Macquarie Research: Observations on Australian exports

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Commodities Comment
Observations on Australian exports
Feature article
 ABARES’s release of January export data for Australia highlight a number of
interesting trends in bulk commodities. In the short term, they reinforce the
view that China pulled back dramatically from the coal market post the floods
in Queensland. For the longer term, it is apparent that Australian iron ore
lump is in increasingly short supply.

Latest news
 Lead and zinc were the biggest LME gainers on Thursday, in contrast
precious metals fell back with an oil price decline. Meanwhile, the latest WSD
SteelBenchmarker assessment showed further growth in the premium for US
hot rolled coil over its Chinese equivalent. The differential is not $318/t,
having been as low as $49/t in November.
 There are unconfirmed reports of a potential European settlement of secondquarter
South African charge ferrochrome prices at $1.40/lb, up 15c/lb from
first-quarter levels. This is above our expectations and reflects a strong
recovery in stainless steel production and recent spot market rise.
 This week the US Secretary of Energy, Steven Chu, determined that the US
government (the DOE) would transfer 1605tU (4.2mlbs U308) of natural
uranium per year from its stockpiles for calendar years 2011, 2012, 2013 (with
transfers starting from March 1). No more than 450tU (1.2mlbsU308) would
be able to be sold in any given quarter. We had anticipated 1,000tU per
annum of DOE/USEC sales for 2011-13, so this development is incrementally
bearish. Given we expect this material will be sold into the spot market,
starting this month (with potential for up to 1.2mlbs U308 sales), it’s hard to
see as anything other than a cap to spot pricing in the near term.
 Meanwhile, China promised generous loans for industrial and infrastructure
development ($5bn loan for a petrochemical complex and a loan
Kazakhstan's sovereign wealth fund Samruk-Kazyna of $1.7bn – note Samruk
Kazyna runs Kazatomprom). In turn Nazarbayev is said to have promised
55,000 tonnes of uranium (143 million pounds of U3O8). This gives us
increasing confidence that China will continue to import above normal levels
of below market price uranium from Kazakhstan in 2011/12.
 Glencore expects a strong 2011 and very robust returns, driven by organic
growth, continued demand recovery and higher commodity prices. The
company also stated that there had been no decision over a possible IPO and
did not want to commit to a timeframe for making a decision as it is
considering many different capital structures.
 Brazilian iron ore port export numbers for February show a surprisingly
decent month given the usual seasonal weakness at 332mtpa - up 19%
MoM and 28% YoY.
 Wayne Venter, managing director of Norilsk's African operations, stated on
Thursday that Norilsk expects nickel output at its South African Nkomati mine
(in a JV with African Rainbow Minerals) to rise to 20,000tpa by end 2012 from
6,000tpa.