Decision enabling market analysis & price outlook For Dec 31, 2013 Report Summary LME / SHFE / as on 30 th Dec, 2013 Fundamental Summary Technical Summary Price outlook summary Price Ranges Procurement strategy review (LME Cash) Procurement strategy (LME Cash) Futures Strategy Review LME 3M: USD 2086 ( 0.27%) SHFE 3M: CNY 15290 (+0.46%) Dec 13: INR 130.00 ( 0.36%) Critical factors Expected weakness in demand from Chinese steel sector Inventory movement at LME US Fed trimming its monthly bond purchases Gaining strength in US economic activity Tightening supply in spot market Cash trading at premium to Sum Up Impact Bearish Bearish Mixed Price is above 18 pd EMA indicating positive bias. RSI (9) being overbought, resistance is expected around USD 2170 2190. LME Concisely, upside momentum is seen stalling hence retracement towards USD 2050 is likely in the coming few sessions. Short term uptrend in the zinc price is likely to provide support around INR 125 while resistance is expected around INR 130.50/132.50 in the coming few sessions. 0 5 days 0 10 days Range Price Bias Range Price Bias 2130 2050 Positive 2190 1970 Mixed Dec 13 buying requirements were completed at an average price of USD 1858.75 compared to the monthly average of USD 1868.67 per ton. 25% of Jan 14 buying requirements completed at USD 1975 on 20 th Dec 2013. Remaining 75% of Jan 14 buying requirements should be considered around USD 2030. Trader should wait for fresh position. Trading Strategy Filled on Position Entry Objective Stop loss LME Wait Discuss with our expert 1 Phone: +91 40 33 40 40 40 E mail: services@transgraph.com Internet: www.transgraph.com
Parameter Average savings (INR*/USD) Performance Audit AMJ 2013 JAS 2013 LME 3 m forward LME Cash (procurement) LME 3 m forward LME Cash (procurement) 1.10* 16.71 28.62 0.67* 9.40 23.91 Strike rate % 100 85.71 100 66.67 40.00 100 Net profit / Gross profit Ratio % 100 79.59 57.14 65.28 Market Review Amid position squaring in thin trading conditions ahead of New Year holiday, Industrial metal complex traded on a mixed to negative note during the Monday s trade at LME. Fundamental Overview and expectations: Chinese production of refined Zinc and Zinc concentrates has remianed higher Y o Y since March 2013 keeping market well supplied in first eleven months of the year. While zinc ingot production in Nov 2013 increased modestly (M o M) to to 503 KT. Production in first 11 months (Jan Nov) have remained around 12.4 percent higher at 4.93 million tons compared to production of 4.38 million tons during the same period in 2012. Zinc concentrate production in first 11 months of 2013 is at 5.16 million tons, around 9.2 percent higher compared to 4.72 million tons in first 11 months of 2012. Rising domestic supply of raw material concentrates is expected to keep Chinese Zinc production higher in the medium term. While spread started narrowing down since last week of November, it entered into backwardation in mid December and recovered slightly in third week of the month. However, Zinc market again into backwardation last week with Cash trading at a premium compared to 3 month. Chart adjacent showing spread and price movement since first week of October clearly shows that 3 month forward started rallying upward once spread touched zero. Spread between the cash and 3 month official plunged to its lowest in 2013 and are at USD ( 18 per ton, as on 30th Dec) Economic Overview and expectations: Below expected gains in previously owned homes sales in US indicates that higher borrowing costs are to some extent holding back the recovery in residential real estate. Pending home sales registered an increase of 0.2 percent, the first gain in six months which signals that gains in hiring, household wealth and consumer confidence would help boost the housing recovery and give greater momentum to the economy in the medium term. 2
At economic data front, week ahead is going to be a rather quiet week in terms of key economic releases as New Year holidays shall delay some of the key releases into next week. However, having said that we shall still see some of the key releases particularly from China and US. Manufacturing PMI numbers from US and China shall remain the major attraction of the week in addition to other key data such as Non Manufacturing PMI data from China and consumer confidence data from US. Notable improvement seen in the jobs market and Q3 GDP growth along with approval of new budget deal ahead of the January deadline is expected to boost consumer confidence in December. We expect a sharp spike from 70.4 seen last month to around 76 this month. While we expect a marginal fall in Chinese Manufacturing PMI from 51.4 in November to 51.3 in December owing to year end cash crunch which got