Macquarie Research, Surge in Canadian nickel production in 4Q10 after Vale strike ends

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Commodities Comment
Surge in Canadian nickel production in 4Q10 after Vale strike ends

Feature article
 Vale appears to have ramped up nickel production much faster than
previously appreciated following the ending of its year-long strike.

Latest news
 Base metals fell slightly, but gold rose on “fears over Portugal‟s sovereign
debt” (whatever that means).
 Alcoa has announced that it will restart idled potlines at three of its aluminium
smelters in the USA (Massena East [125ktpa] in NY, Intalco [280ktpa] in WA
and Wenatchee [185ktpa] in WA) during 1H11. The restarts will add 137kt to
2011 output. The decision reflects rising demand and helps Alcoa to meet offtake
obligations in its power supply agreements.
 In Indonesia, the amount of refined tin metal checked prior to export fell by
9.2% YoY to 7,722t in December, and total volume of metal checked prior to
export over last year as a whole was 6.8% lower than in 2009. The fall in
exports is a function of a protracted monsoon season last year, which
adversely affected onshore and offshore mining operations. However, exports
increased for a third month in a row, rising by 7.3% in December to 8,492t
(3MMA), suggesting that „the world is over‟ and supply is responding to
record-high tin prices in recent months.
 The Chinese government‟s subsidy programme for home appliances has
been extended yet again (to end-2011) and expanded (to a further 19
provinces and cities). The subsidy of generally 10% of the prices of the
televisions, refrigerators, washing machines, air conditioners and computers
was originally set to conclude at the end of May 2010. The government also
announced that the automobile rural subsidy program and scrappage scheme
will be discontinued in 2011. The China Association of Automobile
Manufacturers still expects automobile sales growth of around 10% YoY in
2011. The energy-efficient vehicles and new energy vehicles subsidy program
should boost the share of higher copper-containing vehicles in the total.
 The Chinese NDRC says that the country met its five-year target to reduce
energy consumption per unit of gross domestic product by 20% by the end of
2010. Meanwhile, the Chinese State Grid expects generating capacity to
reach 1,440GW by 2015 and 1,760GW by 2020, up from 950GW at end-
2010. The Grid wants to add 38GW of nuclear capacity to its current capacity
of 9GW by 2015. This target of 47GW by 2015 compares to our current
estimate of 33GW in 2015 and 48GW by 2016, presenting upside risk to our
current uranium demand forecasts.
 Data from CISA shows a surge in Chinese steel production in the final ten
days of 20101 to an annualised rate of 631mtpa, reflecting an easing of
energy-related cuts. We estimate 2010 production reached 630mt for the year
as a whole, 10% higher YoY, while apparent demand grew by only 5.4% YoY
to 602mt (crude steel basis). We think that there was 20mt plus of destocking
in 2010, suggesting real consumption growth of well over 10%.