Commodities -Stainless boom to run out of steam:: Macquarie Research,

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Commodities Comment
Stainless boom to run out of steam
Feature article
 We review recent developments in stainless steel production. Demand and
production is still strong but there are signs of an easing in orders.
Latest news
 Base and precious metals were stronger, with iron ore also continuing its
resurgence. The Platts 62% iron ore assessment rose $5.50/t to $175/t cfr on
a return of Chinese buyers to the market. The rise came at the same time as
a 7% rise in Indian freight tariffs. As we noted, the inventory volumes at small
Chinese steel mills were starting to run low, necessitating a further buying
push in the coming weeks. The SGX swaps market also climbed strongly,
with Q2 up 2.8% to $170/t cfr.
 Ahead of the PMI data tomorrow, we have seen solid results in regional
surveys of manufacturing in the US, suggesting the ISM index should remain
close to the strong 61.4 level seen in February. Flash estimates for Europe
(57.7 from 59) and China (52.5 from 51.7) were solid, while the Japan release
today fell very sharply from 52.9 to 46.4, as output was dramatically impacted
by the natural disasters.
 While there has yet to be confirmation of Japanese fiscal year thermal coal
contract pricing, we understand that a settlement has been made been
Xstrata and Chugoku at $129-$130/t. This is up from the $98/t settled last
year and ahead of the previous record settlement of $125/t. Coal swaps were
up today, with May11 for Newcastle up $3/t to $123.45/t. Newcastle prices
may continue to rally on the back of this settlement, although we are cautious
on the sustainability of these prices given the lack of demand for imported
coal from China and a likely improvement in supply in the Pacific.
 This is a very strong result in light of the loss of Japanese demand due to the
impact of the Tsunami on coal-fired power generation, with ~7.5GW of coal
capacity affect. We understand that TEPCO’s Hitachinaka plant (1GW) and
Joban Joint Power’s Nakoso plant (1.45GW) should be back on line in the
next 3-6 months, but Shinchi (2GW) and Haramachi (2GW) have suffered
considerable damage and won’t be functioning in the foreseeable future.
 Codelco's Ventanas copper smelter and refinery has been instructed to
suspend operations in a court order that was issued in response to complaints
filed following the leaking of sulphur dioxide on 23 March. Codelco has stated
this was an isolated incident and that the problem has been remedied. The
plant produced about 365,000t of copper cathode in 2010.
 The strike at Sumitomo's San Cristobal mine in Bolivia is entering its second
week. Unions claim that all operations have been suspended although it is
not clear whether concentrate shipping schedules to zinc-lead smelters have
been affected, although a protracted dispute could clearly cause
disruption. The world's two largest custom zinc smelters are both buyers of
concentrates from San Cristobal. The mine produced about 285,000t of zincin-
concentrate (2% of world output) and 80,000t of lead-in-concentrate (2% of
world output) in 2010, volumes which were unchanged and up 10% year-onyear,
respectively, despite a three-week strike last year.