relaxed following money infusion by Central bank, it will still be in expansionary area which shall negate any disappointment for market. Calendar Key Economic & Other Fundamental Data Event Date Expected Value Current Value S&P/CS Composite 20 HPI y/y (US) 31 Dec 13.4 % 13.3 % CB Consumer Confidence (US) 31 Dec 76.0 70.4 Manufacturing PMI (China) 01 Jan 51.3 51.4 Technical Outlook LME Zinc 3 M forward price traded mixed within its previous day range there by placing Bearish Harami body, hence early signal for consolidation. Price is well above 18 pd EMA and steep slope is evident on the chart likely to find support around USD 2050. On the daily technical setup, RSI (9) is deeply overbought hence consolidation is likely to follow. On the higher side, extension based resistance is likely around USD 2115/2190 in the coming few sessions. On the down side swing based support is 2970, while USD 2050 should support the current upside momentum. Concisely, upside momentum is seen stalling hence retracement towards USD 2050 is likely in the coming few sessions. 3
Zinc Volatility 1.50 1.00 0.50 0.00 Sep 13 Oct 13 Nov 13 Dec 13 Powered by TransRisk Zinc Daily Future Volatility RISK PARAMETER 55 45 35 25 Zinc AVaR 26.667 15 Sep 13 Oct 13 Nov 13 Dec 13 Powered by TransRisk Zinc Daily Future AVaR (USD/MT) Zinc Commodity Price Chart Links http://www.transgraph.com/commodityupdates_metals.aspx http://www.transgraph.com/commodityupdates_zinc.aspx Market and details Dec 30 2013 Dec 27 2013 Change %Change LME Zinc Cash, USD/Ton 2106 2101 5.00 0.24 LME Zinc 3 M, USD/Ton 2086 2091 5.75 0.27 LME Zinc 15 M, USD/Ton 2106 2106 0.50 0.02 Changjiang, Yuan/Ton 15175 15175 0.00 0.00 SHFE 3M Futures Yuan/Ton 15290 15220 70.00 0.46 HZL prices Ex Chanderiya, INR/Ton 179214 175956 3258.24 1.85 Mumbai Spot Market, INR / ton 130500 131300 800.00 0.61 LME warehouse stocks (In tons) 888600 885600 3000.00 0.34 Zinc Dec 30, 2013 Open High Low Close Dec 13 130.25 131.10 129.50 130.00 Jan 14 130.50 131.25 129.45 129.70 Change (Previous close) 0.50 (130.50) 0.95 (130.65) % Change 0.38 0.73 Cumulative Volume (in lots) Open interest 7793 4540 4
LEGAL INFORMATION This document is the whole property of Transgraph Consulting Private Limited, Hyderabad, India (hereafter TransGraph ). The following acts are strictly prohibited: Reproduction and/or forwarding for sale or any other uses Posting on any communication medium Transmittal via the Internet Terms of usage Upon receipt of this document either directly or indirectly, it is understood that the user will and must fully comply with the other terms and conditions of TransGraph. By accepting this document the user agrees to be bound by the foregoing limitations. This publication is prepared by TransGraph and protected by copyright laws. Unless otherwise noted in the Service Agreement, the entire contents of this publication are copyrighted by TransGraph, and may not be reproduced, stored in another retrieval system, posted on any communication medium, or transmitted in any form or by any means without prior written consent of TransGraph. Unauthorized reproduction or distribution of this publication, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of TransGraph. The information and opinions contained in this report have been obtained from sources TransGraph believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any assets (commodities, currencies, etc) or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient; they are subject to change without any notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any views expressed reflect the current views of the analysts, which do not necessarily correspond to the opinions of TransGraph or its affiliates. Opinions expressed may differ from views set out in other documents, including research, published by TransGraph. Any reference to past performance should not be taken as an indication of future performance. No member in the public related to TransGraph accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. Analyst Certification Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst's views about any and all of the factors and assets (commodities, currencies, etc) named in this report, and (ii) no part of the analyst's compensation is directly or indirectly, related to the execution of the specific recommendations or views expressed herein. Copyright 2013 TransGraph Consulting Private Limited, Hyderabad, India. Prepared by Consulting Team TransGraph Registered Office: 6 3 655/2/1, AP Civil Supplies Bhavan Lane, Somajiguda, Hyderabad 500082 INDIA Phone: +91 40 33 40 40 40 E mail: services@transgraph.com Internet: www.transgraph.com Discuss with our expert 5 Phone: +91 40 33 40 40 40 E mail: services@transgraph.com Internet: www.transgraph.com