McCloskey Beijing Coal Conference: pricing looking strong into 4Q:: Macquarie Research,

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McCloskey Beijing Coal Conference:
pricing looking strong into 4Q
Feature article
 Macquarie joined the 2011 McCloskey China Import and Export Forum held in
Beijing this week. Feedback from the conference was quite upbeat in terms of
the thermal coal price outlook for 4Q11.
Latest news
 Thursday was a day of across-the-board gains for metals, as a narrower US
trade deficit for July and hope of positive moves toward jobs creation in the
country boosted sentiment. Lead climbed 3.1% to $2,509/t, while precious
metals also recouped some of the losses from earlier in the weak, as the ECB
noted concerns over European growth.
 Macquarie attended a nickel/stainless steel forum in Munich over the past two
days. Following surprisingly good orders in July and most of August, mills are
reporting weakness emerging in recent weeks, but nothing like the collapse
some are fearing. The main concern expressed by the Europeans at the
conference is a strong rise in Chinese stainless imports this year (up 40–50%
YoY). Imports may take 20% of the European market this year, up from
around 15% last year, although not all are from China. Meanwhile, in Asia
Taiwan’s Tang Eng steel has noted worries over 2H stainless steel demand
and has dropped 300-series export prices by $100/t for September.
 At the conference there was considerable debate about the role of Chinese
nickel pig iron in giving an "unfair" (due to a 40% Chinese export tax on the
product and its environmental impact) cost advantage to Chinese stainless
steel mils (of up to $600/t in 1Q11, according to Marcus Moll of SMR,
although others pointed out that nickel in nickel pig iron is now the most
expensive nickel unit on offer now). The discussions at the conference
highlighted the world’s general lack of knowledge about the level of NPI
production, costs and future sustainability. Feedback from discussions
indicated a strong belief that nickel prices are well supported above $20,000/t
due to Chinese buying.
 Latest data shows China’s daily crude steel output fell 2.2% sequentially to
1.905mt/day (695mtpa) in the last ten days of August. While this represents
the first sub-700mtpa period since late-May, the run rate remains extremely
strong. Full month CISA data suggests a 706mtpa run rate for August.
 "It's OK." "Things are certainly not great, but not bad either." These comments
sum up well our overall impression of current conditions in the aluminium
market from producers, consumers and traders who we have been meeting at
Metal Bulletin's Aluminium Conference in Paris this week. Indeed, our view is
that market conditions are better than the negativity in the majority of the
recent macro economic news flow might suggest, as we highlighted in our
presentation to the conference on Thursday. People appear to be worrying
about what could go wrong in the world economy, but there is no talk of
anything actually going wrong in the aluminium market today. Clients
interested in receiving a copy are invited to contact us.