Still looking for a platinum performance  ::Macquarie Research

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Still looking for a platinum
performance
 We review the outlook for platinum ahead of platinum week, with plenty of
catalysts ahead to bring platinum out of the doldrums.
Latest news
 Base metals were largely unchanged on Thursday, although silver fell by an
astounding 17% from the AM fix on Wednesday (to the AM fix on Thursday),
to $32.5/oz (although it rebounded after this to trade up to $35/oz).
 The Chinese copper import arbitrage has opened slightly, and the Chinese
SHFE forward curve has gone into backwardation. We expect the flow of
metal from Chinese bonded warehouses to LME (South Korea in particular)
that has driven LME stocks higher over the past 6 months to end this month.
In other words LME stocks are set to be flat to down over the coming month.
 RUSAL upgraded its 2011 aluminium demand forecast to 46mt in its 1Q11
report on Thursday, up from 43.8mt last quarter. The increase is driven by a
0.5mt increase in forecast Chinese consumption to 19mt and a 1.7mt increase
in world ex-China/developed word/CIS/Russian consumption (South America,
Asia ex-China) to 12.5mt.
 From 6th May 2010, unionised miners at KGHM have engaged in work-to-rule
action, following violent protests the previous day. Around half of all KGHM
employees are reported to be working in accordance with the legal terms of
their contracts, their aim being to stifle output, while evading disciplinary
action and prosecution, according to CRU. The workers are demanding a
PLN300 (US$108.81) monthly pay rise and KGHM has agreed to negotiate,
however a date for these negotiations is yet to be agreed. KGHM is expected
to produce over 400,000t of copper-in-concentrate in 2011.
 We presented at the 15th Metal Bulletin Zinc and its Markets seminar in
Dublin on Wednesday. The themes common to the commodities space
regarding a positive demand outlook and rising cost of new mine capacity
were again evident in many outlooks.
 Zhang Lin of Teck highlighted that over 70% of the zinc resource finds in the
past 10 years are still at a prospecting and exploration status, with many
simply being too geologically diverse and/or expensive to bring to production.
As a result, Teck sees only an additional 700ktpa of zinc in concentrate being
added to Chinese output through 2015, compared with 4.3mtpa of additional
smelter capacity, leaving China ever more reliant on the international
concentrate market.
 At the same conference, Nyrstar's Maarten de Leeuw noted that Nyrstar saw
15-20% wage inflation for Chinese-based staff over the past year, reflective of
the cost inflation being felt by the mining and metals processing sector in the
country.
 China's need to diversify its iron ore supply sources in the face of
underperformance in seaborne supply and flat out domestic production
continues, with Nanjing Steel having agreed on an offtake deal for 19 million
tonnes of ore over the next 10 years, starting from June 1. China will need to
source at least 15mt more from 'non-traditional' supply sources in 2011 in
order to satiate demand.