SPECIAL MONTHLY REPORT ON BASE METALS

Transcription

1 SPECIAL MONTHLY REPORT ON BASE METALS SEPTEMBER 2018 COPPER NICKEL LEAD ZINC ALIUMINUM

2 BASE METALS PERFORMANCE (August 2018) (% change) Nickel Lead Aluminium Zinc SHFE LME MCX Copper BASE METALS PERFORMANCE (January - August 2018) (% change) BASE METALS Nickel Lead Aluminium Zinc Copper SHFE LME MCX 1

3 COPPER Copper ended in red in the month of August as global trade war concerns between US and China coupled with slowdown to kept prices under pressure. Meanwhile profits earned by China's industrial firms rose 16.2 percent in July from a year earlier, slowing from 20 percent in June. Copper traded in range of As per ICSG data released, almost 74,000 tonnes of refined copper was supplied in the month of May bringing the deficit down to 31,000 tonnes compared to April. China accounts for nearly half of global copper consumption estimated at 24 million tonnes. The United States accounts for about 8 percent. Meanwhile growth in China's manufacturing sector unexpectedly picked up in August after sliding for two months, a sign that economic activity is still fairly resilient despite weak investment and an escalating trade battle with the United States. Copper can trade on sideways bias but short covering at lower levels can be seen. Overall it can take support near 405 while upside will be capped near 450. Chinese economy is confronting a double whammy of stiffening domestic conditions and the trade war with the US. Economic growth has slowed noticeably in recent months, particularly in infrastructure investment and credit supply, while financial markets have suffered setbacks, with both equities and the yuan retreating to near 2016 lows. Intensifying domestic constraints have been the main reason for the economic slowdown to date. While trade tensions have dealt a heavy blow to investor confidence, their impact on trade activity, and hence growth, has so for been limited. China s exports to the US have risen 12 per cent on average over the past three months, in line with growth in total exports. China trade surplus China s trade surplus with the United States widened to a record in August even as its export growth slowed slightly, an outcome that could push Trump to turn up the heat on Beijing. China Copper imports: China s imports of copper fell 6.7 percent from a month ago to 420,000 tonnes in August, data from the General Administration of Customs showed recently. Key news Sterlite closure hits copper production, imports up 221% in June quarter COPPER US and China trade war Copper prices got under pressure as President Donald Trump threatened to slap tariffs on virtually all Chinese imports into United States, escalating the trade dispute and fuelling fears of weaker demand for industrial metals. China s economic slowdown than the home-grown deleveraging campaign China has softened its aggressive campaign to tackle debt in the face of the trade war, but it will be tougher this time around to stimulate the economy while retaining the benefits of its reform measures. The Domestic refined copper production fell 47.1 per cent in quarter ending June (Q1FY19), leading to an increase in price and fall in exports. Though the fall in production was mainly due to the closure of Vedanta's smelter plant at Thoothukudi, the shutdown of smelters of Hindustan Copper (HCL) and Hindalco for maintenance purposes also had an impact. China copper treatment charges for 2019 to fall as concentrate flips to deficit Antaike Treatment and refining charges (TC/RCs) paid to China's copper smelters are set to drop below $80 a tonne next year as processing capacity expands and copper concentrate falls into a deficit. 2

4 Chile's Codelco produced 875,000 tonnes copper in st half Copper production at Codelco, Chile's state-owned copper mining company, rose 2 percent in the first half of 2018 to 813,000 tonnes, Chief Executive Nelson Pizarro said on Friday. The world s top copper miner benefited from rising prices, posting a pretax profit of $1.235 billion in the same period, up 25 percent yearon-year, with a production cost per pound of copper of $1.38, an increase of 4 percent year-on-year. Chinese firm launches $832 million Zambia copper mine NFC Africa, majority owned by China Non-ferrous Metals Company Limited (CNMC), launched output at a new $832 million Zambian copper mine, extending the firm's lifespan by over 20 years. Zambia, Africa's second-largest producer of the metal, saw output rise 10.6 percent in the first half of the year on the back of stable power supply and relatively higher metal prices in recent months. Falling LME on warrant stocks and falling SHFE stockpiles On-warrant stocks of copper available to the market in LME stood at 147,450 tonnes, down from more than 234,000 tonnes in mid-august, signalling a tighter market. Stockpiles in ShFE warehouses have fallen to 136,051 tonnes from more than 300,000 tonnes in April. COPPER 2

