/214:, Target Price Change GBP4, /6/213:, Target Price Change GBP4, /12/214:, Target Price Change GBP4, /7/213:, Target Price Change GBP4, /2/215:, Target Price Change GBP4, /8/213:, Target Price Change GBP4, /3/215:, Target Price Change GBP4, /9/213:, Target Price Change GBP4, /4/215:, Target Price Change GBP4, /12/213:, Target Price Change GBP4, /6/215:, Target Price Change GBP3, /12/213:, Target Price Change GBP4, /8/215:, Target Price Change GBP3, /1/214:, Target Price Change GBP4, /9/215:, Target Price Change GBP3, /4/214:, Target Price Change GBP4, /1/215:, Target Price Change GBP3, /5/214:, Target Price Change GBP4, /11/215:, Target Price Change GBP3, /6/214:, Target Price Change GBP4, /12/215:, Target Price Change GBP3, /7/214:, Target Price Change GBP4, /12/215:, Target Price Change GBP3, /8/214:, Target Price Change GBP4,65. Deutsche Bank AG/London Page 23

24 28 January 216 Equity rating key Equity rating dispersion and banking relationships : Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 27 were: : Expected total return (including dividends) of 1% or more over a 12-month period Hold: Expected total return (including dividends) between -1% and 1% over a 12- month period Sell: Expected total return (including dividends) of -1% or worse over a 12-month period Regulatory Disclosures 1.Important Additional Conflict Disclosures % 47 % 37 % 3 % 6 % 23 % Hold Sell Companies Covered Cos. w/ Banking Relationship Global Universe Aside from within this report, important conflict disclosures can also be found at under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2.Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at Page 24 Deutsche Bank AG/London

25 28 January 216 Additional Information The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche Bank may act as principal for its own account or as agent for another person. Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in this research report. Others within Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or otherwise. Deutsche Bank and/or its affiliates may also be holding debt securities of the issuers it writes on. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment banking revenues. Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst s judgment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Prices and availability of financial instruments are subject to change without notice and investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties. Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to FX depreciation, or to specified interest rates these are common in emerging markets. It is important to note that the index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to acknowledge that funding in a currency that differs from the currency in which coupons are denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to the risks related to rates movements. Deutsche Bank AG/London Page 25

26 28 January 216 Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable for all investors. 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Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No Member of associations: JSDA, Type II Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Page 26 Deutsche Bank AG/London