Gold physical demand: YTD run rate

Transcription

1 Spot gold ($/oz) SGE prem ($/oz) Index Daily Gold physical demand: YTD run rate Government bond yields in the US are still important for gold, and the recent decline in the US 10-year government bond yields is a key reason why ETF holdings have flat-lined this year. Also, we still to expect the US bond yield to move higher towards year-end, with a target of 3.75% (currently around 2.66%). This, we believe, is likely to put pressure on ETF gold holdings. Therefore, if one assumes that gold will move higher on a sustainable basis where yields move higher too, one also has to assume that gold physical demand, especially from Asia, will be strong. It is well known, and evident from China s import data China, that China was one of the few pillars of support for gold in We continue to monitor developments in Asia, and China in particular. At the moment, gold demand from Asia is weak. Earlier this month, we would have ascribed this to seasonality. However, seasonal weakness is over now, so now we ascribe the current demand weakness to the gold price that moved above $1,300 in recent weeks. We are witnessing demand weakness in two indicators. The first is the SGE premium, which has traded in negative for the past three days (see Figure 1). The second indicator is the YTD run rate for gold demand from Asia more broadly, which is captured in our Standard Bank Gold Physical Flow Index. We compare the YTD activity relative to previous years. So far in 2014, we are below the run rate of 2013 (see Figure 2). It is still early in the year, and worth noting that the gold price s sharp decline came only in April last year - the event that triggered the sharp rise in Asia demand. But so far it appears as if we need another leg down in the gold price to trigger the same reaction. If physical demand is weak, and bond yields move higher, we believe gold seems destined to struggle, especially once future market movement settles (i.e. when speculative shortcovering stops). From a tactical perspective, we still look for gold a lower gold price in Q1 and Q2.. Once again, key in this is the US 10y government bond yield. SGE gold premium vs. spot gold Oct 10-Dec 10-Feb Spot gold SGE premium Gold Physical Flow Index By Walter de Wet Trading days Commodities Strategist Walter de Wet Walter.DeWet@standardbank.co.za Commodities Strategist Leon Westgate Leon.Westgate@standardbank.com Commodities Strategist Melinda Moore Melinda.Moore@standardbank.com This material is "non-independent research". Non-independent research is a "marketing communication" as defined in the UK FCA Handbook. It has not been prepared in accordance with the full legal requirements designed to promote independence of research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Source: Standard Bank Research, SGE Source: Standard Bank Research

2 Base metals Copper is testing the $7,000 level the first time since November last year, with selling in Asia pushing the price lower. We still forecast a copper price of above $7,000 on average for all four quarters of this year. Therefore, we expect to see some buying if the price drops too far below this level. LME cancelled warrant copper inventory dropped further today (6,800mt), with the bulk of the cancellations coming from Europe. Copper cancelled warrants as a percentage of total LME inventory now stands at 54%. For base metals, we expect the market to look towards next week s data releases, and in particular the Chinese manufacturing PMI (despite the data being perhaps distorted by the public holidays in February). From a base metal perspective, we are especially interested in how the order books of fabricators and manufacturers will develop over the next few months. The December and January manufacturing PMI New Export Orders sub-index dropped below 50, indicating diminishing new export orders. A further drop in new orders could signal reluctance from Chinese fabricators to buy metal, which could put further downward pressure on prices. The zinc/lead spread dropped to below $70 yesterday. As pointed out, fundamentally we still favour lead over zinc (on a 12m view). Between $50 $0, we would expect renewed interest to initiate long the spread again. But for now, the market seems still to like zinc. However, lead is sitting on its 200d MA. Bulks By Walter de Wet Today it was the PBOC s turn to calm investment markets, with an unidentified official stating that China s system cash supplies were adequate and that a post-cny drain was normal, and not to be read as a change in monetary policy towards a more tightening bias. Although markets rallied early, by COB, the PBOC s further cash drain, together with Saturday s PMI results and next week s National People s Congress headline nervousness had returned, muting any initial euphoria. Shanghai Equities rose a further unconvincing 0.3% to 2,047 points today, coming off intra-day highs of 2,068, with property and auto stocks remaining weak. Shanghai 7- day interbank rates rose to 3.44% today, after the PBOC drained a further RMB 60 bln via a 14-day repo at 3.8% again, taking the week s net withdrawals to RMB 160bln, combined with RMB 108bln last week (RMB268bln). Shanghai Rebar Futures May-14 contract closed up RMB 23/t at RMB 3,340/t, rallying from RMB 3,333/t into the close. Dazong HRC April-14 futures shifted up RMB 4/t to RMB 3,396/t. Among physical steels, Tangshan billet prices rose RMB 10/t to RMB 2,850/t. Rebar prices fell RMB 20/t in Shanghai and Beijing. HRC prices fell RMB 10/t in Shanghai and Beijing. China s daily steel output fell 4.8% to mt in mid-february, with CISA mill inventories at mt, up 6% p/p and up 47% since end-december. Dalian Commodity Exchange IO active May-14 contract prices rose RMB 4/t to RMB 824/t, with lower volumes of 88,000 lots traded today. Among physical iron ore, RioT tendered a PB fines Fe 61.4% March cargo at $117.58/t, below yesterday s levels of $118.11/t. However globalore saw bids for PB fines improve to $119.10/t, while on CBMX a Fe 61% cargo was bid at $117.50/t. The TSI Fe 62% China CFR price index rose 20 cents to $118/t (MTD: $121.54/t). The Platts Fe 62% index rose 75 cents to $118.25/t (MTD: $121.41/t), while the TSI Fe 58% index fell $1.60/t to $106.10/t (MTD: $111.24/t). The Metal Bulletin Fe 62% index rose 54 cents to $117.87/t, while its Fe 58% index fell 43 cents to 2