5 Nickel Nickel dropped sharply lower last month tracking weakness in other base metals amid trade war concerns. Nickel moved in range of in MCX. Nornickel, which vies with Brazil s Vale SA to be the world s biggest nickel producer, said it expected the nickel deficit on global markets to widen from 15,000 tonnes to 124,000 tonnes. Electric car bets boosting nickel demand Expectations of a boom in demand for electric vehicles are leading investors and battery makers to stockpile nickel and helping to fuel a spike in global prices of the metal, Russian mining company Norilsk Nickel stated recently. Nornickel, the world s second-largest nickel producer, said demand for the metal from the battery sector leapt 38 percent in the first half of this year versus the same period last year. Nickel can trade with weak bias but short covering at lower levels cannot be denied. Overall it can take support near 865 and can face resistance near 930 in the month of Sep Key news Strict mining norms in Philippines can support Nickel Nickel prices could be supported over the next few months, as Philippines will start limiting the land that miners can develop at any one time as new rules to protect the environment take effect. The new curbs, backed by President Duterte, target 29 of 48 mines operating in the Philippines, which are nickel producers supplying ores to the world s leading market, China. NICKEL 3

6 Lead The battery metal lead has witnessed steep selling pressure in last two months as fear of escalation of trade war fears between US and China kept the prices under pressure but supply constraints due to stringent environment restrictions can lead to short covering in near term. China's capital Beijing will shut around 1,000 manufacturing firms by 2020 as part of a programme aimed at curbing smog and boosting income in neighbouring regions. In the month of Sep battery metal can trade on sideways path as it has support near 138 while it has resistance near 158 in MCX. Global Lead acid battery Market The global Lead Acid battery market size was valued at USD 46.6 billion in 2015 and is expected to reach USD billion by 2025, according to a new report by Grand View Research, Inc. Expansion of the automotive industry in China, India, Brazil, Mexico, South Africa, Indonesia, and Germany is anticipated to drive industry growth. Furthermore, increasing utilization of energy storage systems and UPS in industries including mining, oil and gas, nuclear power, electricity generation, gas turbine, construction, hospitality, banking, manufacturing, and off-grid renewable is anticipated to drive Lead Acid battery demand over the forecast period. Global demand for refined lead exceeded supply by 39,000 mt in the first half of 2018, according to provisional data compiled by the International Lead & Zinc Study Group. Global lead output increased 1.2% to million mt in H from million mt in H1 2017, with ILZSG attributing this to rises in India and the US, whereas production fell by 0.4% in Europe and 3.7% in South Korea. Key News Battery demand can improve in near term LEAD The growth in passenger car, commercial vehicle and motorcycle industry, along with growing application of energy storage, is expected to drive industry demand for batteries. Increasing requirement of UPS in industrial sectors including oil & gas, manufacturing, chemical, and healthcare has further spurred batteries demand. Lead Acid is dependable and inexpensive on a cost-per-watt base. There are few other batteries that deliver bulk power as cheaply as Lead Acid, and this makes the battery costeffective for automobiles, golf cars, forklifts, marine and uninterruptible power supplies (UPS). 4

