Macquarie Research:: Mn ore market outlook remains good

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Commodities Comment
Mn ore market outlook remains good
Feature article
 We review the market outlook for manganese ore following our recent visit to
South Africa, which is the world’s leading producer and hosts the largest and
highest grade reserves. While prices will be under pressure in the short term
after BHP Billiton’s aggressive pricing announcement this week, we remain
positive on market prospects going forward and continue to anticipate that the
market for medium- and high-grade manganese ore will become increasingly
tight over the first half of this decade, underpinning prices.

Latest news
 LME base metals prices finished flat to down in trading on Wednesday.
Tin closed unchanged but not before posting a new record during the day.
LME zinc declined by 0.3% despite SHFE zinc rallying to a three-year high.
Copper and lead recorded the sharpest falls, closing down by 1.8%, the latter
despite a sharp increase in cancelled warrants. PGM prices also fell, while
gold and silver ended the day broadly unchanged.
 US industrial production fell by 0.1% MoM in January, trailing consensus
market expectations for an increase of about 0.5%. However, December data
was revised up to show a rise of 1.2% MoM, from an initial estimate of 0.8%.
Moreover, manufacturing output maintained positive momentum with a rise of
0.3% MoM in January, following an upwardly revised gain of 0.9% in
December. Meanwhile, US housing market data remain moribund, with
new starts falling by 2% YoY in January and confidence surveys of the sector
stuck at very low levels.
 In its 4Q10 results commentary Norsk Hydro noted that the company had
seen increased demand throughout 2010. It expects this to continue into
2011, with significant parts of its downstream businesses having solid
order books for 1H 2011. Demand for metal products, in particular
extrusion ingot and sheet ingot, has been strong and demand for primary
foundry alloys has improved in Northern Europe, notably in Germany and
export markets in Asia. Meanwhile, Norsk's Qatalum aluminium plant
ramp-up is reportedly on track to reach full output from June 2011
and should be about 500,000t of primary metal this year.
 Indonesia’s PT Timah, the world’s second largest tin producer, has said that it
expects its refined tin production to fall to between 37,000t and 40,000t in 2011,
which would mark a reverse of up to about 3,500t (8%) from last year’s output
of 40,413t. The tin market is already deep in deficit and expectations of such
supply-side shortfalls are supporting record tin prices at present. However,
we would be surprised if the company’s production does in fact fall this year,
noting that it is expanding its mining fleet of offshore dredges and that present
price levels provide a strong incentive to increase output. Indeed, indications
are that the physical tin market has not tightened any further over the last
two-to-three months, during which time the price has risen by almost 20%.
 Elsewhere, Bolivia’s Vinto has announced that it will inaugurate its new
Ausmelt tin furnace in November and could increase its refined tin output by
up to 50% by 2012, which would amount to about 5,500t. Vinto produced
11,520t of refined tin in 2010.