3 $102.76/t. The Argus Fe 62% index rose 80 cents to $116.50/t. Mysteel s Fe 62% index remained flat at $117.50/t, while its Fe 58% index was stable at $105.50/t. In IO supply news, MMX has concluded the part-sale of its Sudeste port to Trafigura and Mubadala today, giving them a 65% stake. MMX will have rights to ship 7mtpa from the port. Vale has shipped its first Valemax to Malaysia s Teluk Rubiah port, with 383,500 tonnes of ore aboard. Vale plans to blend ores from different production units to improve final quality for its Asian customer base from this 35mtpa distribution centre. We are still yet to fully understand the company s logic in operating this discharge/re-load strategy: although the theoretical concept of trying to capture some of Australia s freight competitiveness is appealing, reality is proving impractical. Flinders Mines is keen to use Balla Balla s proposed port to explore exporting 5-20mtpa of hematite from its Pilbara project, from H2:15, having agreed to a $25/t service charge and a 30% revenue share for Fe 55.2% sales over $A60/t. The Baltic Exchange Cape index shifted upwards by another 9.7% to $13,762/day, with C3 up 7% at $21.527/t and C5 up 3.4% at $9.568/t. Eurozone sentiment lifted slightly in February from 101 to 101.2, largely driven by services and suggesting GDP growth of 1.5%. Meanwhile Spain s Q4:13 GDP rose by 0.2% y/y, with both household spending and investment up for the 2nd quarter in a row. For Q2:14 thermal coal prices, API 2 is trading at $72.95/t; API 4 is trading at $73/t; while Newcastle is trading at $76.25/t. Two ARA cargoes traded today for May-14, the first at $73.25/t and the second at $73.05/t, down from Tuesday s June deals by cents/t, but above yesterday s offers, providing some support to paper. Zhengzhou Futures May-14 contract price rose RMB 1/t to RMB 538/t. A South China physical NAR 5500 cargo traded at $77/t CFR, with early May bid at $76.90/t, with concern about Daqin s upcoming April rail maintenance at play, together with improved macro sentiment today. Port stocks are at 19.16mt, off 1.1% d/d. Shenhua is selling coal flat this week, with NAR 5500 spot trading at RMB 568.8/t, in line with Q1 contract settlements. Shanxi s Daqin line expects to rail 15mt more in China s January thermal imports reached 26.4mt, above December s 24mt, including lignite imports of 7.9mt and anthracite imports of 3.8mt. Premium Hard Coking Coal spot prices are trading in the $ /t Qld FOB range, with China CFR prices ranging $ /t. On the Dalian Exchange, May-14 coke price traded up RMB 1/t to RMB 1,284/t, while HCC prices closed off RMB 3/t to RMB 917/t. Stocks are at 12.25mt, up 0.2% w/w. Environmental pressures are continuing to keep steel mill demand weak. By Melinda Moore 3

