Commodities Comment Five takeaways from LME Week 2011 :Macquarie Research,

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Commodities Comment
Five takeaways from LME Week 2011
Feature article
 We review the prevalent themes running through the base metals markets
during the annual LME Week festivities in London.
Latest news
 Base metals edged higher again on Friday, with copper edging up a further
2% to $7,350/t and tin rebounding 3.6% to $22,935/t. As a result, all major
LME metals (except lead) were up over the week as a whole, with tin
(+12.7%) leading the way. LME copper stocks also fell by 4,625t overnight
(1%), as more material headed for China.
 European auto sales were reasonable in September according to preliminary
JD Power data at an annualised rate of 12.56mt, up from 12.3 in August. This
is roughly flat YoY and down 1.1%YoY YTD. Germany continues to
strengthen after weakness in 2010 following the end to scrappage schemes,
while sales in France continue to run at a recent rate of -1.5% YoY and
+0.2%YoY YTD despite the end to scrappage schemes at end 2010.
 Coal prices weakened somewhat this week, with some lower physical trades
reported and paper markets also falling. API#2 has eased to $118.75/t for
Q4'11, while there were some weaker trades reported out of Richards Bay at
~$110-$115/t. We would note that there are now arbitrage opportunities
opening up from Richards Bay to China at current prices, which prices a
strong support for API#4. We also understand there has been increasing
interest from Korea for higher-CV material from RB, given its competitiveness
vs. Newcastle prices at present.
 McCloskey’s has reported that further maintenance is set to impact BMA’s
Hay Point terminal later this month, closing one of the facility’s two berths for
15 days from 19 October. This follows a six-week outage of a berth during
July-August to repair damage. Recent shipping data suggests the terminal
has been running back close to capacity in recent weeks, thus a 15-day
outage would cost in the region of 800kt of coal. The terminal also already
scheduled another prolonged one-berth closure in April next year to allow
work on the building of a new third berth.
 US payrolls rose by 103,000 in September, following a gain of 57,000 in
August, according to data published on Friday. The September rise was
almost double consensus market forecasts but much of the outperformance
was owed to the end of a strike at Verizon Communications. The
unemployment rate remained steady at 9.1%. Meanwhile, German industrial
production declined by less than had been forecast with a dip of 1% from July
to August. More worrying was an unexpected second consecutive monthly
fall in new order intake by German factories in August.
 First Quantum Minerals has said that nickel production is set to resume at its
Ravensthorpe mine in Queensland, Australia, by the end of 2011, following a
two-year redevelopment programme. Annual average production for the first
five years is expected to be 39,000t, according to the company. We are
forecasting production of only 10,000t in 2012. Meanwhile, Finnish miner
Talavivaara has slashed full year nickel guidance to 16,000t from 22-28,000t
after a poor Q3 performance.