Open Close High Low Daily change Change (%) Cash Settle

Transcription

1 : Daily 03 December 2013 Tapering talk continues to dominate sentiment on the run up to Friday s Nonfarm Payroll data, with intervening economic data, such as yesterday s better than expected US ISM figure looked at in respect of its impact on a tapering decision rather than the strength of the underlying economic picture. Price-wise its been a mixed bag heading into Tuesday afternoon, with copper and lead coming under further pressure while the other base metals have managed to tread water. Dollar weakness is however stating to lend some background support. Gold may bounce a bit after yesterday s sell-off, but tactically it should still be sold into rallies. We believe yesterday s decline in the gold price following the better-thanexpected ISM manufacturing data is a preview of what is likely to happen should the US non-farm payrolls data for November comes close to 200K jobs. Perhaps more important, and while the ISM manufacturing was bearish for gold (via the impact of Fed policy), is that some sub-indices of the ISM index showed good strength. Most notably, the employment, new orders, production sub-indices all registered marked increases. Research Strategists Walter de Wet, CFA* Walter.DeWet@standardbank.com Leon Westgate* Leon.Westgate@standardbank.com Melinda Moore* Melinda.Moore@standardbank.com Sentiment has been improving across the IO swaps curve over the past two days, as perceptions regarding the outlook for China s GDP growth in 2014 strengthen and as Brazilian miners announce cutbacks in anticipated volumes for China s IO restocking process also continues strongly, making up for destocking in H2:12 and Q2:13, in the face of unexpected strength in steel output since July, due to property pumppriming. Commodity price data (02 December 2013) Base metals LME 3-month Open Close High Low Daily change Change (%) Cash Settle Change in cash settle Cash - 3m Aluminium 1,748 1,743 1,754 1, % 1, Copper 7,041 6,975 7,061 6, % 7, Lead 2,070 2,067 2,084 2, % 2, Nickel 13,501 13,515 13,548 13, % 13, Tin 22,650 22,500 22,790 22, % 22, Zinc 1,881 1,877 1,889 1, % 1, Energy Open Close High Low day/day Change (%) ATM 1m vol ATM 6m vol ATM 1y vol ICE Brent % NYMEX WTI % ICE Gasoil % API2 Q4' AM Fix PM Fix High bid Low offer Closing bid Change (d/d) EFP's Gold 1, , , /-0.3 Silver /+1.0 Platinum 1, , /+3.5 Palladium /+1.0 Sources: LME; BBG Please refer to the disclaimer at the end of this document *This document is not investment research, as it has not been prepared in accordance with the requirements designed to promote the independence of research. It therefore constitutes a marketing communication as defined by the UK FCA Handbook, and must not be considered a Research Report under US or any other regulatory regime. U.S. Disclosure: Standard Bank Group Limited does and seeks to do business with companies covered in its reports. As a result, 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.

2 Base metals Tapering talk continues to dominate sentiment on the run up to Friday s Nonfarm Payroll data, with intervening economic data, such as yesterday s better than expected US ISM figure looked at in respect of its impact on a tapering decision rather than the strength of the underlying economic picture. Price-wise its been a mixed bag heading into Tuesday afternoon, with copper and lead coming under further pressure while the other base metals have managed to tread water. Dollar weakness is however stating to lend some background support. Copper has seen decent two way interest build up, however prices have nevertheless continued to fall away with stops being triggered below $6,950. On the SHFE, speculative selling activity emerged overnight with prices falling just under 1% while open interest gained 3.6%, suggesting fresh short positions were added. The SHFE activity is still in contrast to the physical market where domestic physical copper in Shanghai is trading at a 60 CNY premium to the December SHFE contract. The arbitrage window is nevertheless still deeply negative, yielding a $110/mt loss on a cash basis as of this morning, though its also worth noting that the premium for material in bonded warehouse in Shangahi