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Commodities Comment
Japan quake impact on commodities
Feature article
The full extent impact of the devastating earthquake and tsunami are not yet
clear at this early stage but appears negative for Uranium in the short and
long run. The near-term impact for thermal coal appears negative for
Newcastle pricing, but we think Japan has the capacity to use 4–8mt of
additional coal to make up for lost nuclear baseload capacity.
Latest news
Base metals were mostly muted in Monday trading as markets digested the
implications of the Japan quake, with lead and zinc the big movers, rising
3.9%MoM and 2.2% MoM, respectively. In the precious metals space, silver
made a substantial 6.1% MoM gain, with gold/silver continuing to plummet to
an exceptionally low level of 39.3.
It has been reported that the Hanekam Tunnel that links Freeport McMoRan's
Grasberg copper and gold mine with downtown Timika is now in operation
again, a week after a landslide blocked the transport link. Ramdani Sirait,
spokesman at local subsidiary PT Freeport Indonesia, said that "the tunnel is
back to operations, and transportation [between the mine and town] is back to
normal from Sunday.”
We have received confirmation that Rio Tinto has settled 2Q contracts for
their two Hail Creek brands of hard coking coal (HCC) at $330/t and $328/t
FOB Australia, respectively. Furthermore, semi-soft coal has been agreed at
$264/t – as expected, 80% of HCC. Both represent all-time record levels,
surpassing those seen in 2008.
The supply issues in coking coal continue, with Canada's Teck reducing 1Q
shipment guidance by ~0.5mt to 4.6–4.9mt due to a combination of bad
weather and operational issues with rail and port providers. We reiterate that
despite recent weakness in the spot price, the seaborne market remains
undersupplied every week, and potential remains for Australian March exports
to be more weather-affected than February given a number of port outages
thus far in the month.
Sentiment in the Chinese steel market remains weak, with prices continuing to
fall, as HRC dropped RMB100/t to RMB 4,630/t ($603/t ex VAT) as traders
continued to report sluggish transactions. As with base metals, checks
suggest that this is largely linked to the limited availability of working capital
financing that is restricting end users’ ability to buy and hold inventory, and
has taken the urgency out of steel purchasing.
The difficulties in bringing blast furnace alternatives to commercial operation
have again been highlighted by a further delay in commissioning of Baosteel's
second 1.5mtpa Corex unit at Luojin. Steel Business Briefing has reported
that high production costs are a factor in the delay, with the cost of ironmaking
being 36% higher than traditional blast furnace costs, despite the ability to use
only iron ore fines and much less coke.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Commodities Comment
Japan quake impact on commodities
Feature article
The full extent impact of the devastating earthquake and tsunami are not yet
clear at this early stage but appears negative for Uranium in the short and
long run. The near-term impact for thermal coal appears negative for
Newcastle pricing, but we think Japan has the capacity to use 4–8mt of
additional coal to make up for lost nuclear baseload capacity.
Latest news
Base metals were mostly muted in Monday trading as markets digested the
implications of the Japan quake, with lead and zinc the big movers, rising
3.9%MoM and 2.2% MoM, respectively. In the precious metals space, silver
made a substantial 6.1% MoM gain, with gold/silver continuing to plummet to
an exceptionally low level of 39.3.
It has been reported that the Hanekam Tunnel that links Freeport McMoRan's
Grasberg copper and gold mine with downtown Timika is now in operation
again, a week after a landslide blocked the transport link. Ramdani Sirait,
spokesman at local subsidiary PT Freeport Indonesia, said that "the tunnel is
back to operations, and transportation [between the mine and town] is back to
normal from Sunday.”
We have received confirmation that Rio Tinto has settled 2Q contracts for
their two Hail Creek brands of hard coking coal (HCC) at $330/t and $328/t
FOB Australia, respectively. Furthermore, semi-soft coal has been agreed at
$264/t – as expected, 80% of HCC. Both represent all-time record levels,
surpassing those seen in 2008.
The supply issues in coking coal continue, with Canada's Teck reducing 1Q
shipment guidance by ~0.5mt to 4.6–4.9mt due to a combination of bad
weather and operational issues with rail and port providers. We reiterate that
despite recent weakness in the spot price, the seaborne market remains
undersupplied every week, and potential remains for Australian March exports
to be more weather-affected than February given a number of port outages
thus far in the month.
Sentiment in the Chinese steel market remains weak, with prices continuing to
fall, as HRC dropped RMB100/t to RMB 4,630/t ($603/t ex VAT) as traders
continued to report sluggish transactions. As with base metals, checks
suggest that this is largely linked to the limited availability of working capital
financing that is restricting end users’ ability to buy and hold inventory, and
has taken the urgency out of steel purchasing.
The difficulties in bringing blast furnace alternatives to commercial operation
have again been highlighted by a further delay in commissioning of Baosteel's
second 1.5mtpa Corex unit at Luojin. Steel Business Briefing has reported
that high production costs are a factor in the delay, with the cost of ironmaking
being 36% higher than traditional blast furnace costs, despite the ability to use
only iron ore fines and much less coke.
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