LME copper stocks withdrawals to rise as Chinese buying accelerates ::Macquarie Research,

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LME copper stocks withdrawals to rise
as Chinese buying accelerates
Feature article
 A surge in LME copper cancelled warrants to 60,000t this week is a lead
indicator of an imminent large withdrawal of stocks from LME warehouses,
presumably to China. It reflects a likely end to consumer destocking in China
and a continuation of the recent recovery in Chinese imports.
Latest news
 Base metals staged a significant rally on Thursday, as risk appetite received a
boost from encouraging rhetoric regarding moves to recapitalise Eurozone
banks, with the ECB buying covered bonds again. This was reinforced by
better than expected US jobs data. Copper was the big beneficiary, rising a
massive 6% (the largest since early 2010) to $7,208/t. Precious metals also
rebounded strongly, with silver up 10.8% and palladium arresting its recent
collapse with a 7.1% rise to $588/oz.
 LME copper stocks also fell by 3,200t (0.7%) while nickel inventories also
dropped 0.5% to below 95,000t.
 In the US, AK Steel has taken steps towards boosting its vertical integration
into raw materials. The company has boosted its stake in Magnetation, who
produce roughly 400kt from an existing concentration plant in Minnesota. The
deal includes an operating agreement under which the JV will assess
construction of a second beneficiation line with 1mtpa capacity near the
existing operations with potential future expansion to 4 lines with total capacity
of 3.5mtpa by 2016. AK is currently the only 'inland' mill in the US which
sources the majority of its iron ore from Brazil.
 Platts has reported that Rio Tinto has settled iron ore lump premium
negotiations with some steelmakers in Northeast Asia for the October-to-
December quarter at 25¢ per dry metric ton unit FOB Australia. This is a
decline of $0.0125/dmtu, or 4.8%QoQ. Platts also note that Rio is still in
negotiations with steelmakers in China for the Q4 premium, following the Q3
lump premium of $0.1561/dmtu – a significant discount to Asian peers.
 Taiwan’s Tang Eng Iron Works has cut its 300-series hot and cold rolled
stainless sheet and coil export prices by around $160/tonne for October.
Steel Business Briefing notes that the steelmaker continues to produce at
70% of its 28,000-30,000 tonnes/month capacity at its Kaohsiung facility, a
level maintained since June as the physical market remains subdued.
 Japan's largest copper producer, Pan Pacific Copper plans to produce
272,400t of copper during the October 2011-March 2012 period, up 1.2%
from April-September 2011. Over the same period, 15,400kg of gold and
185,400kg of silver output is expected, down 16% and 8% respectively
compared with the previous six month period. Meanwhile, the company
has maintained 2012 copper premiums to Asian customers at 2011 levels.
 Freeport McMoRan Copper and Gold’s Grasberg mine in Indonesia have
seen union workers at the facility extend their strike into a second month.