is still up around the $200/mt mark. LME onwarrant inventory meanwhile declined a net 8,500 mt, the main reason being a 7,525 mt jump in cancelled warrants in New Orleans. Nickel has continued to tread water around $13,450/mt with the metal trading in only a very narrow $81 range heading into Tuesday afternoon. Turnover has been relatively decent nevertheless, with LME Select volumes outpacing those seen in lead heading into US trade. LME inventory has meanwhile continued to advance, with on-warrant stocks climbing a net 2,766 mt. The main location for the activity was Johor, where a fresh inflow of 1,572 mt was supplemented by 1,728 mt of previously cancelled material being placed back on warrant. Elsewhere, Rotterdam saw a 414 mt increase in cancelled warrants. By Leon Westgate Precious metals As our G10 analyst, Steve Barrow, pointed out this morning - right now financial markets do not look prepared for tapering should the Fed decide to trim bond purchases at the December 17 th /18 th meeting. This could leave markets vulnerable should data, such as Friday s non-farm payrolls, suggest that the possibility of tapering needs to be priced in to a greater extent than it is right now. In our view, this includes gold. Gold may bounce a bit after yesterday s sell-off, but tactically it should still be sold into rallies. We believe yesterday s decline in the gold price following the better-than-expected ISM manufacturing data is a preview of what is likely to happen should the US non-farm payrolls data for November comes close to 200K jobs. Perhaps more important, and while the ISM manufacturing was bearish for gold (via the impact of Fed policy), is that some sub-indices of the ISM index showed good strength. Most notably, the employment, new orders, production sub-indices all registered marked increases. Furthermore, as pointed out over the past few weeks, the physical demand response for gold from Asia remains lackluster compared to June and July this year, and indications are that it is unlikely to improve anytime soon. As a result, the threat that a sudden improvement in physical market in Asia may trigger the short-covering, has diminished. Silver should follow gold and as a result remains a sell into rallies. As pointed out last week, we expect PGM to trade largely sideways, possibly tracking gold lower, after news that AMCU, the representative union at Amplats, has postponed until January a vote on whether or not to strike. The news has removed possible strike action for the time being, which has reduced downside support for now. Some support is coming from growing ETF holdings, which continues to emanate in South Africa where holdings platinum still proves a successful strategy given the weakness in the Rand. By Walter de Wet Bulks Sentiment has been improving across the IO swaps curve over the past two days, as perceptions regarding the outlook for China s GDP growth in 2014 strengthen and as Brazilian miners announce cutbacks in anticipated volumes for China s IO restocking process also continues strongly, making up for destocking in H2:12 and Q2:13, in the face of unexpected strength in steel output since July, due to property pump-priming. 2

3 Shanghai Equities rose 0.69% to 2223 points, with financials and energy the only sectors to experience profit-taking. Steel rallied, on the back of comments by the China Securities Journal that the government would take more measures to ease industry overcapacity, with MIIT studying a capacity quota system. The Economic Information Daily says China may set next year s GDP growth target at 7% (down from 7.5% this year), although most still expect at least 7.5% growth. Meanwhile the CPI target is expected to be 3.5% and Money Supply to be 13%. A new strain of bird flu (H7N9) is impacting travellers to Shenzhen. Meanwhile Shanghai s pollution levels remain at the worst, since tracking began last year. China s official non-manufacturing PMI fell from 56.3 in October to 56 in November, suggesting the property sector is beginning to slow ahead of winter. Shanghai 7-day interbank rates fell to 4.62%, after the PBOC sold RMB 18bln in 7-day reverse repos, keeping the reigns tight. The RMB is reputedly the 2nd most used currency in global trade