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Commodities Comment
Latest LME OI data suggest new longs
The LME’s latest open interest data suggest that new long positions have
been added over the last week. However, the latest rise in prices (in part
reversed today) appears to have taken its cue from foreign exchange markets
in the absence of fundamental short-term conviction in metals markets.
Latest news
LME base metals prices fell heavily in trading on Tuesday under the weight of
short-term worries over the market outlook. Lead fell furthest, declining by
4.9% on the day. Copper closed 2.4% lower, and aluminium was down by
1.1%. Precious metals prices also fell, with silver sliding by 2.2% and gold
pulling back to $1,451/t.oz.
ERA’s Ranger uranium mine produced 439tU in 1Q 2011, down 42% YoY.
This follows the suspension of plant processing on 28 January due to heavy
rains. The plant was set to be shut for 12 weeks, but this has now been
extended until late July, assuming rains over the next (and last) three weeks
of this wet season are not substantial (chart left). This means the processing
plant will be out for at least 26 weeks. Guidance was lowered to 2,035tU for
2011, substantially lower than our previous forecast (2,500tU) and previous
company guidance of 3,216tU. The additional supply necessary to meet
ERA’s 2011 sales commitments of around 3,816tU will be met by purchased
material, a substantial portion of which has already been finalised. Assuming
China continues to import at 2010 rates, the ex-China market looks set to be
in deficit in 2011, supporting uranium prices above marginal costs and around
current spot price levels. For medium-term investors, we recommend selling
into any price strength resulting from this major disruption.
Data on inventory at smaller mills in China continue to show iron ore
stockpiles being run down, but the pace is slowing. We expect the next data
point (due in two weeks) to start to show an increase in mill inventories,
following purchasing activity over the last couple of weeks that has pushed
spot prices back up to $183/t cfr. Port stocks also continue to fall and now
stand at 83mt, down from a peak of 88mt at the end of February. More
important, port stocks are now down to just 1.5 months of imports and are
approaching some of the lowest levels of the past five years. We have heard
that a sizable proportion of recent spot iron ore transactions has been from
port stocks, as seaborne availability remains extremely tight.
Meanwhile, reported trader inventories of steel fell another 2% WoW last
week. With prices rising by 1.7% WoW, it appears that the flow from traders
to end users that we had been anticipating has finally arrived. According to
the high frequency production data from CISA, Chinese steel mills were
running at an average rate of 702mtpa in the final 11 days of March. This was
down slightly from the 710mtpa recorded in the middle of the month, but still
implies that production for the whole of March will come in at above 700mtpa.
Official data for March are to be released Friday.
Japanese ferronickel producer Pacific Metals has indicated that it plans to
restart operations at its Tsunami-affected plant in June and recommence
shipments in July, costing the company around 12,000t of lost nickel
production. Offsetting this is the likelihood that nickel ore destined for this
plant will most likely be redirected for nickel pig iron production in China.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Commodities Comment
Latest LME OI data suggest new longs
The LME’s latest open interest data suggest that new long positions have
been added over the last week. However, the latest rise in prices (in part
reversed today) appears to have taken its cue from foreign exchange markets
in the absence of fundamental short-term conviction in metals markets.
Latest news
LME base metals prices fell heavily in trading on Tuesday under the weight of
short-term worries over the market outlook. Lead fell furthest, declining by
4.9% on the day. Copper closed 2.4% lower, and aluminium was down by
1.1%. Precious metals prices also fell, with silver sliding by 2.2% and gold
pulling back to $1,451/t.oz.
ERA’s Ranger uranium mine produced 439tU in 1Q 2011, down 42% YoY.
This follows the suspension of plant processing on 28 January due to heavy
rains. The plant was set to be shut for 12 weeks, but this has now been
extended until late July, assuming rains over the next (and last) three weeks
of this wet season are not substantial (chart left). This means the processing
plant will be out for at least 26 weeks. Guidance was lowered to 2,035tU for
2011, substantially lower than our previous forecast (2,500tU) and previous
company guidance of 3,216tU. The additional supply necessary to meet
ERA’s 2011 sales commitments of around 3,816tU will be met by purchased
material, a substantial portion of which has already been finalised. Assuming
China continues to import at 2010 rates, the ex-China market looks set to be
in deficit in 2011, supporting uranium prices above marginal costs and around
current spot price levels. For medium-term investors, we recommend selling
into any price strength resulting from this major disruption.
Data on inventory at smaller mills in China continue to show iron ore
stockpiles being run down, but the pace is slowing. We expect the next data
point (due in two weeks) to start to show an increase in mill inventories,
following purchasing activity over the last couple of weeks that has pushed
spot prices back up to $183/t cfr. Port stocks also continue to fall and now
stand at 83mt, down from a peak of 88mt at the end of February. More
important, port stocks are now down to just 1.5 months of imports and are
approaching some of the lowest levels of the past five years. We have heard
that a sizable proportion of recent spot iron ore transactions has been from
port stocks, as seaborne availability remains extremely tight.
Meanwhile, reported trader inventories of steel fell another 2% WoW last
week. With prices rising by 1.7% WoW, it appears that the flow from traders
to end users that we had been anticipating has finally arrived. According to
the high frequency production data from CISA, Chinese steel mills were
running at an average rate of 702mtpa in the final 11 days of March. This was
down slightly from the 710mtpa recorded in the middle of the month, but still
implies that production for the whole of March will come in at above 700mtpa.
Official data for March are to be released Friday.
Japanese ferronickel producer Pacific Metals has indicated that it plans to
restart operations at its Tsunami-affected plant in June and recommence
shipments in July, costing the company around 12,000t of lost nickel
production. Offsetting this is the likelihood that nickel ore destined for this
plant will most likely be redirected for nickel pig iron production in China.
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