7 Zinc Zinc prices tumbled lower last month as its prices fell on trade war tensions between China and US. Zinc moved in range of In the month of Sep, Zinc can trade with sideways bias as short covering at lower levels can be seen. Overall it can take support near 165 and can face resistance near 185. LME zinc inventories have climbed by 74 percent since the start of March to 229,675 tonnes. Zinc inventories in warehouses monitored by the ShFE fell 11.8 percent recently to 30,800 tonnes, their lowest since October Zinc, mainly used for galvanizing steel, was also pressured by a slide in Chinese steel futures of more than 4 percent after a source involved with China's output-cut plan stated the environment ministry may allow northern provinces to set their own production curbs over winter. World zinc mine production fell by 2.4% compared to the first half of This was mainly the result of reported reductions in Australia, China and India that more than offset a 5.6% rise in Europe, influenced by increases in Finland, Greece, Ireland and Serbia. Higher refined zinc metal production in Belgium, Canada, China, Japan, Norway and Peru was partially balanced by decreases in India and the United States resulting in an overall rise globally of 2.1%. A small 0.6% reduction in global usage of refined zinc metal was mainly influenced by decreases in apparent demand in South Africa, Taiwan (China), and the United States. In Europe, rises in Belgium, France and Poland were offset by reductions in Germany and Italy. Lead and Zinc Spread Key News Century zinc mine on track, secures $40m for expansion New Century Resources has entered into a $40 million debt facility with NAB for expansion funding of its Century zinc mine, 250km northwest of Mt Isa, Queensland. The funds will help New Century fast track its expansion process at the mine, which is due to restart in the fourth quarter (Q4) of The Century mine was previously among the world s largest zinc mines until its closure in 2016 by previous owner MMG. Analysis: Lead and Zinc spread can move in range of - 35 to -24 in the month of Sep Source: Reuters ZINC ILZSG estimates According to preliminary data recently compiled by the ILZSG, the global market for refined zinc metal was in deficit by 17kt over the first six months of 2018 with total reported inventories increasing by 77kt over the same period. 5

8 Aluminum Aluminum traded on positive path in the month of August on supply concerns.overall it moved in range of Aluminum production in China equaled its monthly high since July 2017 as new smelters took output back to the level that preceded capacity closures in mid Aluminium prices can trade on sideways path as some short covering can be seen at lower levels. It can take support near 138 and resistance near 160 in MCX. Trump, who put in place tariffs on steel and aluminium imports in March, signed proclamations allowing relief from the quotas on steel from South Korea, Brazil and Argentina and on aluminium from Argentina. China is shipping unusually high volumes of alumina for a second time this year to an international market desperate for the ingredient used to make aluminium. Billionaire Oleg Deripaska is negotiating with US authorities on a plan to lift the sanctions before an October deadline, but buyers have been jockeying for supplies in the meantime in case his measures don t satisfy the US. projects include a 10,000 tonne-per-year (tpy) aluminium alloy plant to be built by Huachuang Metal on the Binzhou city government website. Aluminium producers offer Q4 premiums of $112/T, $115/T to Japan buyers-sources A global aluminium producer has offered Japanese buyers a premium of $112 per tonne for primary metal shipments for the October-December quarter, down 15 percent from the current quarter. Another producer has sought a premium of $115 a tonne, down 13 percent from the premium of $132 agreed for the July- September quarter. China Aluminium exports increased China sustained a surge in aluminium shipments to world markets in August as buyers sought supplies from the largest producer to replace metal from United Co. Rusal, which has been hit by US sanctions. Exports of unwrought aluminium and products reached 517,000 metric tonnes, almost the same as the 520,000 tonnes in July, which was the highest total in more than three years. Shipments exceeded 1.5 million tonnes in June through August, a record for a three month period, and were up 15% in the first eight months of the year. ALIUMINUM Key News Workers extend strike at Alcoa's alumina operations in Western Australia Workers at Alcoa's alumina and bauxite operations in Western Australia have voted to reject a proposed workplace agreement and will continue to strike. Around 1,500 staff at three alumina refineries and two bauxite mines walked out on Aug. 8 over a new workplace agreement they say does not offer sufficient job security. China's aluminium capital Binzhou plans new 'high-end' projects The city of Binzhou in eastern China's Shandong province, home to top aluminium producer China Hongqiao Group is planning five new projects to support development of a high-end aluminium industry. The Global aluminium output rises to mln Tonnes in July According to the International Aluminium Institute (IAI) Global primary aluminium output rose to million tonnes in July from revised million tonnes in June Estimated Chinese production rose to 3.11 million tonnes in July from a revised 3.05 million tonnes in June. 6

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