finance (LCs), surpassing the Euro in October, with 17% of its trade settled in yuan compared with <1% in Shanghai Rebar Futures Jan-14 contract closed up RMB 13/t at RMB 3,582/t, while the May-14 active contract closed RMB 14/t higher at RMB 3,709/t, above the 3700 mark. Dazong HRC Jan-14 futures shifted up RMB 1/t to RMB 3,569/t. Among physical steels, Tangshan billet prices traded unchanged today at RMB 3,020/t. Rebar prices traded up RMB 20/t in both Shanghai and Beijing. Lianyungang kept its rebar prices unchanged for December, while Zenith increased its prices by RMB 50/t. HRC prices traded flat in both Shanghai and Beijing markets. Dalian Commodity Exchange IO active May-14 contract prices closed up RMB 3/t to RMB 939/t, with 18,342 lots traded. Among physical iron ore, in a busy day with all 3 majors participating, a PB fines cargo traded on globalore at $138.40/t, with a BHPB MNP cargo then trading at $138.50/t, while a BHPB Yandi Fe 57.7% fines Jan-cargo traded at $125.50/t. A Vale SSFT Fe 62.62% (6.63% Si; 1.22% Al) tender went through at $138.69/t. Local Chinese platforms were quiet however. PB fines at port traded at RMB 915/t. The TSI Fe 62% China CFR price index rose $1.40/t to $138.20/t. The Platts Fe 62% index rose $1.50/t to $138/t, while the TSI Fe 58% index rose 50 cents to $124.50/t. Mysteel s Fe 62% index shifted up $1/t to $137.25/t, while its Fe 58% index jumped $1/t to $124/t. Metal Bulletin s Fe 62% index rose $1.02/t to $138.33/t, while its Fe 58% index rose 75 cents to $119.67/t. In IO supply news, suppliers appear to be cutting back expectations in Brazil. Vale is unlikely to experience any tonnage growth next year, with ongoing depletion at its southern mines and delays to its Carajas +40mt project, suggesting virtually zero growth since Meanwhile MMX is to scale back its expansion plans for Serra Azul, from 30mtpa to 15mtpa by H2:15, up from 8.6mtpa this year. However the miner is still keen to find a partner to develop the project first. Bellzone is looking to find funders for tis $865m Kalia project in Guinea, 300-km from port. The SA Government has approved a new port for Eyre Peninsula, at Lucky Bay, for IronClad to begin exporting IO from. The cost will be $23m to build. The Baltic Exchange Cape index shifted up 5.3% to $27,041/day, with C3 up $26.06/t and C5 up $12.26/t. For Q1:14 thermal coal prices, API 2 is trading at $81/t; API 4 is trading at $83.65/t; while Newcastle is trading at $86.80/t. A NEWC March-14 cargo traded at $86/t, while x2 Feb-14 cargoes of RB1 traded at $83.50/t yesterday. Indian ports are holding over 8.4mt of thermal stocks, compared to 8.5mt last week. In China, Zhengzhou Futures Jan-14 contract price rallied RMB 13/t to RMB 595.6/t; while the May-14 price fell RMB 3.6/t to RMB 591.2/t, with Chinese Q1 NAR 5500 at $82.90/t and NEWC NAR 5500 FOB at $70.50/t. Q1 Indo Sub-bit traded at $61.75/t, while Cal114 went through at $61.50/t. China s NDRC expects to expand the resources tax to coal, which will be levied by local governments and is expected to be price-linked (potentially levied at 5% (c.rmb 2.5-3/t for thermal). Coal stocks at Coal stock at major ports dropped 0.5% to 12.16mt, with GZ stocks up 1.2% at 2.39mt today. Premium Hard Coking Coal spot prices are trading in the $ /t Qld FOB range, following the rise in freight rates this week, with China CFR prices remaining in the $ /t range. On the Dalian Exchange, Jan-14 coke price traded off RMB 2/t to RMB 1,542/t, while HCC prices closed up RMB 3/t at RMB 1,082/t. Melinda Moore 3

4 Base metals Daily LME Stock Movement (mt) Metal Today Yesterday In Out One day change YTD change (mt) Cancelled warrants (mt) Cancelled warrants (%) Contract turnover Aluminium 5,465,575 5,471, ,175-6, ,525 2,174, ,029 Copper 418, , ,650-1,650 98, , ,783 Lead 229, , ,375 47, ,656 Nickel 252, ,126 1, ,064 99, ,865 Tin 10,600 10, ,225 2, ,396 Zinc 955, , ,675-4, , , ,695 Shanghai 3-month forward prices COMEX active month future prices Metal Open Last 1d Chnge Open Close Change Change (%) Aluminium 13,930 13, Ali Sep' Copper 50,300 50, Cu Sep' % Zinc 14,750 14, ZAR metal prices Aluminium Copper Lead Nickel Tin Zinc ZAR/USD Cash 17,512 71,921 20, , ,595 19, month 18,074 72,348 21, , ,381 19, Energy Energy