Macquarie Research, ::Copper premiums falling, other metals premiums mostly steady

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Commodities Comment
Copper premiums falling, other metals
premiums mostly steady
 We review recent trends in physical premiums for base metals and aluminium,
which offer investors a valuable guide to current market conditions.

Latest news
 LME metals prices posted a mixed performance in trading on Tuesday, with
aluminium (+1.5%) and zinc (+1%) advancing, while nickel fell by a further
2.5%. Copper was broadly unchanged. Meanwhile, all precious metals prices
fell, with palladium down by 3.6% on the day.
 German factory orders rose by a stronger-than-expected 2.9% MoM in
January to be 16% higher YoY, the Economy Ministry in Berlin said on
Tuesday. German industrial output data for January is due out Wednesday. A
breakdown of the figures showed the strongest rise was in domestic demand,
which gained 4.5% MoM in January, followed by eurozone orders that were
2.0% higher over the same period.
 The US National Federation of Independent Business’ optimism index climbed
to 94.5 in February, its highest since the recession began in December 2007.
This compares well with the average value of the index during the previous
expansion that started in November 2001.
 The latest CISA high frequency crude steel production data suggest output in
China reached an annualised rate of 698mt over the period 21–28 February –
a new all-time high. Over last month as a whole average crude steel output
was running at a rate of 665mtpa. This follows a very strong ramp-up over the
last four months, during which time the country has added the equivalent of
total Japanese steel production (~120mtpa).
 Copper miners with cumulative annual output of 1.59mt still have to
renegotiate employment contracts with their staff during the remainder of
2011. The next major labour contract to expire covers workers at
Antofagasta’s Esperanza project (~160,000t in 2011), which runs to the end of
May. Another four mines with more than 600,000t of production between them
will need to renew labour contracts with their staff during June. Over the last
four years strikes have represented more than 20% of unanticipated mine
supply disruptions in the copper market.
 Vedanta’s 1.2mtpa expansion project at the Jharsuguda smelter could start to
ramp up on as little as three months’ notice. The smelter expansion is ready to
take raw materials should any one of three bauxite projects/mines that the
company is seeking to develop become available to it. It may take six to nine
months to ramp up, so within a year of the company securing additional
bauxite output Jharsuguda could be utilising that additional supply.
 China Datang Corp estimates that China's largest five power producers
booked a combined loss of RMB13.72bn on their thermal power operations in
2010, due to the sharp increase in coal price. The five power producers had
436 thermal power plants, of which more than 50% (236) were in loss. In the
past three years, the five power producers saw their thermal power plants
suffer a total loss of RMB60.26bn, according to China Datang Corp