Macquarie Research, Mixed March for commodity prices

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Mixed March for commodity prices
 We review commodity price and inventory performance for March.
Latest news
 Base metals had a relatively flat day in LME trading, with lead the
outperformer, while gold rose by 1.2% to $1,436/oz. Meanwhile, the iron ore
resurgence continued with the Platts 62% Fe assessment up by $4/t to
$179.5/t CFR China, as small steel mills continued to re-enter the market.
 Coal pricing into the Atlantic market was strong today, with physical DES ARA
for June 2011 trading at $131/t. Richards Bay was also up, with physical
materials for 3Q11 trading at $126.50/t and for 4Q11 at $128/t. Swaps rallied
on these trades, although Newcastle swaps underperformed as demand for
this specification of coal remained soft. We understand that demand for subbituminous
coal has improved, with Indian and Chinese buyers starting to buy
lower CV-coal, which is currently at a significant energy-adjusted discount.
 Chile's Collahuasi has lifted a force majeure on copper concentrate shipments
that had been declared after an accident at its primary loading terminal in
December 2010. The company said that it is on course to complete repairs at
the terminal in the port of Patache within the next 2–3 months. Meanwhile, the
strike at Sumitomo's San Cristobal silver-zinc-lead mine in Bolivia has ended
after 12 days. While San Cristobal is an important supplier to both the zinc
and lead markets (~2% of world supply), the stoppage was too short to cause
any significant disruption.
 Japan's Mitsubishi has said that it will increase its lead metal production by
16% in the April–September 2011 period to meet rising domestic demand for
batteries following the devastating earthquake and tsunami in March. We note
that, in volume terms, Mitsubishi's planned production increase amounts to
less than 2,000t over the entire six months, and we maintain our view that
what has happened in Japan will not substantially shift the global supplydemand
balance in the lead market. Japan accounts for less than 3% of world
lead demand. The Chinese market, in contrast, is almost 15 times larger, and
we note that market conditions have recently softened. The latest rise in the
exchange price appears to be due more to funds than to fundamentals.
 Japanese nickel producer, Sumitomo Metal Mining, has announced plans for
nickel production for the 12 months to end-March 2012. Interpolating the
numbers suggests that its calendar year production of metal and ferronickel
will be around 63.5kt this year, up from 57.9kt in 2010. It is planning an
increase of about 4.5kt in its ferronickel output this calendar year to close to
22kt, which should partly offset lower production at Pacific Metals's 40ktpa
ferronickel operations at Hachinohe, which were closed due to the recent
tsunami which and may be down for up to 3 months (10kt loss). We expect
total Japanese primary nickel, which is 100% based on imported feed, to rise
to just above 160kt in 2011, slightly above 2010's estimated output of 158kt
and equal to 10% of global production.
 McCloskey's has reported that Strategic Natural Resources is planning to
export coal from its Elitheni coal mine in June 2012, with the port to export
0.5mt of 5,500kcal NAR coal.