futures pricing Price Change Price Change Price Change Price Change Price Change 1 month 2 month 3 month 6 month 1 year Sing Gasoil ($/bbbl) Gasoil 0.1% Rdam ($/mt) NWE CIF jet ($/mt) 1, , , , Singapore Kero ($/bbl) % Rdam barges ($/mt) % Fuel Oil FOB ($/mt) Sing FO180 Cargo ($/mt) Thermal coal Q1 14 Q2 14 Q3 14 Cal 14 Cal 15 API2 (CIF ARA) API4 (FOB RBCT) Precious metals 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 MA 200-day MA Support Resistance Gold , , , , , , Silver Platinum , , , , , , Palladium Active Month Future COMEX GLD COMEX SLV NYMEX PAL NYMEX PLAT DGCX GLD TOCOM GLD CBOT GLD Settlement 1, , , , , Open Interest 386, ,122 35,823 60,259 1, , Change in Open Interest 2,360 20,846 1,309-2, Sources: Standard Bank; LME; Bloomberg 4

5 Bulks Percentage change Latest Price Steel Physical 1-day 1-week 1-month 3-month 6-month 1-year Turkish Scrap 80:20 (Iskinderun CFR) $/t % -2.04% 3.28% 13.70% 0.06% China Tangshan Steel Billet $/t % -5.02% 4.46% 2.07% China HRC export (Shanghai FOB) $/t % -4.52% 0.96% -4.69% North Europe HRC domestic (ex-works) $/t % -4.97% -2.27% North America HRC domestic (Midwest FOB) $/t % 3.03% 4.13% 18.26% 5.59% Steel Futures LME Billet Cash $/t % -0.32% 56.17% 66.73% % LME Billet Futures (1-mth) $/t % -0.74% 52.27% 63.37% % LME Steel Billet Stocks change Shanghai Rebar Futures (Active contract) $/t % 1.36% 7.82% 4.51% 12.41% 0.67% Shanghai Rebar Futures O/W Stocks change SHFE Rebar - Open Interest SHFE Rebar - Total Volume China Steel Inventory (million tonnes) % -3.76% % % 6.87% Iron ore China Iron Ore Fines (62% Fe; CFR Tianjin) $/t % 0.74% -1.37% 22.25% 18.65% China Iron Ore Fines (58% Fe; CFR Tianjin) $/t % 2.48% -4.32% 19.58% 15.78% SGX AsiaClear IO Swaps 62% Fe $/t (1-mth) % 1.56% 1.14% 16.80% 19.45% SGX AsiaClear IO Swaps 62% Fe Open interest 35, China Iron Ore Inventory (million tonnes) % 9.69% 10.17% 13.33% 2.77% Coking coal Premium Hard Coking Coal (Qld FOB) $/t % -1.20% 1.06% % Capesize freight Tubarao Brazil-Beilun China (C3) Pilbara Australia-Qingdao China (C5) Saldanha South Africa-Beilun China % 6.19% 3.45% 38.46% 20.00% Tubarao Brazil to Rotterdam Europe Saldanha South Africa-Rotterdam Europe Financials pricing RMB Currency % 0.01% -0.09% -0.46% -0.64% -2.19% China 7-day repo % -2.9% 4.5% 20.6% -4.1% 35.9% Shanghai Equities Composite 2, % 1.81% 3.40% 4.69% -3.33% 13.42% Sources: Standard Bank; LME; Bloomberg 5

6 Disclaimer THIS COMMUNICATION MAY CONTAIN RESEARCH. SUCH RESEARCH IS A MARKETING COMMUNICATION: It is not investment research as it is not the result of financial analysis and has not been prepared in accordance with legal requirements designed to promote investment research independence. Additional information with respect to any security referred to herein may be made available on request. This material is for the general information of institutional and market professionals clients of Standard Bank Group (SBG) only. Recipients who are not market professionals or institutional investor customers of SBG should seek advice of their independent financial advisor prior to taking any investment decision based on this communication or for any necessary explanation of its content. It does not take into account the particular investment objectives, financial situation or needs of individual clients. Before acting on any advice or recommendations in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The information, tools and material presented in this marketing communication are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This material is based on information that we consider reliable, but SBG does not warrant or represent (expressly or impliedly) that it is accurate, complete, not misleading or as to its fitness for the purpose intended and it should not be relied upon as such. The information and opinions contained in this document were produced by SBG as per the date stated and may be subject to change without prior notification Opinions expressed are our current opinions as of the date appearing on this material only. We endeavour to update the material in this report on a timely basis, but regulatory compliance or other reasons may prevent us from doing so. SBG or its employees may from time to time have long or short