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Chinese aluminium restrictions?
Feature article
We review the background to the Chinese government’s announcement to
ban approval of new aluminium smelting projects.
Latest news
LME base metals prices all rose on the day with nickel recording the strongest
gain of 4.3%, while copper closed up by 2.5%. Lead and zinc both rose
despite the ongoing LME stock build, with another 26,550t of zinc delivered
into New Orleans on Tuesday and total lead stocks now well over 300,000t.
Precious metals also rose with silver outstripping its peers to finish 3.6%
higher at $44.79/t.oz, while gold posted a new record of over $1,500/t.oz
(+0.7% on the day).
The Chinese lead market continues to be affected by concerns over the
government's response to lead poisoning in recent months. Small-scale leadacid
battery makers are reportedly buying only on an as-needs basis,
concerned in case of disruptions to their operations and/or falling lead prices.
Larger battery makers find themselves with stronger bargaining power and
are using this to resist strongly paying higher prices. The market for imported
lead concentrates is quiet and lead smelters seem ready to reduce production
rather than buy at today's levels and run at a loss (due to low TCs and the de
facto silver penalty). However, end-battery demand is still strong. Latest data
show Chinese auto output up 10.3% YoY in Q1 2011 and lead-acid battery
exports up by 22% YoY on a 3MMA basis to February 2011. Lead prices
should ultimately remain well supported and differential between SHFE and
LME prices should close.
Global crude steel production was 1.523mt annualised in March, a touch
below February levels, according to worldSteel. For the quarter, global crude
steel output was 375kt (1.521mt annualised), up 11%QoQ and 12.4% YoY.
Much of the QoQ improvement was driven by China, but there may well have
been under-reporting of Chinese output in late 2010. Nevertheless, the rest of
the world recorded a 6.1% QoQ and 11.5% YoY in 1Q11.
Freeport McMoRan increased its total copper mine output by 2% YoY to
431,000t in Q1 2011. The company attributed this to accessing higher grade
ore in Indonesia and has now reached its target mining rate of 635,000 tpd on
a run-of-mine basis at the Morenci mine in New Mexico. Freeport's latest
guidance for total full year production is close to 1.8m tonnes.
BHP Billiton's Cannington mine, which is the world's largest lead mine
accounting for ~6% of total output, recorded a 15% YoY fall in production to
51,9100t lead-in-concentrate in Q1 2011, which was attributed lower head
grades and weather-related disruptions to operations. We expect a 10% fall
in output in 2011 as a whole as a result of a grade decline. Meanwhile, BHP
Billiton's coking coal production out of Queensland fell 14.6%QoQ, with
shipments slipping by a more hefty 38%QoQ due to the impact of the floods. It
does appear that been some restocking following the big drawdown in stocks
in Q4, although stocks still appear to be 862kt lower than they were in 3Q10.
This leaves the likely recovery in shipments in 2Q11 vulnerable to disruptions.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Chinese aluminium restrictions?
Feature article
We review the background to the Chinese government’s announcement to
ban approval of new aluminium smelting projects.
Latest news
LME base metals prices all rose on the day with nickel recording the strongest
gain of 4.3%, while copper closed up by 2.5%. Lead and zinc both rose
despite the ongoing LME stock build, with another 26,550t of zinc delivered
into New Orleans on Tuesday and total lead stocks now well over 300,000t.
Precious metals also rose with silver outstripping its peers to finish 3.6%
higher at $44.79/t.oz, while gold posted a new record of over $1,500/t.oz
(+0.7% on the day).
The Chinese lead market continues to be affected by concerns over the
government's response to lead poisoning in recent months. Small-scale leadacid
battery makers are reportedly buying only on an as-needs basis,
concerned in case of disruptions to their operations and/or falling lead prices.
Larger battery makers find themselves with stronger bargaining power and
are using this to resist strongly paying higher prices. The market for imported
lead concentrates is quiet and lead smelters seem ready to reduce production
rather than buy at today's levels and run at a loss (due to low TCs and the de
facto silver penalty). However, end-battery demand is still strong. Latest data
show Chinese auto output up 10.3% YoY in Q1 2011 and lead-acid battery
exports up by 22% YoY on a 3MMA basis to February 2011. Lead prices
should ultimately remain well supported and differential between SHFE and
LME prices should close.
Global crude steel production was 1.523mt annualised in March, a touch
below February levels, according to worldSteel. For the quarter, global crude
steel output was 375kt (1.521mt annualised), up 11%QoQ and 12.4% YoY.
Much of the QoQ improvement was driven by China, but there may well have
been under-reporting of Chinese output in late 2010. Nevertheless, the rest of
the world recorded a 6.1% QoQ and 11.5% YoY in 1Q11.
Freeport McMoRan increased its total copper mine output by 2% YoY to
431,000t in Q1 2011. The company attributed this to accessing higher grade
ore in Indonesia and has now reached its target mining rate of 635,000 tpd on
a run-of-mine basis at the Morenci mine in New Mexico. Freeport's latest
guidance for total full year production is close to 1.8m tonnes.
BHP Billiton's Cannington mine, which is the world's largest lead mine
accounting for ~6% of total output, recorded a 15% YoY fall in production to
51,9100t lead-in-concentrate in Q1 2011, which was attributed lower head
grades and weather-related disruptions to operations. We expect a 10% fall
in output in 2011 as a whole as a result of a grade decline. Meanwhile, BHP
Billiton's coking coal production out of Queensland fell 14.6%QoQ, with
shipments slipping by a more hefty 38%QoQ due to the impact of the floods. It
does appear that been some restocking following the big drawdown in stocks
in Q4, although stocks still appear to be 862kt lower than they were in 3Q10.
This leaves the likely recovery in shipments in 2Q11 vulnerable to disruptions.
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