Macquarie Research: Commodities Comment Global IP set to reaccelerate

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Commodities Comment
Global IP set to reaccelerate
Feature article
 Key leading indicators like the PMIs and those published by the OECD
suggest that global industrial production (IP) will pick up pace in early-2011.
Latest news
 Base metals were mixed in the first LME trading session for the year, with
copper easing as Shanghai stocks rose and reports that Collahuasi
recommenced shipments, as most other metals posted gains.
 Our sources report that the much-discussed shipment from Collahuasi on
December 26 was material that was moved via ship before the shiploader
accident occurred. Therefore the recent shipment does not mean Collahuasi
is regularly starting to deliver concentrates via the Antofagasta port.
Antofagasta also exports zinc and lead and has limitations for the volume to
be exported, so we do not expect too much to go through that port. As far as
we are aware Xstrata/Anglo continue to seek alternative arrangements, with
around 100,000t per month of concentrate desperately trying to find its way to
market. Force majeure remains in place.
 Ivernia's Magellan lead mine in Western Australia has been ordered by the
state government to suspend shipments after airborne lead was detected
inside containers. We estimate Magellan produced ~55,000 tonnes of lead-inconcentrate
in 2010, and the mine has been expected to continue its ramp-up
to full capacity of around 85,000 tpa this year, which is equivalent to around
2% of world lead mine output. A protracted outage at Magellan would
probably leave the market in deficit, supporting prices and undermining
treatment charges.
 Richards Bay Coal Terminal (RBCT) shipped 6.15mt in December to bring
exports to 63.4mt for 2010, up from 61.5mt in 2009. The better performance
has, however, come at the expense of depleted port stocks, which are now at
a very low 1.66mt, compared with 2.44mt at the end of 2010. Physical prices
were strong, with DES ARA trading at $130.50/t for March delivery and
Newcastle at $132.50/t for April delivery.
 Mid-term uranium prices rose from $62/lb U308 to $64/lb over the past week,
while long- term uranium indicator prices rose from $65/lb to $67/lb, according
to Tradetech. Meanwhile, an announcement from Chinese news wires that the
country had made a technical breakthrough, enabling it to reprocess spent
nuclear fuel, appears to be more hype than substance. Reprocessing is
expensive, and actions speak louder than words, with China stockpiling
uranium in an unprecedented manner in 2010.
 Coal logistics in Queensland are continuing to recover from the floods, with
the 18mtpa Moura system now partially operational and only the 66mtpa
Blackwater system out of action. However, with speed restrictions likely to
remain in place over the coming weeks, effective capacity on the mines will
still be reduced. We estimate 0.8mt of met coal and 0.3mt of thermal lost to
the seaborne market every week Blackwater is down, in addition to the 3mt of
met and 1.5mt of thermal we estimate has been lost since the start of
December. Focus will now shift to the mining operations themselves and how
quickly and consistently coal can start to flow onto the rail network given the
disruptions in getting both employees and equipment to sites.