positions in securities, warrants, futures, options, derivatives or other financial instruments referred to in this material. Where SBG designates research material to be a marketing communication, that term is used in SBG s Research Policy. This policy is available from the Research Compliance Office at SBG. SBG does and seeks to do business with companies covered in its research reports including Research Communications. As a result, 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. SBG has published a Conflicts of Interest Policy that is available upon request which describes the organisational and administrative arrangements for the prevention and avoidance of conflicts of interest. Further disclosures required under the FCA Conduct of Business Sourcebook and other regulatory bodies are available on request from the Research Compliance Department and or Global Conflicts Control Room, unless otherwise stated, share prices provided within this material are as at the close of business on the day prior to the date of the material. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of SBG. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of SBG or its affiliates. SBG believes the information and opinions in the Disclosure Appendix of this report are accurate and complete. Information and opinions presented in the other sections of this communication were obtained or derived from sources SBG believes are reliable, but SBG makes no representations as to their accuracy or completeness. Additional information is available upon request. SBG accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that liability arises under specific statutes or regulations applicable to SBG. The services, securities and investments discussed in this material may not be available to nor suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. Past performance is no guide to future performance. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Some investments discussed in this marketing communication have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make them investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realize those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. 6

7 This report is issued and distributed in Europe Standard Bank PLC. 20 Gresham Street, London EC2V 7JE which is authorised by the Prudential Regulation Authority ( PRA ) and regulated by the Prudential Regulation Authority (PRA ) and the Financial Conduct Authority ( FCA ). This report is being distributed in the United States by Standard New York Securities (USA) LLC; in Kenya by CfC Stanbic Financial Services Ltd; in Nigeria by Stanbic IBTC; in Angola by Standard Bank de Angola S.A.; in Brazil by Banco Standard de Investimentos S.A.; in China by Standard Resources (China) Limited;; in Botswana by Stanbic Bank Botswana Limited; in Democratic Republic of Congo by Stanbic Bank Congo s.a.r.l.; in Ghana by Stanbic Bank Ghana Limited;in Isle of Man by Standard Bank Isle of Man Limited; in Jersey by Standard Bank Jersey Limited; in Madagascar by Union Commercial Bank S.A.; in Mozambique by Standard Bank s.a.r.l.; in Malawi by Standard Bank Limited; in Namibia by Standard Bank Namibia Limited; in Mauritius by Standard Bank (Mauritius) Limited; in Taiwan by The Standard Bank of South Africa; in Tanzania by Stanbic Bank Tanzania Limited; in Singapore by Standard Merchant Bank (Asia) Limited; in Swaziland by Standard Bank Swaziland Limited; in Zambia by Stanbic Bank Zambia Limited; in Zimbabwe by Stanbic Bank Zimbabwe Limited; in UAE by Standard Bank Plc Dubai branch In jurisdictions where SBG is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Please note that this report was originally prepared by SBG for distribution to SBG market professionals and institutional investor customers. Recipients who are not market professionals or institutional investor customers of these firms should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the PRA or in respect of which the protections of the PRA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. Standard Bank Group Ltd Reg.No. 1969/017128/06 is listed on the JSE Limited. Copyright 2013 SBG. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Standard Bank Group Ltd. 7