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Commodities Comment
Aus Coal on the mend from 1Q loss
Feature article
With trade data released up to February and shipping data for March, we can
now make a more educated guess at the loss of coal exports due to the floods
in Queensland and how much they may bounce back in 2Q. We think
additional supply of met coal will be absorbed by the market near today’s high
prices, although additional thermal coal seems likely to weaken in order to
entice demand from Chinese buyers.
Latest news
Base metals mostly finished higher in Tuesday trading, despite further
tightening from Chinese policy makers which increased deposit rates and
loans for maturities under one-year by 25bps. With monetary policy tight and
activity and inflation likely to slow into 2Q, its unlikely that conditions will be
tightened much further
The Cobalt Development Institute statistics for 2010 global output suggests
total production rose 34.4% YoY to 76,363t, a new all-time high. With global
consumption around 63,000t by our estimates, this would imply a sizable 21%
surplus in the cobalt market. However, we think the 42% Chinese production
growth in the figures is overstated, with the 32,930t figure well above the
25,200t of recoverable cobalt content from Chinese import volumes in
2010. Notwithstanding this, the market remains strongly oversupplied, with
the LME price again trading down 3.9% to $16.56/lb.
Canada's Ivernia has announced another voluntary suspension of shipments
of lead concentrates from its Magellan mine in Western Australia after tests
showed mud on a shipping container was mixed with lead probably originating
from the mine. The company has said there is no public safety risk. In 2010,
Magellan produced ~44,100t of lead-in-concentrate, which was less than
1.5% of world output. With China's lead mine output rising rapidly, we do not
think this will significantly affect the lead market balance. Indeed, the main
issue in the lead market at the moment is the depressed state of demand in
China as a result of a government review of the operating standards of leadacid
battery producers after recent incidents of pollution.
Ferrochrome prices remain under pressure. In China, spot import prices are
falling with current quotes at 105–106¢/lb CIF, marking a fall of 4–5% over the
last month. Chinese spot import prices are now down year-on-year for the first
time since (albeit marginally) for the first time since before the
GFC. Meanwhile, it is reported that increased discounts have been conceded
from "headline" contract price levels in other major ferrochrome consuming
markets. For South African producers, already facing a strong rand and rising
power prices, financial pressures will be increasing.
A train collision on the Fenoco coal railway in Colombia on Sunday evening
has lead to the death of four workers. The tragic accident led to the derailment
of both trains, with producers serviced by the railway not declaring force
majeure.
UK coal stocks at electricity generators have fallen a further 1.5mt in January
2011 to 11.8mt. Stocks are now at comfortable levels relative to current
consumption, although if consumption and domestic production remain stable,
imports will have to rise to ensure stocks don’t fall to critically low levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Commodities Comment
Aus Coal on the mend from 1Q loss
Feature article
With trade data released up to February and shipping data for March, we can
now make a more educated guess at the loss of coal exports due to the floods
in Queensland and how much they may bounce back in 2Q. We think
additional supply of met coal will be absorbed by the market near today’s high
prices, although additional thermal coal seems likely to weaken in order to
entice demand from Chinese buyers.
Latest news
Base metals mostly finished higher in Tuesday trading, despite further
tightening from Chinese policy makers which increased deposit rates and
loans for maturities under one-year by 25bps. With monetary policy tight and
activity and inflation likely to slow into 2Q, its unlikely that conditions will be
tightened much further
The Cobalt Development Institute statistics for 2010 global output suggests
total production rose 34.4% YoY to 76,363t, a new all-time high. With global
consumption around 63,000t by our estimates, this would imply a sizable 21%
surplus in the cobalt market. However, we think the 42% Chinese production
growth in the figures is overstated, with the 32,930t figure well above the
25,200t of recoverable cobalt content from Chinese import volumes in
2010. Notwithstanding this, the market remains strongly oversupplied, with
the LME price again trading down 3.9% to $16.56/lb.
Canada's Ivernia has announced another voluntary suspension of shipments
of lead concentrates from its Magellan mine in Western Australia after tests
showed mud on a shipping container was mixed with lead probably originating
from the mine. The company has said there is no public safety risk. In 2010,
Magellan produced ~44,100t of lead-in-concentrate, which was less than
1.5% of world output. With China's lead mine output rising rapidly, we do not
think this will significantly affect the lead market balance. Indeed, the main
issue in the lead market at the moment is the depressed state of demand in
China as a result of a government review of the operating standards of leadacid
battery producers after recent incidents of pollution.
Ferrochrome prices remain under pressure. In China, spot import prices are
falling with current quotes at 105–106¢/lb CIF, marking a fall of 4–5% over the
last month. Chinese spot import prices are now down year-on-year for the first
time since (albeit marginally) for the first time since before the
GFC. Meanwhile, it is reported that increased discounts have been conceded
from "headline" contract price levels in other major ferrochrome consuming
markets. For South African producers, already facing a strong rand and rising
power prices, financial pressures will be increasing.
A train collision on the Fenoco coal railway in Colombia on Sunday evening
has lead to the death of four workers. The tragic accident led to the derailment
of both trains, with producers serviced by the railway not declaring force
majeure.
UK coal stocks at electricity generators have fallen a further 1.5mt in January
2011 to 11.8mt. Stocks are now at comfortable levels relative to current
consumption, although if consumption and domestic production remain stable,
imports will have to rise to ensure stocks don’t fall to critically low levels.
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