4 Commodity Prices Base Metals LME 3 month Open Close High Low Daily Change (%) Cash Settle Change in Cash - 3m change cash settle Aluminium Copper Lead Nickel Tin Zinc Daily LME Stock Change (mt) Metal Today Yesterday In Out One day change YTD change (mt) Cancelled warrants (mt) Cancelled warrants (%) Contract turnover Aluminium Copper Lead Nickel Tin Zinc Shanghai 3-month Open Last 1d Change COMEX Open Close Change Change (%) Aluminium Ali Feb' Copper Cu Feb' Zinc ZAR metal prices Aluminium Copper Lead Nickel Tin Zinc ZAR/USD fix Cash month Precious metals AM Fix PM Fix High bid Low offer Closing bid Daily EFP's change Gold /-0.5 Silver /0 Platinum /+3.5 Palladium /+1.0 Forwards (%) 1 month 2 months 3 months 6 months 12 months Gold Silver USD Libor Technical Indicators 30-day RSI 10-day MA 20-day MA 100-day 200-day Support Resistance MA MA Gold Silver Platinum Palladium Active Month Future COMEX COMEX SLV NYMEX NYMEX DGCX GLD TOCOM CBOT GLD GLD PAL PLAT GLD Settlement Open Interest Change in Open Interest Energy Energy futures pricing 1 month Change 2 month Change 3 month Change 6 month Change Sing Gasoil ($/bbbl) Gasoil 0.1% Rdam ($/mt) NWE CIF jet ($/mt) Singapore Kero ($/bbl) % Rdam barges ($/mt) % Fuel Oil FOB ($/mt) Sing FO180 Cargo ($/mt) Thermal coal Q1 14 Change Q2 14 Change Q3 14 Change Cal 14 Change API2 (CIF ARA) API4 (FOB RBCT) Source: LME, NYMEX, COMEX, SHFE, Standard Bank Research 4

5 Commodity Prices Latest Price 1-week 1-month 3-month 6-month 1-year Bulks Steel Physical Turkish Scrap 80:20 (Iskinderun CFR) $/t % 1.96% 10.61% 10.86% -0.80% China Tangshan Steel Billet $/t % -0.20% 1.43% -0.60% -7.81% China HRC export (Shanghai FOB) $/t % 0.19% 0.57% 6.18% -6.16% North Europe HRC domestic (ex-works) $/t % 0.00% -1.71% -1.71% -8.51% North America HRC domestic (Midwest FOB) $/t % 0.15% 6.21% 8.06% 8.40% Steel Futures LME Billet Cash $/t % 23.53% 50.00% % 7.51% LME Billet Futures (1-mth) $/t % 23.53% 48.58% % 6.78% LME Steel Billet Stocks change Shanghai Rebar Futures (Active contract) $/t % -7.66% -4.07% 3.15% % Shanghai Rebar Futures On-Warrant Stocks change SHFE Rebar - Open Interest SHFE Rebar - Total Volume China Steel Inventory (million tonnes) % 0.39% % % 1.55% Iron ore China Iron Ore Fines (62% Fe; CFR Tianjin) $/t % -5.67% -0.23% 6.31% % China Iron Ore Fines (58% Fe; CFR Tianjin) $/t % -3.02% -0.33% 6.82% % SGX AsiaClear IO Swaps 62% Fe $/t (1-mth) % -5.31% 0.88% 7.58% % Platinum China Iron Ore Inventory (million tonnes) % 0.73% 16.30% 12.62% 11.69% Coking coal Premium Hard Coking Coal (Qld FOB) $/t % -1.70% -9.02% -4.39% % Capesize freight Saldanha South Africa-Beilun China % % % 31.48% 42.00% Financials pricing RMB Currency % -0.29% -1.06% -1.22% -2.75% China 7-day repo % % % 11.67% 34.45% API2 (CIF ARA) % -9.26% -8.18% 3.33% % Source: LME, SGX, McCloskey, SHFE, Bloomberg 5

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